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

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**FORM        10-QSB/A**

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**000-29587**

**IBSG      INTERNATIONAL, INC.**

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

**1132      Celebration Blvd., Celebration, FL 34747**

**(321) 939-6321**

**      None**

**Common      Stock, $0.001 par value per share**

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**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 of Changes in Shareholders’ Equity                (unaudited)                          | 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                                                      | 25  |
| Item                3. Controls and Procedures                                                                                                                                         | 31  |
|                                                                                                                                                                                   |     |
| **Part                II. Other Information**                                                                                                                                          |     |
| Item                1. Legal Proceedings                                                                                                                                               | 32  |
| Item                2. Changes in Securities                                                                                                                                           | 32  |
| Item                3. Defaults Upon Senior                Securities                                                                                                                  | 33  |
| Item                4. Submission of Matters to a Vote of Security                Holders                                                                                              | 33  |
| Item                5. Other Information                                                                                                                                               | 33  |
| Item                6. Exhibits and Reports on Form                8-K                                                                                                                 | 33  |
| Signatures                                                                                                                                                                             | 34  |

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I      FINANCIAL 

|   |         The                accompanying unaudited 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                changes in 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                consolidated 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. This                Form 10-QSB is being amended to restate the accompanying consolidated                financial statements. In April 2006 management determined that the                embedded conversion options in the $1 million senior secured convertible                note, and the related warrants should have been recorded as derivative                liabilities as of March 31, 2005 with changes in fair value charged                to                other income (expense). See the consolidated financial statements                Note 9                for further information.  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED      FINANCIAL STATEMENTS**

**March      31, 2005**

**(unaudited)**

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Balance Sheet**

|                                                                  |   |   | **March                31, 2005****As                Restated (Note 9)****(Unaudited)** |   |
|-----------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------|--------|
| CURRENT                ASSETS                                         |   |   |                                                                                         |   |
|    Cash                                                |   | $      | 692,288                                                                                 |   |
|    Accounts                receivable                  |   |   | 4,623,075                                                                               |   |
|    Prepaid                expenses                     |   |   | 103,220                                                                                 |   |
|                                                                  |   |   |                                                                                    |   |
|      Total                Current Assets     |   |   | 5,418,583                                                                               |   |
|                                                                  |   |   |                                                                                    |   |
| FURNITURE,                FIXTURES AND SOFTWARE, NET                  |   |   | 1,165,484                                                                               |   |
|                                                                  |   |   |                                                                                    |   |
| OTHER                ASSETS                                           |   |   |                                                                                         |   |
|    Prepaid                expenses                     |   |   | 337,500                                                                                 |   |
|    Debt                issue costs                     |   |   | 14,783                                                                                  |   |
|    Deposits                                            |   |   | 1,380                                                                                   |   |
|   Deferred              Consulting                          |   |   | 5,382,196                                                                               |   |
|                                                                  |   |   |                                                                                    |   |
|      Total                Other Assets       |   |   | 5,735,859                                                                               |   |
|                                                                  |   |   |                                                                                    |   |
|        TOTAL                ASSETS |   | $      | 12,319,925                                                                              |   |
|                                                                  |   |   |                                                                                    |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Balance Sheet**

**(Continued)**

|                                                                                          |   |   | **March                31, 2005****As                Restated (Note 9)****(Unaudited)** |   |
|-----------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------|--------|
| CURRENT                LIABILITIES                                                            |   |   |                                                                                         |   |
|    Accounts                payable and accrued expenses                        |   | $      | 281,535                                                                                 |   |
|    Deferred                revenue                                             |   |   | 688,942                                                                                 |   |
|    Capital                leases payable                                       |   |   | 10,349                                                                                  |   |
|    Note                payable-related party                                   |   |   | 30,754                                                                                  |   |
|    Note                payable-Investor                                        |   |   | 17,807                                                                                  |   |
|    Warrant                liability                                            |   |   | 588,578                                                                                 |   |
|    Embedded                conversion option liability                         |   |   | 455,464                                                                                 |   |
|                                                                                          |   |   |                                                                                    |   |
|      Total                Current Liabilities                        |   |   | 2,073,429                                                                               |   |
|                                                                                          |   |   |                                                                                    |   |
|        TOTAL                LIABILITIES                    |   |   | 2,073,429                                                                               |   |
|                                                                                          |   |   |                                                                                    |   |
| COMMITMENTS                AND CONTINGENCIES (Note 5)                                         |   |   | --                                                                                      |   |
| STOCKHOLDERS’                EQUITY                                                     |   |   |                                                                                         |   |
|    Common                stock authorized 100,000,000 shares at $0.001         |   |   |                                                                                         |   |
|     par                value; 43,063,848 shares issued and outstanding    |   |   | 43,064                                                                                  |   |
|    Additional                paid-in capital                                   |   |   | 12,989,177                                                                              |   |
|    Accumulated                deficit                                          |   |   | (2,785,745                                                                              | )      |
|                                                                                          |   |   |                                                                                    |   |
|      Total                Stockholders’ Equity                 |   |   | 10,246,496                                                                              |   |
|                                                                                          |   |   |                                                                                    |   |
|      TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY |   | $      | 12,319,925                                                                              |   |
|                                                                                          |   |   |                                                                                    |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Statements of Operations**

**(Unaudited)**

|                                                                 |   |   | **For                the Three Months Ended****March                31,** |   |
|----------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                                                 |   |   | **2005****As                Restated (Note 9)**                           |   |   | **2004**  |   |
| REVENUES                                                             |   | $      | 1,108,544                                                                 |   | $ | -- |   |
|                                                                 |   |   |                                                                      |   |   |   |   |
| EXPENSES                                                             |   |   |                                                                      |   |   |   |   |
|    Cost                of sales                       |   |   | 88,884                                                                    |   |   | -- |   |
|    Services                paid for with common stock |   |   | 481,947                                                                   |   |   | 314,400 |   |
|    Amortization                and depreciation       |   |   | 1,022                                                                     |   |   | -- |   |
|    Bonus                shares expense                |   |   | 19,200                                                                    |   |   | 2,541,293 |   |
|    Bad                debt expense - related party    |   |   | 5,009                                                                     |   |   | 187,016 |   |
|    General                and administrative expenses |   |   | 330,779                                                                   |   |   | 332,133 |   |

|      Total                Expenses                          |   |   | 926,841  |   |   | 3,374,842  |   |
|--------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|------------|--------|
|                                                                                 |   |   |     |   |   |       |   |
|    Income                (Loss) from operations                       |   |   | 181,703  |   |   | (3,374,842 | )      |
|    Gain                on release of debt                             |   |   | 52,317   |   |   | --         |   |
|                                                                                 |   |   |     |   |   |       |   |
| OTHER                INCOME (EXPENSES)                                               |   |   |     |   |   |       |   |
|    Interest                expense                                    |   |   | (20,537  | )      |   | (15,745    | )      |
|    Change                in fair value of embedded conversion options |   |   | (358,291 | )      |   | --         |   |
|    Change                in fair value of warrants                    |   |   | 294,524  |   |   | --         |   |

|      Total                Other Income (Expenses) |   |   | (31,987    | )      |   | (15,745    | )      |
|----------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                                                       |   |   |       |   |   |       |   |
|                                                                       |   |   |       |   |   |       |   |
| NET                INCOME (LOSS)                                           |   | $      | 149,716    |   | $      | (3,390,587 | )      |
|                                                                       |   |   |       |   |   |       |   |
| BASIC                INCOME (LOSS) PER SHARE                               |   | $      | 0.00       |   | $      | (0.16      | )      |
|                                                                       |   |   |       |   |   |       |   |
| DILUTED                INCOME PER SHARE                                    |   | $      | 0.00       |   | $      | --         |   |
|                                                                       |   |   |       |   |   |       |   |
| WEIGHTED                  AVERAGE NUMBER OF SHARES OUTSTANDING             |   |   | 38,112,717 |   |   | 21,064,756 |   |
|                                                                       |   |   |       |   |   |       |   |
| DILUTED                  WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING     |   |   | 39,262,717 |   |   | 21,064,756 |   |
|                                                                       |   |   |       |   |   |       |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Statements of Changes in Stockholders’ Equity**

**Three      Months Ended March 31, 2005**

**As      Restated (Note 9)**

**(unaudited)**

|                                                                      |   | **Common                Stock** |           |       |   |                                          |   |   |       |                                          |   |                                   |   |
|---------------------------------------------------------------------------|--------|---------------------------------|----------------|------------|--------|-----------------------------------------------|--------|--------|------------|-----------------------------------------------|--------|----------------------------------------|--------|
|                                                                      |   | **Shares**                      |           | **Amount** |   | **Additional                Paid-in Capital** |   |        |       | **Stock                Subscription Payable** |   | **Accumulated                Deficit** |   | **Total** |   |
| Balance,                December 31, 2004                                 |   |                            | 37,605,202     |       | $      | 37,605                                        |   | $      | 12,491,361 |                                          |   |                                   | $      | 59,500 |   | $ | (2,935,461 | ) | $ | 9,653,005 |   |
| Common                stock issued for cash (unaudited)                   |   |                            | 2,577,618      |       |   | 2,578                                         |   |   | 386,922    |                                          |   |                                   |   | (59,500 | ) |   | - |   |   | 330,000 |   |
| Common                stock issued for stock offering costs (unaudited)   |   |                            | 288,249        |       |   | 288                                           |   |   | 121,110    |                                          |   |                                   |   | - |   |   | - |   |   | 121,398 |   |
| Stock                offering costs (unaudited)                           |   |                            | -              |       |   | -                                             |   |   | (121,398   | )                                             |   |                                   |   | - |   |   | - |   |   | (121,398 | ) |
| Common                stock issued for price protection (unaudited)       |   |                            | 2,222,779      |       |   | 2,223                                         |   |   | (2,223     | )                                             |   |                                   |   | - |   |   | - |   |   | - |   |
| Common                stock issued for services (unaudited)               |   |                            | 300,000        |       |   | 300                                           |   |   | 104,700    |                                          |   |                                   |   | - |   |   | - |   |   | 105,000 |   |
| Common                stock issued for bonus shares (unaudited)           |   |                            | 70,000         |       |   | 70                                            |   |   | 19,130     |                                          |   |                                   |   | - |   |   | - |   |   | 19,200 |   |
| Commission                paid on fund raising (unaudited)                |   |                            | -              |       |   | -                                             |   |   | (10,425    | )                                             |   |                                   |   | - |   |   | - |   |   | (10,425 | ) |
| Net                income for the period ended March 31, 2005 (unaudited) |   |                            | -              |       |   | -                                             |   |   | -          |                                          |   |                                   |   | - |   |   | 149,716 |   |   | 149,716 |   |
| **Balance,                March 31, 2005 (unaudited)**                    |   |                            | **43,063,848** |       | $      | 43,064                                        |   | $      | 12,989,177 |                                          |   |                                   | $      | - |   | $ | (2,785,745 | ) | $ | 10,246,496 |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Statements of Cash Flows**

**As      Restated (Note 9)**

**(Unaudited)**

|                                                                                                                                    |   |   | **For                the Three Months Ended****March                31,** |       |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|------------|
|                                                                                                                                    |   |   | **2005**                                                                  | ** ** | ** ** | **2004** |   |
| CASH                FLOW FROM OPERATING ACTIVITIES:                                                                                     |   |   |                                                                           |       |   |  |   |
|    Net                Income (Loss)                                                                                      |   | $      | 149,716                                                                   |       | $ | (3,390,567 | ) |
|    Adjustments                to reconcile net income (loss) to net                                                      |   |   |                                                                      |       |   |   |   |
|     cash                used by operating activities:                                                               |   |   |                                                                      |       |   |   |   |
|      Equity                instruments                                                                         |   |   | 124,200                                                                   |       |   | 2,541,293 |   |
|      Amortization                of deferred consulting expense                                                |   |   | 346,947                                                                   |       |   | 314,400 |   |
|      Change                in fair value of warrants and embedded conversion option                liabilities |   |   | 63,767                                                                    |       |   |   |   |
|      Bad                debt expense                                                                           |   |   | 5,009                                                                     |       |   | 187,016 |   |
|      Amortization                and depreciation expense                                                      |   |   | 77,069                                                                    |       |   | 41,559 |   |
|      Amortization                of debt discount                                                              |   |   | 17,807                                                                    |       |   | -- |   |
|    Changes                in operating assets and liabilities:                                                           |   |   |                                                                      |       |   |   |   |
|      Accounts                receivable                                                                        |   |   | (8,000                                                                    | )          |   | -- |   |
|      Prepaid                expenses                                                                           |   |   | (433,745                                                                  | )          |   | -- |   |
|      Decrease                (Increase) in other assets                                                        |   |   | (14,783                                                                   | )          |   | (7,629 | ) |
|      Increase                (decrease) in accounts payable & accrued expenses                             |   |   | (67,469                                                                   | )          |   | 40,349 |   |
|      Deferred                revenue                                                                           |   |   | (658,544                                                                  | )          |   | -- |   |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
|        Net                Cash Used by Operating Activities                                          |   |   | (398,026                                                                  | )          |   | (273,579 | ) |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                                                    |   |   |                                                                      |       |   |   |   |
|    Loan                to Commerce, Inc.                                                                                 |   |   | (5,009                                                                    | )          |   | (71,785 | ) |
|    Purchase                of fixed assets                                                                               |   |   | (3,111                                                                    | )          |   | (23,978 | ) |
|    Advances                to IBSG Group prior to consolidation                                                          |   |   | --                                                                        |       |   | (203,753 | ) |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
|      Net                Cash Used by Investing Activities                                                      |   |   | (8,120                                                                    | )          |   | (299,516 | ) |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                                                    |   |   |                                                                      |       |   |   |   |
|    Proceeds                from note payable                                                                             |   |   | 1,000,000                                                                 |       |   | -- |   |
|    Costs                related to note payable                                                                          |   |   | (19,725                                                                   | )          |   | -- |   |
|    Proceeds                from related party borrowings                                                                 |   |   | --                                                                        |       |   | 132,000 |   |
|    Payments                of related party borrowings                                                                   |   |   | (208,206                                                                  | )          |   | (57,243 | ) |
|    Proceeds                from capital lease                                                                            |   |   | --                                                                        |       |   | -- |   |
|    Payments                on capital leases                                                                             |   |   | (1,631                                                                    | )          |   | -- |   |
|    Proceeds                from stock subscription payable                                                               |   |   | --                                                                        |       |   | -- |   |
|    Stock                offering costs                                                                                   |   |   | (10,425                                                                   | )          |   | -- |   |
|    Common                stock issued for cash                                                                           |   |   | 330,000                                                                   |       |   | 742,555 |   |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
|        Net                Cash Provided by Financing Activities                                      |   |   | 1,090,013                                                                 |       |   | 817,312 |   |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
| NET                INCREASE IN CASH                                                                                                     |   |   | 683,867                                                                   |       |   | 244,217 |   |
| CASH                AT BEGINNING OF PERIOD                                                                                              |   |   | 8,421                                                                     |       |   | 5,559 |   |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |
| CASH                AT END OF PERIOD                                                                                                    |   | $      | 692,288                                                                   |       | $ | 249,776 |   |
|                                                                                                                                    |   |   |                                                                      |       |   |   |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Consolidated      Statements of Cash Flows**

**(Continued)**

**As      Restated (Note 9)**

**(Unaudited)**

|                                                                                                                       |   |   | **For                the Three Months Ended****March                31,** |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|
|                                                                                                                       |   |   | **2005**                                                                  |   |   | **2004** |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION                                                            |   |   |                                                                           |   |   |  |   |
|    Interest                paid                                                                             |   | $      | 2,462                                                                     |   | $ | 15,745 |   |
|    Income                taxes paid                                                                         |   | $      | --                                                                        |   | $ | -- |   |
| SCHEDULE                OF NON-CASH FINANCING ACTIVITIES                                                                   |   |   |                                                                      |   |   |   |   |
|    Common                stock issued for deferred consulting expenses                                      |   | $      | --                                                                        |   | $ | 7,545,600 |   |
|    Common                stock issued for services                                                          |   | $      | 124,200                                                                   |   | $ | 2,541,293 |   |
|     Initial                recording of debt discounts from issue costs and                derivatives |   | $      | 1,000,000                                                                 |   | $ | -- |   |

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes      to the Consolidated Financial Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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                unaudited 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. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes      to the Consolidated Financial Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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,*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 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes      to the Consolidated Financial Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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 Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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 Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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 2                nd                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 2                nd                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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes      to the Consolidated Financial Statements**

**March      31, 2005 and 2004**

**(unaudited)**

|   | 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) |   | $      | 2,523,075 |   |
| State                of California                    |   |   | 2,000,000 |   |
| BuzGate                                               |   |   | 100,000   |   |
|                                                  |   |   |      |   |
|                                                  |   | $      | 4,623,075 |   |
|                                                  |   |   |      |   |

|                                                  |   |   |      |
|-------------------------------------------------------|--------|--------|-----------|
| Corporate                Affairs Commission (Nigeria) |   | $      | 652,055   |   |
| State                of California                    |   |   | 391,489   |   |
| BuzGate                                               |   |   | 65,000    |   |
|                                                  |   |   |      |   |
|                                                  |   | $      | 1,108,544 |   |
|                                                  |   |   |      |   |

----

**IBSG        INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes        to the Consolidated Financial Statements**

**March        31, 2005 and 2004**

**(unaudited)**

|                                                  |   |   |    |
|-------------------------------------------------------|--------|--------|---------|
| Corporate                Affairs Commission (Nigeria) |   | $      | 404,144 |   |
| State                of California                    |   |   | 249,798 |   |
| BuzGate                                               |   |   | 35,000  |   |
|                                                  |   |   |    |   |
|                                                  |   | $      | 688,942 |   |
|                                                  |   |   |    |   |

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

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f.     | Accounting                for Derivatives The                Company evaluates its convertible debt, options, warrants or other                contracts to determine if those contracts or embedded components                of those                contracts qualify as derivatives to be separately accounted for under                Statement of Financial Accounting Standards 133 “Accounting for Derivative                Instruments and Hedging Activities” and related interpretations including                EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to,                and Potentially Settled in, a Company’s Own Stock”.  The                result of this accounting treatment is that the fair value of the                embedded                derivative is marked-to-market each balance sheet date and recorded                as a                liability. In the event that the fair value is recorded as a liability,                the change in fair value is recorded in the consolidated statement                of                operations as an other income or expense. Upon conversion or exercise                of a                derivative instrument, the instrument is marked to fair value at                the                conversion date and then that fair value is reclassified to equity.                Equity                instruments that are initially classified as equity that become subject                to                reclassification under SFAS 133 are reclassified to liability at                the fair                value of the instrument on the reclassification date. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | g.     | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**IBSG        INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes        to the Consolidated Financial Statements**

**March        31, 2005 and 2004**

**(unaudited)**

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**IBSG        INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes        to the Consolidated Financial Statements**

**March        31, 2005 and 2004**

**(unaudited)**

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**IBSG        INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes        to the Consolidated Financial Statements**

**March        31, 2005 and 2004**

**(unaudited)**

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

|   | The                Company’s 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 net losses through March 31, 2005 of $2,785,745.                Revenues had not been sufficient to cover its operating costs and                to allow                it to continue as a going concern. The potential proceeds from the                sale of                common stock, other contemplated debt and equity financing, and increases                in operating revenues from new development would enable the Company                to                continue as a going concern. There can be no assurance that the Company                can or will be able to complete any debt or equity financing. If                these are                not successful, management is committed to meeting the operational                cash                flow needs of the Company. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SecuritiesIssued:  Coupon:                                                PrincipalRepayments:       Maturity: Seniority                andSecurity:      ConversionPrice:       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 theinvestor                in common stock. If an event of default occurs at anytime                after the Issue Date and is not cured within 20 days, theDefault                Rate of 15% per annum applies.   On                the 12th month anniversary of the Closing Date, the Companyshall                be required to make principal repayments based on thefollowing                schedule: Equal monthly installments for theremainder                of the note in cash or at the option of the Company instock                at a price equal to a 15% discount of the company’s commonstock                price at time of repayment with a maximum price of adiscount                of 15% off the company’s common stock price at theIssue                Date. The                Notes will mature 24 months after the Issue Date. The                Notes will be senior to any and all indebtedness of TheCompany                except for a bank line currently being negotiated for upto                $500,000 and will be secured substantially by all assets ofthe Company                and its subsidiaries. At the option of theinvestor                this may be waived. Notwithstanding the foregoing,Investor                agrees to sign the appropriate subordination documentsrequested                by the bank. The                Notes issued will be convertible at the option of theholder,                at a fixed price of Price $.29, however, if theCompany’s                revenues for fiscal 2004 were not at least $5,000,000and                revenue results for the first quarter of fiscal 2005 are notat                least $2,000,000 then the conversion price will be reduced byone                third. For the purposes of this transaction only, revenueis                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 Statements**

**March      31, 2005 and 2004**

**(unaudited)**

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Class                AWarrants:                                                                              ForcedConversionFeature:                                                                                                                                                                                 Milestones:                                                                                                               | The                investors received Class A Warrants to purchase 3,225,807shares.                The Class A Warrants: warrants shall have a 5-year lifeand                an exercise price of $.312. The warrants shall be re-pricedif                the Company does not have revenues of at least $20 millionfor                2005 based on the following schedule: Less                than $20m - 15% discountedLess                than $15m - 30% discountedLess                than $10m - 45% discounted If,                following the Effective Date, all of the Milestonesspecified                below are satisfied on each trading day occurringduring                any period of ten consecutive trading days, then theCompany                may force conversion of the Notes by delivering to theInvestors                written notice thereof (a “Forced Conversion Notice”)on                the business day immediately following the last day of suchperiod                (the “Forced Conversion Date”). The Forced ConversionNotice                will specify the aggregate principal amount of the Notesthat                is subject to the forced conversion, which amount (i) shallnot                exceed 35% of the aggregate dollar volume traded on theCompany’s                principal market during the seven (7) trading daysimmediately                preceding the Forced Conversion Date and (ii) shallbe                allocated among the Investors on a pro rata basis. On theForced                Conversion Date, each Investor will be deemed to haveconverted                an amount of principal of its Debenture equal to (A)its                pro rata share of the aggregate principal amount specifiedin                the Forced Conversion Notice minus (B) the amount ofprincipal                converted by such Investor during the twenty tradingdays                immediately preceding the Forced Conversion Date. (a)                The Registration Statement must be effective and availablefor                resale of the Conversion Shares and Warrant Shares by theInvestors.(b)                The closing bid price for the common stock must be above$.60.(c)                No event of default, or event that could become an event ofdefault,                shall have occurred.(d)                The issuance pursuant to the Forced Conversion does notcause                (i) the number of shares beneficially owned by anyInvestor                to exceed 4.9% of the number of shares thenoutstanding. |

----

**IBSG      INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes      to the Consolidated Financial Statements**

**March      31, 2005 and 2004**

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Anti-dilutionRights:                             Restrictions                onother                financing               Insider                Lock-up:                                           FutureOfferings:                                           FundamentalChange:                                           RegistrationRights:                                                                                     |   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 Statements**

