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


**Washington,
      D.C. 20549**










**(Mark
      One)**


**x**
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934
              FOR
                THE QUARTERLY PERIOD ENDED**MARCH
                31, 2007**




**OR**




**o**
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




Commission
      file number **000-29587**




**IBSG
      INTERNATIONAL, INC.**


(Name
      of
      small business issuer in its charter)


****


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






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


(Address
      and Zip Code of Principal Executive Offices)




Registrant’s
      Telephone Number: **(321)
      939-6321**




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


**None**




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


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


**(Title
      of Class)**




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





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




As
      of
      April 13, 2007, there were 8,537,098 shares of the registrant's common
      stock outstanding.


Transitional
        Small Business Disclosure Format (Check one): Yes [ ] No [X]




-1-





**IBSG
      INTERNATIONAL, INC.**





**Part
      I. Financial Information**




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




(a)
            Consolidated
                Balance Sheets as of March 31, 2007
                (unaudited)




(b)
            Consolidated
                Statements of Operations for the Three Months
                March 31, 2007 and 2006
                (unaudited)





(c)
            Consolidated
                Statement of Cash Flow for the Three Months
                Ended March 31, 2007 and 2006
                (unaudited)





(d)
            Notes
                to Consolidated Financial Statements
                (unaudited)




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




Item
      3. Controls and Procedures




**Part
      II. Other Information**





Item
      1. Legal
      Proceedings




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




Item
      3. Defaults upon Senior
      Securities




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




Item
      5. Other
      Information




Item
      6.
      Exhibits




Signatures




-2-




PART
      I
      FINANCIAL INFORMATION





General





The
      accompanying reviewed financial statements have been prepared in accordance
      with
      the instructions to Form 10-QSB. Therefore, they do not include all information
      and footnotes necessary for a complete presentation of financial position,
      results of operations, cash flow, and stockholders’ equity in conformity with
      generally accepted accounting principles. Except as disclosed herein, there
      has
      been no material change in the information disclosed in the notes to the
      financial statements included in the company’s annual report on Form 10-KSB for
      the year ended December 31, 2006. In the opinion of management, all adjustments
      considered necessary for a fair presentation of the results of operations and
      financial position have been included and all such adjustments are of a normal
      recurring nature. Operating results for the quarter ended March 31, 2007 are
      not
      necessarily indicative of the results that can be expected for the year ended
      December 31, 2007.




-3-


**IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      FINANCIAL STATEMENTS**




**March
      31, 2007**


**(Unaudited)**




-4-




Item
      1. Financial Statements


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Balance Sheet


(Unaudited)








ASSETS




CURRENT
                ASSETS
            
            
            **March
                31, 2007**Cash
            
            $
            705,881Accounts
                receivable, net
            
            
            17,908,762Prepaid
                expenses
            
            
            418,165Total
                Current Assets
            
            
            19,032,808FURNITURE,
                FIXTURES AND SOFTWARE, NET
            
            
            983,016OTHER
                ASSETSAccount
                receivable - long term
            
            
            1,736,433Deposits
              and other
              assets
            
            
            200,273Deferred
                consulting services
            
            
            3,243,371Goodwill
            
            
            38,000Total
                Other Assets
            
            
            5,218,077TOTAL
                ASSETS
            
            $
            25,233,901




-5-




LIABILITIES
      AND STOCKHOLDERS’ EQUITY




CURRENT
                LIABILITIES
            
            **March
                31, 2007**Accounts
                payable and accrued expenses
            
            $789,669Accrued
                tax provision
            
            2,950,402Deferred
                revenue
            
            2,966,740Capital
                leases payable
            
            2,687Total
                Current Liabilities
            
            6,709,498COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS’
                EQUITYCommon
                stock authorized 100,000,000 shares at $0.001par
                value; 7,052,181 shares issued and outstanding
            
            
            7,052Additional
                paid-in capital
            
            
            16,230,838Retained
                Earnings
            
            
            2,286,513Total
                Stockholders’ Equity
            
            
            18,524,403TOTAL
                LIABILTIES AND STOCKHOLDERS’ EQUITY
            
            $
            25,233,901


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




-6-




**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Statements of Operations


(Unaudited)





**Three
                months ended**
              **March
                31,****2007**
            
            
            **2006****Sales**
            
            
            
            $
            3,030,716
            
            
            
            $
            1,698,811**Cost
                of Sales**
            
            
            
            
            89,093
            
            
            
            
            68,043**Gross
                Profit**
            
            
            
            
            2,941,623
            
            
            
            
            1,630,768**Operating
                Expenses**Amortization
                and depreciation
            
            
            
            
            7,904
            
            
            
            
            10,394Stock
                based compensation
            
            
            
            
            297,665
            
            
            
            
            346,589Salary
            
            
            
            
            240,167
            
            
            
            
            213,955General
                and administrative
            
            
            
            
            383,814
            
            
            
            
            254,704Bad
                debt expense
            
            
            
            
            176,000
            
            
            
            
            -**Total
                Operating Expenses**
            
            
            
            
            1,105,550
            
            
            
            
            850,642**Income
                from Operations**
            
            
            
            
            1,836,073
            
            
            
            
            780,126**Other
                Income (Expense)**Interest
                income
            
            
            
            
            32,946
            
            
            
            
            -Loss
                on debt settlement and warrants
            
            
            
            
            -
            
            
            
            
            (470,897
            )Change
                in fair value of embedded options
            
            
            
            
            -
            
            
            
            
            (18,683
            )Change
                in fair value of warrants
            
            
            
            
            -
            
            
            
            
            (61,181
            )Tax
                provision
            
            
            
            
            (804,753
            )
            
            
            
            (12,188
            )**Total
                Other Income (Expense), net**
            
            
            
            
            (771,807
            )
            
            
            
            (562,849
            )**Net
                Income**
            
            
            
            **$**
            **1,064,266**
            ****
            ****
            ****
            **$**
            **217,177**
            ****
            ****
            ********
            ****
            ****
            ****
            
            ****
            ****
            ****
            ****
            
            ****
            ****
            ******Net
                Income Per Share - Basic And Fully Diluted**
            ****
            ****
            ****
            **$**
            **0.15**
            ****
            ****
            ****
            **$**
            **0.03****Weighted
                average number of shares outstanding during the period - Basic And
                Fully
                Diluted**
            
            
            
            
            **7,072,895**
            
            
            
            
            **6,225,577**




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




-7-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Statements of Cash Flows


(Unaudited)




**For
                the Three Months Ended********March
                31,****2007**
            
            **2006**CASH
                FLOW FROM OPERATING ACTIVITIES:Net
                Income
            
            $
            1,064,266
            
            $
            217,177Adjustments
                to reconcile net income (loss) to netcash
                used by operating activities:Recognition
                of deferred consulting fee
            
            
            297,665
            
            
            293,668Amortization
                and depreciation expense
            
            
            96,997
            
            
            78,436Bad
                debt expense
            
            
            176,000
            
            
            -Change
                in fair value of warrants
            
            
            -
            
            
            -Loss
                on settlement of debt
            
            
            -
            
            
            470,897Stock
                issued for services
            
            
            -
            
            
            20,000Cancellation
                of shares previously issued for services
            
            
            (18)
            
            
            -Changes in operating assets and liabilities:(Increase)
                decrease accounts receivable
            
            
            (2,330,941
            )
            
            1,985,879(Increase)
                decrease in prepaids
            
            
            36,588
            
            
            42,231Increase
                (decrease) in other assets
            
            
            (25,305
            )
            
            (3,004,164
            )Increase
                (decrease) in accounts payable & accrued expenses
            
            
            (174,868
            )
            
            104,646Increase
                (decrease) accrued tax provision
            
            
            828,763
            
            
            -Increase
                (decrease) deferred revenue
            
            
            (232,721
            )
            
            (443,040
            )Net
                Cash Provided (Used) by Operating Activities
            
            
            (263,574
            )
            
            (234,270
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of fixed assets
            
            
            (17,847
            )
            
            (15,907
            )Net
                Cash (Used) by Investing Activities
            
            
            (17,847
            )
            
            (15,907
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Contribution
                of capital
            
            
            25,000
            
            
            -Payments
                on note payable
            
            
            -
            
            
            (250,000
            )Payments
                on capital leases
            
            
            (1,344
            )
            
            (3,515
            )Common
                stock issued for cash
            
            
            -
            
            
            364,270Net
                Cash Provided by Financing Activities
            
            
            23,656
            
            
            110,755NET
                INCREASE (DECREASE) IN CASH
            
            
            (257,765)
            
            
            139,422CASH
                AT BEGINNING OF PERIOD
            
            
            963,646
            
            
            1,297,448CASH
                AT END OF PERIOD
            
            $
            705,881
            
            $
            1,158,026





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




-8-





IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES


Consolidated
      Statements of Cash Flows (Continued)


(Unaudited)




**For
                the Three Months Ended****March
                31,****2007**
            
            **2006**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONInterest
                paid
            
            $
            -
            
            $
            2,462Income
                taxes paid
            
            $
            -
            
            $
            -SCHEDULE
                OF NON-CASH FINANCING ACTIVITIESCommon
                stock issued for services
            
            $
            -
            
            $
            124,200Initial
                recording of debt discounts from issue costs and
                derivatives
            
            $
            -
            
            $
            1,000,000





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




-9-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notesto
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      1
      -  BASIS
      OF
      FINANCIAL STATEMENT PRESENTATION





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared by the Company pursuant to the rules and regulations of the Securities
      and Exchange Commission. Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted in accordance with such rules and regulations. The
      information furnished in the interim condensed consolidated financial statements
      includes normal recurring adjustments and reflects all adjustments, which,
      in
      the opinion of management, are necessary for a fair presentation of such
      financial statements. Management believes the disclosures and information
      presented are adequate to make the information not misleading, it is suggested
      that these interim condensed consolidated financial statements be read in
      conjunction with the Company’s most recent 8-K filings and audited financial
      statements and notes thereto included in its December 31, 2006 Annual Report
      on
      Form 10-KSB. Operating results for the three months ended March 31, 2007
      are not necessarily indicative of the results that may be expected for the
      year
      ending December 31, 2007.





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





a.  Accounting
      Method




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




b.  Estimates




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





c.  Cash
      and
      Cash Equivalents




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




-10-





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




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition





**Revenue
      Recognition**





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





*Background*





We
      sell
      our services and license our products thru master licensee arrangements with
      state operated Small Business Development Centers (“SBDC”), Fortune 1000
      Corporations, Business Associations, Banking Institutions and International
      Economic Development Projects. These organizations represent our current
      customer base, and focus on servicing or supporting small and medium sized
      enterprises (SME). Our target market is comprised of emerging enterprises in
      need of a suite of Business-to-Business products or Web enabled capabilities,
      but lack the resources required for internal development or are focusing their
      resources on growth by outsourcing these capabilities. Master license
      arrangements currently produce the majority of our revenue. We utilize written
      contracts in the form of master license arrangements as the means to establish
      the terms and conditions upon which our products and services are sold.





*Master
      License Customer Characteristics*





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


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





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





o
            professional
                services are recognized as services are
                delivered.




*General*





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





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




-11-





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




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




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


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





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





3.
            Delivery
                occurs,





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





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





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





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





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





*License
      Revenue*





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





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




-12-




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




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition (Continued)





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





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





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





*Professional
      Services Revenue*





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





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





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




*Factors
      for Government or Quasi-Government Agency Customers*





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




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





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





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





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




-13-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition (Continued)





*Deferred
      Revenue*





Deferred
      revenue result from fees billed to customers for which revenue has not yet
      been
      recognized. Deferred revenue generally represents PCS and training services
      not
      yet rendered and deferred until all requirements under SOP 97-2 are met.
      Deferred revenue is recognized upon delivery of our products, as services are
      rendered, or as other requirements requiring deferral under SOP 97-2 are
      satisfied.




