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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 --------------

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                    FOR THE FISCAL YEAR ENDED MARCH 31, 2008.

                        COMMISSION FILE NUMBER 001-13725

                                 --------------

                           ILINC COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               DELAWARE                                    76-0545043
     (STATE OR OTHER JURISDICTION                       (I.R.S. EMPLOYER
   OF INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)

                         2999 N. 44TH STREET, SUITE 650
                             PHOENIX, ARIZONA 85018
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                 (602) 952-1200
              (Registrant's telephone number, including area code)

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<S>   <C>
Securities registered pursuant to Section 12(b) of the Act      Name of Exchange on Which Registered
             COMMON, $0.001 PAR VALUE PER SHARE                       AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act
                            NONE
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                                 --------------

         Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No ( X )

         Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes ( ) No ( X )

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ( X ) No ( )

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. (X)

         Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of "large accelerated filer", "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

            Large accelerated filer  ( )    Accelerated filer ( )
        Non-Accelerated Filer ( )    Smaller Reporting Company  (X)

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

         As of September 30, 2007, the last business day of the registrant's
most recently completed second fiscal quarter, 33,834,693 shares of common stock
were outstanding and the aggregate market value of the on that date was
approximately $20,126,187 (based upon the closing price on the American Stock
Exchange as of September 30, 2007 of $0.63 per share). Aggregate market value is
estimated solely for the purposes of this report. This shall not be construed as
an admission for the purposes of determining affiliate status.

         The number of shares of common stock of the registrant, par value
$0.001 per share, outstanding at June 25, 2008 was 34,623,816 net of shares held
in treasury.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the definitive Proxy Statement relating to the Annual
Meeting of Stockholders of the registrant to be held on August 15, 2008 are
incorporated by reference into Part III of this Report.

================================================================================


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FORM 10-K REPORT INDEX


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<S>     <C>
                                             PART I
Item 1.      Business..................................................................................4
Item 1A.     Risk Factors..............................................................................7
Item 2.      Properties...............................................................................10
Item 3.      Legal Proceedings........................................................................10
Item 4.      Submission of Matters to a Vote of Security Holders......................................11
Item 4A.     Executive Officers.......................................................................11


                                             PART II
Item 5.      Market for Registrant's Common Stock and Related Shareholder Matters.....................11
Item 6.      Selected Financial Data..................................................................12
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations....12
Item 7A.     Quantitative and Qualitative Disclosures about Market Risk...............................29
Item 8.      Financial Statements and Supplementary Data..............................................30
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....58
Item 9A.     Controls and Procedures..................................................................58
Item 9B.     Other....................................................................................59


                                            PART III
Item 10.     Directors and Executive Officers of the Registrant.......................................59
Item 11.     Executive Compensation ..................................................................59
Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related
                Shareholder Matters...................................................................59
Item 13.     Certain Relationships and Related Transactions and Director Independence.................60
Item 14.     Principal Accountant Fees and Services...................................................60


                                             PART IV
Item 15.     Exhibits and Financial Statement Schedules...............................................60
</TABLE>


                                       2

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FORWARD-LOOKING STATEMENTS

         Unless the context requires otherwise, references in this document to
"iLinc Communications," "iLinc," the "Company," "we," "us," and "our" refer to
iLinc Communications, Inc.

         Statements contained in this Annual Report on Form 10-K that involve
words like "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended. These are statements that relate to future periods. Such
forward-looking statements involve certain risks and uncertainties that could
cause actual results to differ materially from anticipated results. These risks
and uncertainties include, but are not limited to, market demand for our
products and services, our ability to attract and retain customers and channel
partners, our ability to expand our technological infrastructure to meet the
demand from our customers, our ability to recruit and retain qualified
employees, the ability of channel partners to successfully resell our products,
the status of the overall economy, the strength of competitive offerings, the
pricing pressures created by market forces and the risks discussed herein (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors"). All forward-looking statements included in this
report are based on information available to us as of the date hereof. We
expressly disclaim any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statements contained herein, to reflect any
change in our expectations or in events, conditions or circumstances on which
any such statement is based. Readers are urged to carefully review and consider
the various disclosures made in this report and in our other reports filed with
the SEC that attempt to advise interested parties of certain risks and factors
that may affect our business. Our reports are available free of charge as soon
as reasonably practicable after such material is electronically filed with the
SEC and may be obtained through our Web site located at www.iLinc.com.

         iLinc, iLinc Communications, iLinc Suite, MeetingLinc, LearnLinc,
ConferenceLinc, SupportLinc, EventPlus, iLinc On-Demand, iReduce, iLinc Green
Meter, iLinc Enterprise, iLinc Essentials and its logos are trademarks or
registered trademarks of iLinc Communications, Inc. All other company names and
products may be trademarks of their respective companies.


                                       3

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                                     PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

         Headquartered in Phoenix, Arizona, iLinc Communications, Inc., a
Delaware Corporation, is a leading provider of Web conferencing software and
services. We develop and sell software that provides real-time collaboration.
Our four-product iLinc Suite, comprised of LearnLinc, MeetingLinc,
ConferenceLinc and SupportLinc, is an award winning suite that includes a
virtual classroom, meeting, webinar and support tool. With our Web
collaboration, conferencing and virtual classroom products, we provide what we
believe to be simple, reliable and cost effective tools for remote
presentations, meetings and online events. Our software is based on a
proprietary architecture and code that finds its origins as far back as 1994, in
what we believe to be the beginnings of the Web conferencing industry. Versions
of the iLinc Suite have been translated into six languages, and it is currently
available in version 10. Our customers may choose from several different pricing
and licensing options for the iLinc software or iLinc service depending upon
their needs. We sell our software solutions to large corporations inside and
outside of the Fortune 1000 as well as small to medium size businesses (SMB) and
individuals. We market our products using a direct sales force and an indirect
distribution channel. Our indirect sales channel consists of agents,
distributors, value added resellers and OEM partners. We allow customers to
choose between purchasing a perpetual license or subscribing to a term license.
Our revenues are a mixture of high margin perpetual and subscription licenses of
software, monthly recurring revenues from subscription licenses as well as
annual maintenance, hosting and support agreements.

PRODUCTS AND SERVICES

WEB CONFERENCING

         The iLinc Suite is a four-product suite of software that addresses the
most common business collaboration needs.

         LearnLinc is an Internet-based software that is designed for training
and education of remote students. With LearnLinc, instructors and students can
collaborate and learn remotely providing an enhanced learning environment that
replicates and surpasses traditional instructor-led classes. Instructors can
create courses and classes, add varied agenda items, enroll students, deliver
live instruction and deliver content that includes audio, video and interactive
multimedia. In combination with TestLinc, LearnLinc permits users to administer
comprehensive tests, organize multiple simultaneous breakout sessions and
record, edit, play back and archive entire sessions for future use.

         MeetingLinc is an online collaboration software designed to facilitate
the sharing of documents, PowerPoint(TM) presentations, graphics and
applications between meeting participants without leaving their desks.
MeetingLinc allows business professionals, government employees and educators to
communicate more effectively and economically through interactive online
meetings using Voice-over IP technology to avoid the expense of travel and long
distance charges. MeetingLinc allows remote participants to give presentations,
demonstrate their products and services, annotate on virtual whiteboards, edit
documents simultaneously and take meeting participants on a Web tour. Like all
of the Web collaboration products in the Suite, MeetingLinc includes integrated
voice and video conferencing services.

         ConferenceLinc is a presentation software designed to deliver the
message in a one-to-many format providing professional management of Web
conferencing events. ConferenceLinc manages events such as earnings
announcements, press briefings, new product announcements, corporate internal
mass communications and external marketing events. ConferenceLinc is built on
the MeetingLinc software platform and code to combine the best interactive
features with an easy-to-use interface providing meaningful and measurable
results to presenters and participants alike. Its design includes features that
take the hassle out of planning and supporting a hosted Web seminar.
ConferenceLinc includes automatic email invitations, "one-click join"
capabilities, online confirmations, update notifications and customized attendee
registration. With ConferenceLinc, presenters may not only present content, but
may also gain audience feedback using real-time polling, live chat, question and
answer sessions and post-event assessments. The entire presentation is easily
recordable for viewing offline and review after the show with the recorder
capturing the content and the audio, video and participant feedback.

                                       4

<PAGE>

         SupportLinc is an online technical support and customer sales support
software designed to give customer service organizations the ability to provide
remote hands-on support for products, systems or software applications.
SupportLinc manages the support call volume and enhances the effectiveness of
traditional telephone-based customer support systems. SupportLinc's custom
interface is designed to be simple to use so as to improve the interaction and
level of support for both customers and their technical support agents.

         Our Web collaboration software is sold on a perpetual license or
periodic license basis. A customer may choose to acquire a one-time perpetual
license (the "Purchase Model") or may rent our software on a periodic basis on
either a per-seat, per-month or per-minute basis (the "Subscription Model").
Should they choose to acquire the software using the Purchase Model, then they
may either elect to host our software behind their own firewall or they may
choose to have iLinc host it for them, depending upon their preferences, budget
and IT capabilities. Customers who select the Purchase Model, whether hosted by
iLinc or the customer, may also subscribe for ongoing customer support and
maintenance and software upgrade services, using a support and maintenance
contract with terms from one to five years. The annual maintenance and support
fee charged is initially based upon a percentage of the purchase price that
varies between 12% and 18% of the purchase license fee paid for the perpetual
licenses, with the percentage depending upon the contractual length and
pre-payment of the annual maintenance and support agreement. If a customer
chooses to have iLinc host their Purchase Model licenses, then the customer is
also charged an annual hosting fee equal to between 8% and 10% of the Purchase
Model License fee that was paid for the perpetual license.

         Customers choosing the Subscription Model pay per seat (concurrent
connection) on either a per-month or per-year basis depending upon the length
and term of the subscription agreement. Hosting and maintenance are included as
a part of the monthly or annual rental fees. Customers may also obtain Web
conferencing on a per-minute basis using the iLinc On-Demand product. Those
choosing the iLinc On-Demand product pay on a monthly basis typically without
contractual commitment.

INDUSTRY TRENDS

         Industry analysts separate the Web Conferencing vendor community into
groups that include: service providers ("Service Providers") and software
providers ("Software Providers"). The difference between Service Providers and
Software Providers is that the Service Providers offer Web conferencing as a
service or rental model basis (an ASP model). Software Providers offer Web
conferencing as a solution that can be purchased and owned by customers (whether
the software is installed internally by customers or hosted by the software
provider). iLinc is one of the only providers that competes in both the Service
Provider and Software Provider markets. We offer the iLinc Suite in various
forms in both a monthly subscription and per-minute service model and a software
perpetual license model.

         Another important trend in the industry is the convergence of
communication technologies such as voice, video and Web conferencing. We believe
that the demand for integrated audio, Web and video conferencing solutions
continues to surge as end user needs for easy-to-use, single-source solutions
increase.

         Web conferencing is also viewed as a critical component of a unified
communications strategy according to industry analyst Gartner in their 2007
MAGIC QUADRANT FOR UNIFIED COMMUNICATIONS report by Bern Elliot, August 2007. We
are seeking private labeled partnerships in which iLinc's software is the
underlying Web conferencing component to unified communication providers UC
strategy.

SALES AND MARKETING FOCUS

         Our organization continually creates new marketing and sales campaigns
that focus in three target markets.

         o    We sell to prospects that are using other Web conferencing service
              providers that are ready to migrate to Web conferencing software.
              We find that these organizations appreciate the cost and feature
              advantages that our technology offers.
         o    We target organizations that have a natural fit for highly secure
              Web conferencing software such as government, military, and
              financial organizations as well as the companies that supply to
              these entities.
         o    We continue to cross sell all of our products and services to our
              large database of existing customers.


                                       5

<PAGE>

         Marketing has developed a plan that incorporates public relations,
tradeshows, Web events, Web marketing initiatives and direct marketing (mail and
email) efforts messaged in campaigns that speak to the needs of our specific
target markets. The goal of our marketing strategy is to drive new business into
our customer base and then cross sell our synergistic products and drive usage
of all products to increase the propensity for our customers to make additional
purchases.

         We have formed relationships with organizations that market and sell
our products and services through their sales distribution channels. The
relationships can be categorized into those that act as agents and sell on our
behalf and value added resellers (a "VAR") that actively sell our products and
provide product support typically to their own existing customer base. As of
March 31, 2008, we had over 20 organizations selling our products providing
indirect sales in the United States and in countries outside the United States,
including Canada, the United Kingdom, The Netherlands, Germany, Spain and Japan.
Our value added resellers execute agreements to resell our products to their
customers through direct sales and in some cases through integration of our
products into their products or service offerings. Our distribution agreements
typically have terms of one to three years and are automatically renewed for an
additional like term unless either party terminates the agreement for breach or
other financial reasons. In most of these agreements, the VAR licenses the
product from us and resells the product to its customers. Under those VAR
agreements, we record only the amount paid to us by the VAR as revenue and
recognize revenue when all revenue recognition criteria have been met.

CUSTOMERS

         We have customers principally in the corporate, higher education and
government sectors who use iLinc inside of their organizations for their Web
conferencing needs. Our corporate customer list includes notable customers in
financial services such as Aetna, Allianz Life, Citigroup, Citizens Financial
Group, JPMorgan Chase and St. