# 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 MARCH 31, 2005

# OR

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

# Commission file number
000-29587

# IBSG INTERNATIONAL,
INC. (Name of small
business issuer in its charter)

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

# 1132 Celebration
Blvd., Celebration, FL 34747(Address and Zip Code
of Principal Executive Offices)

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

# Securities registered under
Section 12(b) of the Exchange Act: None

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

# Common Stock, $0.001
par value per share(Title of Class)

Check whether the issuer: (i) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (ii) has been subject to such filing requirements for the past 90
days.    Yes  |X|    No  |_|
  As of May 10, 2005, there were 43,063,848 shares of the registrants common
stock outstanding.



# IBSG INTERNATIONAL,
INC.

|                                                                                                         | Page
|-------------------------------------------------------------------------------------------------------- | ----
|Part I.  Financial Information                                                                           |     
|Item 1.  Condensed Consolidated Financial Statements and Notes to Consolidated Financial Statements     
|(a) Condensed Consolidated Balance Sheets as of March 31, 2005 (unaudited)                               | 5   
|(b) Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004 (unaudited) | 7   
|(c) Consolidated Statement Changes in Shareholders Equity                                               | 8   
|(d) Consolidated Statement of Cash Flow for the Three Months Ended March 31, 2005 and 2004 (unaudited)   | 9   
|(e) Notes to Consolidated Financial Statements (unaudited)                                               | 11  
|Item 2. Managements  Discussion  and  Analysis  of  Financial  Condition  and Results  of Operations    | 23  
|Item 3. Controls and Procedures                                                                          | 28  
|                                                                                                         |     
|Part II. Other Information                                                                              
|Item 1.  Legal Proceedings                                                                               | 29  
|Item 2.  Changes in Securities                                                                           | 29  
|Item 3.  Defaults Upon Senior Securities                                                                 | 30  
|Item 4.  Submission of Matters to a Vote of Security Holders                                             | 30  
|Item 5.  Other Information                                                                               | 30  
|Item 6.  Exhibits and Reports on Form 8-K                                                                | 30  
|Signatures                                                                                               | 31  



PART I FINANCIAL
INFORMATION

General

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS  March 31, 2005



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Balance
Sheet

ASSETS

|                                      | March 31,
2005
(Unaudited)
|------------------------------------- | --------------------------
|CURRENT ASSETS                        |                           
|Cash$                                 |                           
|Accounts receivable                   |                           
|Prepaid expenses                      |                           
|                                      |                           
|Total Current Assets                  |                           
|                                      |                           
|FURNITURE, FIXTURES AND SOFTWARE, NET |                           
|                                      |                           
|OTHER ASSETS                          |                           
|Prepaid expenses                      |                           
|Debt issue costs                      |                           
|Deposits                              |                           
|                                      |                           
|Total Other Assets                    |                           
|                                      |                           
|TOTAL ASSETS                          |                           
|                                      |                           

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Balance
Sheet (Continued)

LIABILITIES AND
STOCKHOLDERS EQUITY

|                                                     | March 31,
2005
(Unaudited)
|---------------------------------------------------- | --------------------------
|CURRENT LIABILITIES                                  |                           
|Accounts payable and accrued expenses                |                           
|Deferred revenue                                     |                           
|Capital leases payable                               |                           
|Note payable-related party                           |                           
|Note payable-Investor                                |                           
|                                                     |                           
|Total Current Liabilities                            |                           
|                                                     |                           
|TOTAL LIABILITIES                                    |                           
|                                                     |                           
|COMMITMENTS AND CONTINGENCIES                        |                           
|STOCKHOLDERS EQUITY                                 |                           
|Common stock authorized 100,000,000 shares at $0.001 |                           
|par value; 43,063,848 shares issued and outstanding  |                           
|Additional paid-in capital                           |                           
|Deferred consulting expense                          |                           
|Accumulated deficit                                  |                           
|                                                     |                           
|Total Stockholders Equity                           |                           
|                                                     |                           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY           |                           
|                                                     |                           

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Statements
of Operations(Unaudited)

|                                    | For the Three Months Ended
March 31, | 
|----------------------------------- | ------------------------------------ | 
|
|REVENUES                            |                                      | 
|                                    |                                      | 
|EXPENSES                            |                                      | 
|Cost of sales                       |                                      | 
|Services paid for with common stock |                                      | 
|Amortization and depreciation       |                                      | 
|Bonus shares expense                |                                      | 
|Bad debt expense - related party    |                                      | 
|General and administrative expenses |                                      | 
|                                    |                                      | 
|Total Expenses                      |                                      | 
|                                    |                                      | 
|Income (Loss) from operations       |                                      | 
|                                    |                                      | 
|OTHER INCOME (EXPENSES)             |                                      | 
|Gain on release of debt             |                                      | 
|Interest expense                    |                                      | 
|                                    |                                      | 
|Total Other Income (Expenses)       |                                      | 
|                                    |                                      | 
|NET INCOME (LOSS)                   |                                      | 
|                                    |                                      | 
|BASIC INCOME (LOSS) PER SHARE       |                                      | 
|                                    |                                      | 
|DILUTED INCOME PER SHARE            |                                      | 
|                                    |                                      | 
|WEIGHTED AVERAGE NUMBER OF          |                                      | 
|SHARES OUTSTANDING                  |                                      | 
|                                    |                                      | 
|DILUTED WEIGHTED AVERAGE NUMBER OF  |                                      | 
|SHARES OUTSTANDING                  |                                      | 
|                                    |                                      | 