Allowance
        for Doubtful Accounts and Sales Returns
  A
        considerable amount of judgment is required when we assessed the realization
        of
        accounts receivables, including assessing the probability of collection and
        the
        current credit-worthiness of each customer. If the financial condition of
        our
        customers were to deteriorate, resulting in an impairment of their ability
        to
        make payments, an additional provision for doubtful accounts might be required.
        A provision for doubtful accounts would initially be recorded based on our
        historical experience, and then adjusted at the end of each reporting period
        based on a detailed assessment of our accounts receivable and allowance for
        doubtful accounts. In estimating the provision for doubtful accounts, we
        consider (i) the type of entity (government, commercial, retail) and the
        aging
        of the accounts receivable; (ii) trends within and ratios involving the age
        of
        the accounts receivable; (iii) the customer mix in each of the aging categories
        and the nature of the receivable, such as whether it derives from license,
        professional services or maintenance revenue; (iv) our historical provision
        for
        doubtful accounts; (v) the credit worthiness of the customer; and (vi) the
        economic conditions of the customers industry, whether the entity is a national
        government, as well as general economic conditions, among other factors.
        National governments accounts are characterized as fully collectible but
        slow
        payers. The bulk of our historic client base is primarily composed of national
        governments, our periodic valuations do not indicate that an allowance for
        doubtful accounts was necessary at this time.
  In
        the
        first quarter of 2007, the Company has expanded its customer base outside
        of
        national governmental account. Due to this expansion, management has currently
        reevaluated its policies for establishing an allowance for doubtful accounts
        and
        sales return allowance specific to this new customer. This new customer base
        includes state sponsored economic development councils and other
        quasi-governmental agency’s along with corporate based SBDC’s and SME’s. The
        addition of these new customer types generally represents a higher level
        of
        business risk than do national government customers. Management is changing
        its
        estimates specific to this new customer base to use a percentage of sales
        revenue as the basis for its allowance. Management believes that this change
        better addresses the diverse nature of its future customer base. This allowance
        is not established for any particular customer but will be applied to the
        new
        customer types. The percentage will be applied consistently among all contracts
        generated from new customer types. Management has determined that 5% of sales
        should provide an adequate allowance. As of March 31, 2007 that amount was
        $176,000.
  In
        summary, estimates for establishing an allowance for doubtful accounts and
        sales
        returns applicable to national government account will be based on our existing
        method referred to above. Estimates for allowance for doubtful accounts and
        sales returns applicable to the new customer types will be based on the
        percentage of sales method.


-14-




**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




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





We
      currently have four (4) major customers, the State of California, Drako Oil
      of
      Africa, the Industrial Development Corporation - South Africa Initiative and
      the
      Ministry of Trade and Industry of the Kenya Government (Kenya). This does not
      reflect sub-licenses of our customers. Our accounts receivable are as follows
      at
      March 31, 2007:




Current
                - Account ReceivableState
                of California
            
            $
            3,060,620Drako
                Oil
            
            
            3,500,000Industrial
                Development Corporation
            
            
            6,256,430Kenya
            
            
            4,300,000$
            17,117,050Other
              Receivables
            
            
            967,712Less
              Allowance for Bad Debts
            
            
            (176,000
            )Total
              Current Account Receivable
            
            $
            17,908,762Accounts
                Receivable - Long termGalaxy
                Five  (net of discount)
            
            $
            1,736,433Total
                Long term receivable
            
            $
            1,736,433




We
      recognized revenue of the following amounts for the three months ended March
      31,
      2007:




Other
                Revenue
            
            $
            10,495State
                of California
            
            
            173,570DrakoOil
            
            
            403,846Kenya
            
            
            827,945Industrial
                Development Corporation
            
            
            1,614,860Total
                Recognized Revenue
            
            $
            3,030,716





Deferred
      revenue consisted of the following at March 31, 2007:




State
                of California
            
            $
            206,123Kenya
            
            
            666,823Drako Oil
            
            
            821,154Industrial
                Development Corporation
            
            
            1,272,640Total
                Deferred Revenue
            
            $
            2,966,740




-15-







**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


March
      31,
      2007





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




e.  Equity
      Transactions





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





f.  Depreciation
      and Amortization





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




NOTE
      3
      -  EQUITY
      ISSUANCES





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




-16-




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





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





Management’s
      Discussion and Analysis of Consolidated Results of Financial Condition and
      Results of Operations (“MD&A”) should be read in conjunction with the
      consolidated financial statements included herein. Further, this quarterly
      report on Form 10-QSB should be read in conjunction with the Company’s
      Consolidated Financial Statements and Notes to Consolidated Financial Statements
      included in its 2005 Annual Report on Form 10-KSB. In addition, you are urged
      to
      read this report in conjunction with the risk factors described herein.


****


**Overview**




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





A-Division
      IT Systems, LTD. (A-Division), a United Kingdom based subsidiary, provides
      business development support in IBSG International’s (IBSGI) South African
      project. A-Division is a subcontractor to BAE Systems and provides IT projects
      for BAE’s offset programs by establishing IT Hubs. A-Division is engaged in
      international business development and consultancy in the Technology sector
      and
      is a subcontractor for BAE System’s offset credit projects around the world. The
      purchase gives IBSGI participation in e-commerce platform (BizWorld Pro,
      copyrighted and trade mark protected) projects for Small-Midsized Enterprises
      [SMEs] internationally in countries beyond South Africa. IBSGI’s relationship
      with A-Division and BAE has already brought the South African project and
      opportunities with similar projects in Saudi Arabia, Malaysia, members of the
      EU
      and India.





IBSGroup
      offers BizWorld Pro as a solution to enhance the operating efficiency and create
      revenue for State Small Business Development Centers, business associations
      (e.g., Chambers of Commerce) and Fortune 1000 corporations through the licensing
      its unique turnkey digital service center software, which provides a broad
      range
      of digital budgetary, administrative and commercial services (B2B, e-commerce,
      government to business and enterprise business services) on a single
      platform.





Secure
      Blue, Inc. provides, in management’s opinion, an economical Sarbanes-Oxley (SOX)
      compliance and security software suite, Secure Blue Pro. This product is
      targeted to small and mid cap public companies as well as private companies
      that
      work with public companies and must be in compliance with SOX as a result of
      working with a public company.





IBSD,
      Inc. will provide ongoing support of International's other subsidiaries, IBS
      Group, Secure Blue, and A-Division IT. The company provides development, system
      support and secure data storage, and maintains offices in the US and India,
      where its current offshore development and support team is located.





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




-17-




**Critical
      Accounting Policies and Estimates**




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





•
      Revenue recognition;


•
      Estimating sales returns and the allowance for doubtful accounts;


•
      Value of long lived assets including purchased software;


•
      Valuation of services paid for with common stock.




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





*Background*





We
      sell
      our services and license our products thru master licensee arrangements with
      state operated Small Business Development Centers (“SBDC”), Fortune 1000
      Corporations, Business Associations, Banking Institutions and International
      Economic Development Projects. These organizations represent our current
      customer base, and focus on servicing or supporting small and medium sized
      enterprises (SME). Our target market is comprised of emerging enterprises in
      need of a suite of Business-to-Business products or Web enabled capabilities,
      but lack the resources required for internal development or are focusing their
      resources on growth by outsourcing these capabilities. Master license
      arrangements currently produce the majority of our revenue. We utilize written
      contracts in the form of master license arrangements as the means to establish
      the terms and conditions upon which our products and services are sold.





*Master
      License Customer Characteristics*





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


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





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





o
            professional
                services are recognized as services are delivered.




-18-





*General*





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





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





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


5.
            Persuasive
                evidence of an arrangement exists, which consists of a written,
                non-cancelable contract signed by both the customer and us.





6.
            The
                fee is fixed or determinable when we have a signed contract that
                states
                the agreed upon fee for our products and/or services, which specifies
                the
                related payment terms and conditions of the arrangement and it is
                not
                subject to refund or adjustment. We have standard payment terms,
                typically
                net 60 days, included in our contracts.





7.
            Delivery
                occurs,




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





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





8.
            Collection
                is probable as determined by a credit evaluation, the customer’s payment
                history (either with other vendors or with us in the case of follow-on
                sales and renewals) and financial position.





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





*License
      Revenue*





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





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




-19-





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





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





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





*Professional
      Services Revenue*





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





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





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





*Factors
      for Government or Quasi-Government Agency Customers*





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


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





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





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





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




*Deferred
      Revenue*




Deferred
      revenue result from fees billed to customers for which revenue has not yet
      been
      recognized. Deferred revenue generally represents PCS and training services
      not
      yet rendered and deferred until all requirements under SOP 97-2 are met.
      Deferred revenue is recognized upon delivery of our products, as services are
      rendered, or as other requirements requiring deferral under SOP 97-2 are
      satisfied.




-20-





**Market
      for our products**


The
      potential market for the BizWorld Data System includes any entity that has
      a
      customer, vendor or membership base comprised of small to mid size business
      enterprises. The potential markets for Secure Blue are public companies required
      to establish internal control systems or companies that require tracking of
      sensitive files. All current and projected revenues for the Company are
      associated with the digital commerce platform, BizWorld Pro and the recurring
      revenues projected from both license revenues and on going monthly subscription
      fees from small to mid sized enterprises. The projected market size for BizWorld
      Pro is greater than $15 billion annually. No assurances can be made that such
      market shall be realized or result in profitability.




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




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


Many
      states operate Small Business Development Centers funded by a combination of
      US
      Small Business Administration and state resources. The purpose of these centers
      is to provide a range of assistance and training to the small and mid-size
      business sector. We currently have a license agreement with California's small
      business development center system which has fifty regional offices, and an
      agreement with the state of Connecticut to install such a system for their
      12
      regional offices.




**Fortune
      1000 Corporations:**


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




**Business
      Associations:**


Other
      business associations such as local chambers of commerce have membership or
      offer services to small and medium size businesses. We seek to license the
      BizWorld Data System to these organizations as a way of providing additional
      services and generate additional revenues.





**Banking
      Institutions**


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




**Economic
      Development Projects**


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




-21-





**Foreign
      Markets**


In
      2004
      we signed a license agreement with an agency of the country of Nigeria. We
      are
      positioning the product as a national solution for the support and development
      of the small to mid size business community (SMEs) and provide access to the
      same by larger corporations and government entities. By providing the ability
      to
      manage developing businesses on the internet while creating a robust internet
      presence, small to mid size businesses will be enabled for domestic and
      international business. In 2005, we signed the Republic of South Africa and
      a
      SME development and support platform in conjunction with the BAE Systems offset
      program. Additional business development efforts through A-Division IT Systems
      under this program and directly with various foreign governments are currently
      occurring in multiple other nations. No assurances can be given that any new
      business will materialize from these efforts.




**Secure
      Blue Markets**


Secure
      Blue will be targeting small to mid size cap public companies. Because of the
      broad encompassing nature of the SOX legislation, any private company doing
      business with a public company, both in the US and abroad, must be SOX compliant
      for those records dealing with that business. This market represents a projected
      value of $3-$4 billion. Currently in the US there are an estimated 10,000 small
      cap companies and over 10,000 private companies doing business with public
      companies. No assurances can be made that such market shall be realized or
      result in profitability.





**International
      Markets**


Many
      aspects of the Sarbanes-Oxley Act are to be incorporated into new European
      legislation later in 2005 and this will lead to rapid growth and a huge global
      market for SOX solutions well in excess of the US projection. Additionally,
      foreign companies doing business with US public companies will be required
      to be
      SOX compliant as well. It is our objective to establish Secure Blue in the
      US
      before expanding into European and Asian markets.




**Sales
      & Market Strategy**


Intelligent
      Business Systems Group, Inc. current marketing effort primarily consists of
      “word of mouth” referrals from existing or potential customers, targeted
      prospect awareness campaigns, various conventions and trade shows and cold
      calling entities with resources and marketing research. The most effective
      and
      powerful marketing tool is the demonstration of the system and its comprehensive
      features. Demonstrations and contract negotiations are handled on a personal
      basis.





To
      achieve our growth plans Intelligent Business Systems Group, Inc. needs to
      employ more business developers, present a more visible presence at conventions
      and accelerate contract implementation. We also anticipate the need to provide
      enhanced training and marketing services to its customers, which can best be
      achieved by acquiring existing service companies with expertise in that field.
      The addition of more technical staff will accelerate contract implementation
      and
      add-on work (system modifications) as the customer base is extended. There
      can
      be no assurance that we will be able to meet our growth plans or have sufficient
      financial resources to provide the enhanced services.





Secure
      Blue was launched in mid-April of 2005 and in May 2005 we began a series of
      online, live demos to potential channel partners (i.e. accounting and law firms,
      brokerage firms and potential end users). Our distribution strategy is to
      develop third-party channels through professional advisors to publicly traded
      companies. These include investor relations firms, law firms, accountancy firms,
      banks, compliance consultancies, corporate finance advisors, venture capital
      companies and other strategically important organizations. We are approaching
      these potential channel partners individually and demonstrating SOX Pro live
      online to create a dialogue leading to long-term business partnerships. We
      will
      continue to focus our sales activity on third-party channels until we are
      satisfied we can achieve significant traction in the market place. Our
      third-party channels will attack the end-user market through their existing
      client base.





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




**Marketing,
      Sales and Support**


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




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





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





**Customer
      Support**


Our
      management believes that strong customer support is crucial to both the initial
      marketing of its products and maintenance of customer satisfaction, which in
      turn will enhance our reputation and generate repeat orders. In addition, we
      believe that customer interaction and feedback involved in our ongoing support
      functions provide us with information on market trends and customer requirements
      that is critical to future product development efforts. Intelligent Business
      Systems Group, Inc. provides toll free and web site support. However, the first
      line of support is built into the systems through a self diagnostic feature
      which is enhanced by the system being capable of providing instructions to
      navigate a user error or auto report a potential system “bug” which is directed
      to the technical center’s program team which can correct the anomaly on-line and
      auto down load the correction to all systems.




Secure
      Blue believes that effective and speedy customer support is crucial to the
      long-term success of SOX Pro. As a mission-critical application, SOX Pro must
      be
      totally reliable and the support available must be of the highest order. We
      will
      be including 24/7 support as an integral part of the SOX Pro package with an
      ongoing annual fee of 20% of the first years license cost. Our team based in
      Florida will provide technical support for end users and channel
      partners






-22-





**Research
      and Development**


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




**Competition**


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





The
      marketplace is full of so-called point products offering solutions to various
      elements of Sarbanes-Oxley compliance. Virtually all of these solutions are
      heavily biased in price and complexity toward the larger corporation. Secure
      Blue has a major cost advantage over the competition and is a more comprehensive
      SOX solution. We have built the solution on a comprehensive and proven security
      software solution and added sophisticated enhancements such as the PDA access
      for compliant and sub compliant officers to have access to data on activity
      of
      sensitive information. This provides our customer with the required base
      criteria of SOX which is a secure network with sophisticated functionality
      of
      SOX specific monitoring. The majority of the competition has established
      distribution infrastructures built on a range of existing and complementary
      products. We are confident that we can leverage the success of the other
      subsidiary, IBS Group, and their network. Once our third-party channel network
      is established we will focus on attempting take a significant share of the
      small-mid cap company market.





**Results
      of Operations for the Three Months ended March 31, 2007 and
      2006**




The
      Company reflected an increase in sales revenues for the three months ended
      March
      31, 2007 to $3,030,716 compared to sales revenues for the three months ended
      March 31, 2006 of $1,698,811, an increase of $1,331,905. The majority of this
      additional revenue was from Industrial Development Corporation - South Africa
      Initiative who signed a master licenses for $2,200,000. The Company had deferred
      revenues for the three months ended March 31, 2007 of $2,966,740 (deferred
      pending recognition based on amortization policies previously stated; See Note
      2
      of the Financial Statements).




**Operating
      Expenses for the Three Months ended March 31, 2007 and
      2006**




The
      Company had operating expenses of $1,105,550 for the three months ended March
      31, 2007 compared to operating expenses of $850,642 for the three months ended
      March 31, 2006, an increase of $254,908. The primary reason for the increase
      was
      due to bad debt allowance of $176,000 and professional expense of
      $94,500.  Management
      has determined that an allowance should be set aside due to the current and
      potential growth of its client bases.  This
      allowance is not for set aside for any specific customer. This reflects an
      operating profit for the three months ended March 31, 2007 of $1,836,073 as
      compared to $780,126 for the three months ending March 31, 2006.




**Other
      Expense for the Three Months ended March 31, 2007 and
      2006**





The
      company had other expenses for the three months ended March 31, 2007 was
      $771,807 compared to other expenses of $562,849 for the three months
      ended March 31, 2006. The increase in other expenses for 2007 was the accrual
      of
      taxes of 804,753 compared to an accrual of $12,188 in 2006. The Net Income
      reported for the three months ending March 31, 2007 was $1,064,266.




-23-





**Liquidity
      and Capital Resources**




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




We
      currently have four (4) major customers, the State of California, Kenya- Africa,
      and Industrial Development Corporation a South Africa Initiative and Drako
      Oil.
      Our current accounts receivable are as follows at March 31, 2007:





Other
                receivables
            
            $
            967,712State
                of California
            
            
            3,060,620Drako
              Oil
            
            
            3,500,000Kenya
            
            
            4,300,000Industrial
                Development Corporation
            
            
            6,256,430$
            18,804,762




Allowance
                for bad debt
            
            
            (176,000
            )Current
                Accounts Receivable, net of bad debt
            
            $
            17,908,762Long
                Term Accounts ReceivableGalaxy
                5 (net of discount)
            
            $
            1,736,433




Management
      expects to close an offering of securities in which the Company shall use the
      proceeds to fund its business plan.




**FACTORS
      THAT COULD AFFECT FUTURE RESULTS**




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




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




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




·
            uncertain
                commercial acceptance of our products;·
            technological
                obsolescence; and·
            Competition




-24-





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





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





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




A
        considerable amount of judgment is required when we assessed the realization
        of
        accounts receivables, including assessing the probability of collection and
        the
        current credit-worthiness of each customer. If the financial condition of
        our
        customers were to deteriorate, resulting in an impairment of their ability
        to
        make payments, an additional provision for doubtful accounts might be required.
        A provision for doubtful accounts would initially be recorded based on our
        historical experience, and then adjusted at the end of each reporting period
        based on a detailed assessment of our accounts receivable and allowance for
        doubtful accounts. In estimating the provision for doubtful accounts, we
        consider (i) the type of entity (government, commercial, retail) and the
        aging
        of the accounts receivable; (ii) trends within and ratios involving the age
        of
        the accounts receivable; (iii) the customer mix in each of the aging categories
        and the nature of the receivable, such as whether it derives from license,
        professional services or maintenance revenue; (iv) our historical provision
        for
        doubtful accounts; (v) the credit worthiness of the customer; and (vi) the
        economic conditions of the customers industry, whether the entity is a national
        government, as well as general economic conditions, among other factors.
        National governments accounts are characterized as fully collectible but
        slow
        payers. The bulk of our historic client base is primarily composed of national
        governments, our periodic valuations do not indicate that an allowance for
        doubtful accounts was necessary at this time.
  In
        the
        first quarter of 2007, the Company has expanded its customer base outside
        of
        national governmental account. Due to this expansion, management has currently
        reevaluated its policies for establishing an allowance for doubtful accounts
        and
        sales return allowance specific to this new customer. This new customer base
        includes state sponsored economic development councils and other
        quasi-governmental agency’s along with corporate based SBDC’s and SME’s. The
        addition of these new customer types generally represents a higher level
        of
        business risk than do national government customers. Management is changing
        its
        estimates specific to this new customer base to use a percentage of sales
        revenue as the basis for its allowance. Management believes that this change
        better addresses the diverse nature of its future customer base. This allowance
        is not established for any particular customer but will be applied to the
        new
        customer types. The percentage will be applied consistently among all contracts
        generated from new customer types. Management has determined that 5% of sales
        should provide an adequate allowance. As of March 31, 2007 that amount was
        $176,000.
  In
        summary, estimates for establishing an allowance for doubtful accounts and
        sales
        returns applicable to national government account will be based on our existing
        method referred to above. Estimates for allowance for doubtful accounts and
        sales returns applicable to the new customer types will be based on the
        percentage of sales method.


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




**ITEM
      3. CONTROLS AND PROCEDURES**




a)
            Evaluation
                of Disclosure Controls and
                Procedures.





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





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





b)
            Changes
                in Internal Control over Financial
                Reporting




During
      the Quarter ended March 31, 2007, there was no change in our internal control
      over financial reporting (as such term is defined in Rule 13a-15(f) under the
      Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.




-25-





. PART
      II OTHER INFORMATION








Item
      1.Legal
      Proceedings




Not
      applicable





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




Not
      applicable




Item
      3. Defaultsupon Senior Securities




Not
      applicable





Item
      4. Submissionof Matters to a Vote of Security
      Holders




None.





Item5.
      Other Information




Not
      applicable





Item6.
      Exhibits





A. Exhibits:




31.1
            Certification
                of Chief Executive Officer Pursuant
                to Section 302 of the Sarbanes-Oxley Act31.2
            Certification
                of Principal Financial and Accounting
                Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act.





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




-26-




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(b) of the Securities Exchange Act of
      1934, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized, in the City of Celebration, Florida,
      on
      May 11, 2007.






**IBSG
                INTERNATIONAL, INC.**Date: May
                11, 2007
            By:
            /s/ Michael
                RiversMichael
                RiversPresident,
                Chief Executive Officer





**IBSG
                INTERNATIONAL, INC.**Date: May
                11, 2007
            By:
            /s/ Geoffrey
                BirchGeoffrey
                BirchPrincipal
                Accounting Officer




-27-