**March      31, 2005 and 2004**

**(unaudited)**

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

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

|   | The                Company evaluated whether or not the senior secured convertible notes                contain embedded conversion options which meet the definition of                derivatives under SFAS 133 “Accounting for Derivative Instruments and                Hedging Activities” and related interpretations. The Company concluded                that since the secured convertible debentures were subject to liquidated                damages requiring potential cash payments in the event the Company                does                not meet registration statement filing or effectiveness deadlines,                pursuant to the criteria of EITF 00-19, the embedded conversion option                must be accounted for as a derivative liability. In addition, the                Class A                and B warrants must be classified as liabilities for the same reason.                The Company recorded an embedded conversion options liability of                $716,652                and warrant liability relating to the warrants of $883,102 at                the March 17, 2005 funding date and recorded a debt discount $980,274                along with debt discounts for other issue costs to the lender of                $19,726                and a charge to change in fair value of embedded conversion option                and                warrants of $619,480 The debt discount is being amortized over the                term of                the notes. The change in fair value recorded as other income from                March                17, 2005 to March 31, 2005 was $555,713. The embedded conversion                option                and warrants were valued using a black-scholes option pricing model                with                the following assumptions:  Secured                Convertible Notes payable at March 31, 2005 were as follows: Secured                convertible                notes                     $1,000,000Debt                discount                                             982,193 Secured                convertible note,                net                $     17,807   Amortization                expense for the three months ended March 31, 2005 was                $17,807.  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | Warrants                      |   | Embedded                Conversion Options |
|-----------------------------------------|--------|-------------------------------|--------|--------------------------------------------|
|                                    |   | 3/17/05                       |   | 3/31/05                                    |   | 3/17/05 |   | 3/31/05 |
| Expected                volatility      |   | 111%                to 148%   |   | 111%                to 148%                |   | 148% |   | 148% |
| Expected                term            |   | 0.5                to 5 years |   | 0.5                to 5 years              |   | 2                years |   | 2                years |
| Annual                rate of dividends |   | 0                             |   | 0                                          |   | 0 |   | 0 |
| Discount                rate            |   | 4.14%                         |   | 4.14%                                      |   | 4.14 |   | 4.14 |

**IBSG        INTERNATIONAL, INC. AND SUBSIDIARIES**

**Notes        to the Consolidated Financial Statements**

**March        31, 2005 and 2004**

**(unaudited)**

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|   | NOTE                9 RESTATEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |  In                April 2006 management determined that the embedded conversion options                in                the $1 million senior secured convertible note, and the related warrants                should have been recorded as derivative liabilities as of March 17,                2005                with changes in fair value charged to other income (expense). The                effect at March 31, 2005 is as follows: (a) Increase                in warrant liability to $588,578(b) Increase                embedded conversion option liability to $455,464(c) Increase                in change in fair value net expense of $63,767(d) Decrease                to additional paid-in capital of $980,275 The                effect on net income and earning per share was a decrease of $63,767                and                $.01 per share, respectively for the three months ended March 31,                2005.  |

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

**Overview     **

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**Critical      Accounting Policies and Estimates**

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

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

**Liquidity      and Capital Resources**

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

|   | • | technological                obsolescence; and |
|--------|---------|------------------------------------------------|

|   | • | competition |
|--------|---------|-------------|

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**ITEM      3. CONTROLS AND PROCEDURES **

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OTHER INFORMATION

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

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Defaults Upon Senior 

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

|   |                            None |
|--------|----------------------------------------------------------------------------------------|

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

|   | 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. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**SIGNATURES**

| Date: June                  13, 2006 |   | **IBSG                INTERNATIONAL, INC.**  BY:                /S/ Michael Rivers——————————————Michael                RiversPresident,                Chief Executive Officer |
|-------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Date: June                  13, 2006 |   |    BY:                /S/ Geoffrey Birch——————————————Geoffrey                BirchPrincipal                Accounting Officer |
|-------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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