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Statements
of Stockholders Equity

|                             | Common Stock | Additional
Paid-in | Deferred | Stock
Subscription | Accumulated |  
|---------------------------- | ------------ | ------------------ | -------- | ------------------ | ----------- | -
|
|Balance,                     |              |                    |          |                    |             |  
|December 31, 2004            |              |                    |          | 37,605,202         |             | $
|Common stock issued          |              |                   
|for cash (unaudited)         |              |                    |          | 2,577,618          |             |  
|Common stock issued          |              |                   
|for stock offering costs     |              |                   
|(unaudited)                  |              |                    |          | 288,249            |             |  
|Stock offering costs         |              |                   
|(unaudited)                  |              |                    |          | --                 |             |  
|Common stock issued for      |              |                   
|price protection (unaudited) |              |                    |          | 2,222,779          |             |  
|Common stock issued          |              |                   
|for services (unaudited)     |              |                    |          | 300,000            |             |  
|Common stock issued for      |              |                   
|bonus shares (unaudited)     |              |                    |          | 70,000             |             |  
|Commission paid on fund      |              |                   
|raising (unaudited)          |              |                    |          | --                 |             |  
|Deferred services expensed   |              |                   
|3/31/05 (unaudited)          |              |                    |          | --                 |             |  
|Value of warrants granted    |              |                   
|with note payable            |              |                   
|(unaudited)                  |              |                    |          | --                 |             |  
|Beneficial conversion        |              |                   
|feature of note payable      |              |                   
|(unaudited)                  |              |                    |          | --                 |             |  
|Net income for period ended  |              |                   
|March 31, 2005               |              |                   
|(unaudited)                  |              |                    |          | --                 |             |  
|Balance, March 31,           |              |                   
|2005 (unaudited)             |              |                    |          | 43,063,848         |             | $
|                             |              |                    |          |                    |             |  

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Statements
of Cash Flows(Unaudited)

|                                                           | For the Three Months Ended
March 31, | 
|---------------------------------------------------------- | ------------------------------------ | 
|
|CASH FLOW FROM OPERATING ACTIVITIES:                       |                                      | 
|Net Income (Loss)                                          |                                      | 
|Adjustments to reconcile net income (loss) to net          |                                      | 
|cash used by operating activities:                         |                                      | 
|Equity instruments                                         |                                      | 
|Amortization of deferred consulting expense                |                                      | 
|Bad debt expense                                           |                                      | 
|Amortization and depreciation expense                      |                                      | 
|Amortization of debt discount                              |                                      | 
|Changes in operating assets and liabilities:               |                                      | 
|Accounts receivable                                        |                                      | 
|Prepaid expenses                                           |                                      | 
|Decrease (Increase) in other assets                        |                                      | 
|Increase (decrease) in accounts payable & accrued expenses |                                      | 
|Deferred revenue                                           |                                      | 
|                                                           |                                      | 
|Net Cash Used by Operating Activities                      |                                      | 
|                                                           |                                      | 
|CASH FLOWS FROM INVESTING ACTIVITIES:                      |                                      | 
|Loan to Commerce, Inc.                                     |                                      | 
|Purchase of fixed assets                                   |                                      | 
|Advances to IBSG Group prior to consolidation              |                                      | 
|                                                           |                                      | 
|Net Cash Used by Investing Activities                      |                                      | 
|                                                           |                                      | 
|CASH FLOWS FROM FINANCING ACTIVITIES:                      |                                      | 
|Proceeds from note payable                                 |                                      | 
|Costs related to note payable                              |                                      | 
|Proceeds from related party borrowings                     |                                      | 
|Payments of related party borrowings                       |                                      | 
|Proceeds from capital lease                                |                                      | 
|Payments on capital leases                                 |                                      | 
|Proceeds from stock subscription payable                   |                                      | 
|Stock offering costs                                       |                                      | 
|Common stock issued for cash                               |                                      | 
|                                                           |                                      | 
|Net Cash Provided by Financing Activities                  |                                      | 
|                                                           |                                      | 
|NET INCREASE IN CASH                                       |                                      | 
|CASH AT BEGINNING OF PERIOD                                |                                      | 
|                                                           |                                      | 
|CASH AT END OF PERIOD                                      |                                      | 
|                                                           |                                      | 

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Consolidated Statements
of Cash Flows (Continued)(Unaudited)

|                                                      | For the Three Months Ended
March 31, | 
|----------------------------------------------------- | ------------------------------------ | 
|
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      |                                      | 
|Interest paid                                         |                                      | 
|Income taxes paid                                     |                                      | 
|SCHEDULE OF NON-CASH FINANCING ACTIVITIES             |                                      | 
|Common stock issued for deferred consulting expenses  |                                      | 
|Common stock issued for services                      |                                      | 
|Fair value of warrants and note beneficial conversion |                                      | 
|feature                                               |                                      | 

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIESNotes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
| | --------------------------------------------------

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

| | NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | ---------------------------------------------------

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

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

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

| |  | The preparation
of financial statements have been prepared in conformity with accounting principles generally accepted in
the United States of America and 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.
| |  | ----------------------------------------------------------------------------------------------------------------------------------



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | --------------------------------------------------------------

| | d. | Revenue
Recognition
| | -- | -------------------

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | --------------------------------------------------------------------

| | d. | Revenue
Recognition (Continued)
| | -- | -------------------------------

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

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

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | --------------------------------------------------------------------

| | d. | Revenue
Recognition (Continued)
| | -- | -------------------------------

| | Revenues
from professional services consist of training and implementation services. Training
revenues are recognized as the services are performed. Professional services are not
considered essential to the functionality of the other elements of the arrangement and are
accounted for as a separate element. Professional services are recognized as the services
are performed for time and materials contracts or upon achievement of milestones on fixed
price contracts. A provision for estimated losses on fixed-price professional services
contracts is recognized in the period in which the loss becomes known.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Our
licenses for the state of California for each regional office are sold for $50,000 each
for the first year. The Company recognizes 65% of the license fee or $32,500 as revenue
upon the activation of the license by a regional office. The balance of 35% is amortized
on a straight line basis over a one year period. During the year ended December 31, 2004
we activated 33 licenses for regional offices.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
licenses for the Corporate Affairs Commission (Government of Nigeria) consisted of the
following: 1) 1st year license fee of a 5 year term effective from June 1, 2004
to June 1, 2005 for $250,000. Of this amount $162,500 was recognized upon the activation
of the license and the balance of $87,500 is being amortized on a straight line basis over
the 1 year period. 2) A subscription fee for 35,000 businesses at $6.00 per business per
month for a period of three (3) months total invoice of $630,000. All of this revenue was
recognized in the period of June 1, 2004 to September 1, 2004. 3) A subscription fee for
35,000 businesses for the next three months which is being recognized on a straight line
basis for the period from September 2004 to November 1, 2004 total invoice of $840,000,
and 4) a subscription fee for 35,000 businesses for the six months ended June 1, 2005. The
invoice was for $1,260,000 of which $210,000 was recognized for December 2004 and the
balance of $1,020,000 is deferred for 2005. In the period of January 1, 2005 to March 31,
2005, $630,000 was recognized on the balance of
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | --------------------------------------------------------------------

| | d. | Revenue
Recognition (Continued)
| | -- | -------------------------------

| | $1,020,000
that was deferred the prior period, leaving a deferred balance of around $390,000, which
will be recognized in the 2nd quarter for the balance of the contract. There
was also $22,055 from the invoicing of the 1 year license which was also recognized in the
period ending March 31, 2005, leaving a deferred balance of $20,136 which will be
recognized in the 2nd quarter for the balance of the contract.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Allowance
for Doubtful Accounts and Sales Returns
| | -------------------------------------------------

| | We
maintain an allowance for doubtful accounts and a sales return allowance to reduce amounts
to their estimated realizable value. A considerable amount of judgment is required when we
assess the realization of accounts receivables, including assessing the probability of
collection and the current credit-worthiness of each customer. If the financial condition
of our customers were to deteriorate, resulting in an impairment of their ability to make
payments, an additional provision for doubtful accounts may be required. We initially
record a provision for doubtful accounts based on our historical experience, and then
adjust this provision at the end of each reporting period based on a detailed assessment
of our accounts receivable and allowance for doubtful accounts. In estimating the
provision for doubtful accounts, we consider (i) the type of entity (government,
commercial, retail) and the aging of the accounts receivable; (ii) trends within and
ratios involving the age of the accounts receivable; (iii) the customer mix in each of the
aging categories and the nature of the receivable, such as whether it derives from
license, professional services or maintenance revenue; (iv) our historical provision for
doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic
conditions of the customers industry, whether the entity is government, as well as general
economic conditions, among other factors.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
Company records the values for the common stock issuances based on the closing prices of
the common stock on the date of authorization for services, extinguishments of debt, or any
other consideration other than cash. From time to time, the Company will enter the equity
market and raise cash from unaffiliated 3rd party investors. These issuances are valued at
the cash prices that the Company is able to sell the stock for.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | --------------------------------------------------------------------

| | d. | Revenue
Recognition (Continued)
| | -- | -------------------------------

| | We
currently have three (3) customers, the State of California, the Government of Nigeria and
BuzGate. Our accounts receivable are as follows at March 31, 2005:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | 
|-------------------------------------- | 
|Corporate Affairs Commission (Nigeria) | 
|State of California                    | 
|BuzGate                                | 
|                                       | 
|                                       | 
|                                       | 

We
recognized revenue of the following amounts for the period ended March 31, 2005:

|                                       | 
|-------------------------------------- | 
|Corporate Affairs Commission (Nigeria) | 
|State of California                    | 
|BuzGate                                | 
|                                       | 
|                                       | 
|                                       | 

Deferred
revenue consisted of the following at March 31, 2005:

|                                       | 
|-------------------------------------- | 
|Corporate Affairs Commission (Nigeria) | 
|State of California                    | 
|BuzGate                                | 
|                                       | 
|                                       | 
|                                       | 

| | e. | Equity
Transactions
| | -- | -------------------

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

| | f. | Depreciation
and Amortization
| | -- | -----------------------------

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

| | NOTE
3 -          RELATED PARTY TRANSACTIONS
| | --------------------------------------------

| | During
the period ended March 31, 2005, the Company made cash payments of $208,206 on the notes
payable to the M&K Trust.
| | -------------------------------------------------------------------------------------------------------------------------

| | The
President of the Company is being compensated at $150,000 per the year ended December 31,
2004 and $180,000 for 2005. No formal employment agreement exists.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
3 -      RELATED PARTY TRANSACTIONS (Continued)
| | ----------------------------------------------------

| | The
Company loaned $5,009 in the period ended March 31, 2005, $171,072 in the year ended
December 31, 2004 and $115,231 in the year ended December 31, 2003 to Commerce, Inc. These
amounts were deemed to be uncollectible due to Commerces bankruptcy filing.
Accordingly the Company recorded a bad debt expenses of $171,072 and $115,231 for the
years ended December 31, 2004 and 2003, respectively. In the period ended March 31, 2005
the Company recorded a bad debt of $5,009. The companys president is a former
officer and director of Commerce. He served as Commerces president and as a director
for seven years prior to his extended personal leave in September of 2002 and resignation
in February 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2005, the Company owed the M&K Trust $30,754, the Company expects to pay
this amount off in 2005. The amount bears interest at 8% per annum and is secured by the
NetPool software rights and title.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NOTE
4 -      EQUITY ISSUANCES
| | ------------------------------

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

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

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

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

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

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

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

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

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



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
4 -      EQUITY ISSUANCES (Continued)
| | ------------------------------------------

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

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

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

| | NOTE
5 -      COMMITMENTS AND CONTINGENCIES
| | -------------------------------------------

| | The
Company in April 2005 made a settlement agreement with American Express for payment of
$53,000 of the $105,000 owed, which has been paid and forgiveness of the balance has been recorded
under Gain on Release of Debt.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NOTE
6 -      WARRANTS
| | ----------------------

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

| | NOTE
7 -      GOING CONCERN
| | ---------------------------

| | The
Companys condensed consolidated financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a going
concern which contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred cumulative operating losses through
March 31, 2005 of $2,721,978. Revenues had not been sufficient to cover its operating
costs and to allow it to continue as a going concern. The potential proceeds from the sale
of common stock, other contemplated debt and equity financing, and increases in operating
revenues from new development would enable the Company to continue as a going concern.
There can be no assurance that the Company can or will be able to complete any debt or
equity financing. If these are not successful, management is committed to meeting the
operational cash flow needs of the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
8 -      NOTE PAYABLE: LH ASSOCIATES
| | -----------------------------------------

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

|                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Securities     
Issued:        
Coupon:        
               
               
               
Principal      
Repayments:    
          
          
          
          
          
          
 
Maturity:      
 
Seniority and  
Security:      
          
          
          
          
          
 
Conversion     
Price:         
          
          
           
          
          
 
Effective Date: | $1 million Senior Secured Convertible Notes (the "Notes") and
 Class A and Class B common stock purchase warrants.
7% annual,  payable  semiannually in cash or at the option of the
investor in common  stock.  If an event of default  occurs at any
time  after the Issue Date and is not cured  within 20 days,  the
Default Rate of 15% per annum applies.
On the 12th month  anniversary  of the Closing Date,  the Company
shall  be  required  to make  principal  repayments  based on the
following  schedule:     Equal  monthly   installments  for  the
remainder  of the note in cash or at the option of the Company in
stock at a price equal to a 15% discount of the companys  common
stock  price  at time of  repayment  with a  maximum  price  of a
discount  of 15% off the  companys  common  stock  price  at the
Issue Date.
The Notes will mature 24 months after the Issue Date.
The  Notes  will be  senior  to any and all  indebtedness  of The
Company except for a bank line currently being  negotiated for up
to $500,000  and will be secured  substantially  by all assets of
the  The  Company  and its  subsidiaries.  At the  option  of the
investor  this  may be  waived.  Notwithstanding  the  foregoing,
Investor agrees to sign the appropriate  subordination  documents
requested by the bank.
The  Notes  issued  will  be  convertible  at the  option  of the
holder,  at  a  fixed  price  of  Price  $.29,  however,  if  the
Companys  revenues for fiscal 2004 were not at least  $5,000,000
and revenue  results for the first quarter of fiscal 2005 are not
at least  $2,000,000 then the conversion price will be reduced by
one third.  For the purposes of this  transaction  only,  revenue
is defined as both recognized and deferred revenue.
The day the Registration Statement is declared effective.



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
8 -      NOTE PAYABLE: LH ASSOCIATES (Continued)
| | -----------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Class A    
Warrants:  
           
           
           
           
           
           
           
Forced     
Conversion 
Feature:   
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
Milestones: | The  investors  received  Class A Warrants to purchase  3,225,807
shares.  The Class A Warrants:  warrants shall have a 5-year life
and an exercise  price of $.312.  The warrants shall be re-priced
if the  Company  does not have  revenues  of at least $20 million
for 2005 based on the following schedule:
Less than $20m  15% discounted
Less than $15m  30% discounted
Less than $10m  45% discounted
If,   following  the  Effective   Date,  all  of  the  Milestones
specified  below are  satisfied  on each  trading  day  occurring
during  any  period of ten  consecutive  trading  days,  then the
Company may force  conversion  of the Notes by  delivering to the
Investors written notice thereof (a Forced  Conversion  Notice)
on the business day  immediately  following  the last day of such
period (the  Forced  Conversion  Date).  The Forced  Conversion
Notice will specify the aggregate  principal  amount of the Notes
that is subject to the forced conversion,  which amount (i) shall
not  exceed  35% of the  aggregate  dollar  volume  traded on the
Companys  principal  market  during the seven (7)  trading  days
immediately  preceding the Forced  Conversion Date and (ii) shall
be  allocated  among the  Investors  on a pro rata basis.  On the
Forced  Conversion  Date,  each  Investor  will be deemed to have
converted an amount of principal  of its  Debenture  equal to (A)
its pro rata share of the aggregate  principal  amount  specified
in  the  Forced   Conversion  Notice  minus  (B)  the  amount  of
principal  converted by such Investor  during the twenty  trading
days immediately preceding the Forced Conversion Date.
(a) The  Registration  Statement  must be effective and available
for resale of the  Conversion  Shares and  Warrant  Shares by the
Investors.
(b) The  closing  bid price for the  common  stock  must be above
$.60.
(c) No event of default,  or event that could  become an event of
default, shall have occurred.
(d) The  issuance  pursuant  to the  Forced  Conversion  does not
cause  (i)  the  number  of  shares  beneficially  owned  by  any
Investor   to  exceed   4.9%  of  the   number  of  shares   then
outstanding.



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
8 -      NOTE PAYABLE: LH ASSOCIATES (Continued)
| | -----------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Anti-dilution 
Rights:       
              
              
Restrictions on
other financing
              
Insider Lock  
up:          
              
              
              
Future        
Offerings:    
              
              
              
Fundamental   
Change:       
              
              
              
Registration  
Rights: | Should  the  company  sell any  Common  shares or any  instrument
  convertible  into  such,  at a price per share  that is less than
  the   conversion   price,   then  the   conversion   price  shall
  automatically be lowered to that new price.
  The Company will be restricted  from  borrowing  money or issuing
  debt  securities  in the  public  or  private  markets  until the
  Effective Date except for the Bank line disclosed in Seniority.
  The  insiders  will be  locked  up to sell  their  shares  in the
  company  unless the stock price is over $.65 and then  subject to
  Regulation  144  selling  rules,  However,  they  may sell if the
  stock is below  $.65  only  after 9  months  of the  registration
  being effective, subject to rule 144.
  For a  period  of up to 1  year  from  the  Effective  Date,  the
  investor  will  retain  the  right to  participate  in  public or
  private  offerings  of The  Companys  equity and  equity  linked
  securities  (including anything convertible into equity) and will
  be eligible to participate in up to at least 20%.
  Upon a Fundamental  Change,  the Investor(s)  will have the right
  to put  the  security  to The  Company  at  105%  of  outstanding
  principal,  plus  unpaid  accrued  unpaid  interest.  A merger or
  other   change  of  control   transaction   shall   constitute  a
  Fundamental Change.
 Registrant  shall  file a  registration  statement  with  the  SEC
 covering  the  resale and  distribution  by the  investors  of all
 shares which may be received by the investors  upon  conversion of
 Notes and exercise of the  Warrants  within 40 days of the Closing
 Date,  which  Registration  Statement shall be declared  effective
 within  135  days  of  such  Closing  Date.   Penalties:   If  the
 Registration  Statement is not effective  within 135 days from the
 Issue Date or if the  Company  does not  respond to an SEC comment
 within  10  business  days  or if the  effective  registration  is
 unavailable  to the  Investors  for more  than  twenty  (20)  days
 during a 365-day  period,  a 2% penalty per month will be assessed
 until the Registration  Statement is declared effective or becomes
 available. The penalty will be payable monthly in cash.



# IBSG INTERNATIONAL,
INC. AND SUBSIDIARIES Notes to the
Consolidated Financial StatementsMarch 31, 2005 and 2004

| | NOTE
8 -      NOTE PAYABLE: LH ASSOCIATES (Continued)
| | -----------------------------------------------------

|                                                                 |                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Class B       
Warrants:     
              
Due Diligence 
Fee: | The  investors  received  Class B  Warrants  to  purchase  322,581
shares.  The Class B Warrants  have a 180-day life post  effective
registration and an exercise price of $.26 per share.
2% (two percent) of investment  payable out of the escrow  account
upon closing.

| | The
Company has valued the warrants granted at $882,103 using the Black Scholes model. The
Company has valued the beneficial conversion feature of the note at $97,172. These
amounts along with $19,725 have been presented as contra debt accounts. The value of the
warrants, beneficial feature, and other costs are being amortized to interest expense over
the life of the loan. Amortization expense for the three months ended March 31, 2005 was
$17,807. The net value of the note payable as of March 31, 2005 was $17,807.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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

Managements Discussion and
Analysis of Consolidated Results of Financial Condition and Results of Operations
(MD&A) should be read in conjunction with the consolidated financial
statements included herein. Further, this quarterly report on Form 10-QSB should be read
in conjunction with the Companys Consolidated Financial Statements and Notes to
Consolidated Financial Statements included in its 2004 Annual Report on Form 10-KSB. In
addition, you are urged to read this report in conjunction with the risk factors described
herein.

# Overview

The Company is a holding company for
two subsidiaries that are technology companies in the software industry. Our Intelligent
Business Systems Group, Inc. subsidiary is in the business of licensing enterprise
solutions that are designed to enhance the operating efficiency and create revenue for
State Small Business Development Centers, business associations and corporations through
the licensing of its turn-key digital service center software, which provides a broad
range of budgetary, administrative and commercial applications on a single platform known
as the NetPool Data System.

The NetPool Data System provides our
licensees with the ability to operate a turnkey digital service center that is available
for use by a large number of entities on a single platform without requiring these
entities to have a pre-existing web site or digital catalogue. Branded and administered by
our licensees, the system is installed on our licensees server or may be hosted by
Intelligent Business Systems Group, Inc. The end users may access the system via the
licensees web site. Utilizing the NetPool Data System, the licensees are able to
offer a broad spectrum of business-related software applications to their end users. Each
end user can create individualized business models through the systems comprehensive
on-line billing functions. Our licensees can generate revenue through system services and
sub-licenses to individual end users. Typically the licensees charge their end user
customers monthly usage and transaction-based fees. The host licensee may also sell
sub-licenses to other entities in their states or vertical markets and provide those
entities with the ability to offer similar services to their customer/member/consumer
base.

We receive revenue from the licensing
of the use of the NetPool Data System to our clients, fees for customizing the software
for our clients, fees for software maintenance, fees for hosting services and training. We
may also receive sublicense fees from the revenue received from the fees our customers
charge individual users of the system. We have agreed to waive our customary license and
maintenance fees and receive only a share of the revenue generated by two new customers
for use of the system. No revenue was received from this sharing arrangement in 2004.

Our subsidiary, Secure Blue, Inc., is
developing security software that is designed to meet the computer system monitoring needs
required to implement internal control systems required by public companies by allowing
all sensitive digital files to be tracked and usage of the files to be monitored by
designated compliance officers within the organization. This software is currently in
development and has not been released for sale. No revenue was generated by Secure Blue in
2004.



# Critical Accounting
Policies and Estimates

The preparation of our financial
statements requires us to make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the
reported period. A critical accounting policy is one that is both very important to the
portrayal of our financial condition and results, and requires managements most
difficult, subjective or complex judgments. Typically, the circumstances that make these
judgments difficult, subjective and/or complex have to do with the need to make estimates
about the effect of matters that are inherently uncertain. We believe the accounting
policies below represent our critical accounting policies:


Revenue recognition;


Estimating sales returns and the allowance for doubtful accounts;

 Value
of long lived assets including purchased software;

 Valuation
of services paid for with common stock.

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

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

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



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

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

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

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

Revenues from professional services
consist of training and implementation services. Training revenues are recognized as the
services are performed. Professional services are not considered essential to the
functionality of the other elements of the arrangement and are accounted for as a separate
element. Professional services are recognized as the services are performed for time and
materials contracts or upon achievement of milestones on fixed price contracts. A
provision for estimated losses on fixed-price professional services contracts is
recognized in the period in which the loss becomes known.

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

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



# Results of Operations
for the Quarter ended March 31, 2005 and 2004

The Company maintained a conservative
revenue recognition policy related to previously held contracts but has recognized new
business or new licenses activated under previous contracts according to conservative
recognition policies under GAAP. The Company reflected revenues for the quarter ended
March 31, 2005at $1,108,544 and deferred revenues of $688,942, for total revenues
of $1,797,486 (deferred pending recognition based on amortization policies previously
stated; See Note 2 of the Financial Statements). Due to the Companys policy of not
recognizing revenue on its license agreements until payment, the Company reflected no
revenues on the $671,000 of customization work completed in quarter ended March 31, 2004.

# Operating Expenses for
the Quarter ended March 31, 2005 and 2004

The Company had operating expenses of
$926,841 in the quarter ended March 31, 2005.  The expenses we incurred in the
quarter ended March 31, 2005, were primarily amortization of consulting services,
depreciation, and general and administrative expenses.

This reflects an operating profit for
the quarter ended March 31, 2005 of $181,703. The Company has incurred cumulative
operating gain in quarter ended March 31, 2005 of $213,483, and a net operating loss of
$2,721,978 to date.

# Liquidity and Capital
Resources

We incurred cumulative operating
losses through March 31, 2005 of $2,721,978. Revenues had not been sufficient to cover its
operating costs and to allow it to continue as a going concern. The notes in the unaudited
financial statements at and for the quarter ended March 31, 2005, contain an explanatory
paragraph raising substantial doubt of the Companys ability to continue as a going
concern. Note 7 to the unaudited financial statements at and for the quarter ended March
31, 2005 describe the conditions which raise this doubt and managements plans.

We addressed our capital requirements
in March 2005 by sale of $1,000,000 of Senior Secured Convertible Notes (See Note 8 of the
unaudited financial statement). We believe the proceeds of the notes as well as the cash
we expect to generate from operations will enable us to meet our capital needs for at
least the next twelve months.

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



FACTORS
THAT COULD AFFECT FUTURE RESULTS

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

Our customers who are generally state
government agencies or quasi government business associations can be exceedingly tardy in
paying their obligations to us.  We may have to curtail our operations if we do not
have sufficient funds to pay for the expenses of operating our business. The Company will
use additional commercial market opportunities to offset the slow pay nature of the
lucrative government contract market. The Companys current and projected
acquisitions will expand the Companys retail and private sector markets which should
create a blend of payment cycles between the secured government markets and the commercial
markets.

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

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

| |  | technological
obsolescence; and
| | - | -------------------------------

| |  | competition
| | - | -----------

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

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

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

Allowance for Doubtful Accounts and
Sales Returns. We maintain an allowance for doubtful accounts and a sales return allowance
to reduce amounts to their estimated realizable value. A considerable amount of judgment
is required when we assess the realization of accounts receivables, including assessing
the probability of collection and the current credit-worthiness of each customer. If the
financial condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, an additional provision for doubtful accounts may be
required. We initially record a provision for doubtful accounts based on our historical
experience, and then adjust this provision at the end of each reporting period based on a
detailed assessment of our accounts receivable and allowance for doubtful accounts. In
estimating the provision for doubtful accounts, we consider (i) the type of entity
(government, commercial, retail) and the aging of the accounts receivable; (ii) trends
within and ratios involving the age of the accounts receivable; (iii) the customer mix in
each of the aging categories and the nature of the receivable, such as whether it derives
from license, professional services or maintenance revenue; (iv) our historical provision
for doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic
conditions of the customers industry, whether the entity is government, as well as general
economic conditions, among other factors.

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



ITEM 3. CONTROLS AND
PROCEDURES

We carried out an evaluation, under
the supervision and with the participation of our management, including our Chief
Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 as of the end of the period covered by this report. Based on that
evaluation, our Chief Executive Officer and Principal Financial Officer have concluded
that our disclosure controls and procedures as of March 31, 2005 were effective to ensure
that information required to be disclosed by us in reports that we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and
forms.

There have been no material changes
in our internal controls over financial reporting or in other factors that could
materially affect, or are reasonably likely to affect, our internal controls over
financial reporting during the quarter ended March 31, 2005.



PART II OTHER
INFORMATION

Item 1.  Legal Proceedings

| | Not applicable
| | --------------

Item 2.  Changes in
Securities and Small Business Issuer Purchases of Equity Securities

In January 2005, the Company issued
996,667 shares of common stock for cash valued at $0.15 per share. These shares were
issued in a private placement transaction pursuant to Section 4(2) and Regulation D under
the Securities Act of 1933, as amended. No underwriters were involved in this transaction.

In January 2005, the Company issued
28,571 shares of common stock for cash valued at $0.175 per share. These shares were
issued in a private placement transaction pursuant to Section 4(2) and Regulation D under
the Securities Act of 1933, as amended. No underwriters were involved in this transaction.

In January 2005, the Company issued
125,000 shares of common stock for fund raising valued at $0.51 per share, which was the
closing price on the date of issue. These shares were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act of 1933, as
amended. No underwriters were involved in this transaction.

Pursuant to certain provisions in
private placements for cash, the Company was required to issue additional shares of common
stock to the various parties because the closing bid price of the Companys stock was
not $1.00 at the time of the SB-2 filing. Accordingly, the Company issued an additional
2,222,779 shares of common stock to the private placement investors for their cash
purchases. These individuals did not contribute any services or other items to the
Company. These shares were valued at $0.00 per share. These shares were issued in a
private placement transaction pursuant to Section 4(2) and Regulation D under the
Securities Act of 1933, as amended. No underwriters were involved in this transaction.

In February 2005, the Company issued
1,466,666 shares of common stock for cash valued at $0.15 per share. These shares were
issued in a private placement transaction pursuant to Section 4(2) and Regulation D under
the Securities Act of 1933, as amended. No underwriters were involved in this transaction.

In February 2005, the Company issued
30,149 shares of common stock for fund raising valued at $0.33 per share, which was the
closing price on the date of issue. These shares were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act of 1933, as
amended. No underwriters were involved in this transaction.

In February 2005, the Company issued
300,000 shares of common stock for fund raising valued at $0.35 per share, which was the
closing price on the date of issue. These shares were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act of 1933, as
amended. No underwriters were involved in this transaction.

In February 2005, the Company issued
100,000 shares of common stock under Bonus Shares, valued at $0.36 per share, which was
the closing price on the date of issue. These shares were issued in pursuant to Section
4(2) and Regulation D under the Securities Act of 1933, as amended. No underwriters were
involved in this transaction.

In February 2005, the Company issued
85,714 shares of common stock for cash valued at $0.175 per share. These shares were
issued in a private placement transaction pursuant to Section 4(2) and Regulation D under
the Securities Act of 1933, as amended. No underwriters were involved in this transaction.

In March 2005, the Company issued
130,000 shares of common stock for services rendered valued at $0.36 per share, which was
the closing price on the date of issue. These shares were issued pursuant to Section 4(2)
and Regulation D under the Securities Act of 1933, as amended. No underwriters were
involved in this transaction.

In March 2005, the Company issued
3,100 shares of common stock for fund raising valued $0.29 per share, which was the
closing price on the date of issue. These shares were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act of 1933, as
amended. No underwriters were involved in this transaction.



In March 2005, the Company canceled
(30,000) shares of common stock, which was originally issued on June 10, 2004 as Bonus
Shares valued at $0.56 per share, which was the closing price on the date of issue. These
shares were issued pursuant to Section 4(2) and Regulation D under the Securities Act of
1933, as amended. No underwriters were involved in this transaction.

Item 3.  Defaults Upon
Senior Securities

| | Not applicable
| | --------------

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

| | None
| | ----

Item 5.  Other Information

| | Not applicable
| | --------------

Item 6.  Exhibits and
Reports on Form 8-K

A.       
          Exhibits:

| | 31.1 | Certification
of Chief Executive Officer Pursuant to Section 302 of the
                       Sarbanes-Oxley Act.
| | ---- | ------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certification
of Principal Financial and Accounting Officer Pursuant                        to Section
302 of the Sarbanes-Oxley Act.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certification
of Chief Executive Officer Pursuant to Section 906 of the
                       Sarbanes-Oxley Act.
| | ---- | ------------------------------------------------------------------------------------------------------------------

| | 32.2 | Certification
of Principal Financial and Accounting Officer Pursuant                        to Section
906 of the Sarbanes-Oxley Act.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------

B.    
          Reports on Form 8-K

| | On
March 31, 2004, the Company announced that on March 17, 2005, the Company entered into
and a financing transaction with four accredited investors pursuant to which the Company
received $1,000,000 in gross cash proceeds from the issuance of senior secured
convertible notes in a principal amount of $1,000,000 and warrants to purchase 3,548,388
shares of Common Stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



# 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 May 12, 2005.

|Date:  May 12, 2005 |  | IBSG INTERNATIONAL, INC.BY: /S/ Michael Rivers
Michael Rivers President, Chief Executive Officer
|------------------- |  | --------------------------------------------------------------------------------------------------------------

|Date:  May 12, 2005 |  | BY: /S/ Geoffrey Birch 
Geoffrey Birch Principal Accounting Officer
|------------------- |  | ---------------------------------------------------------------------------------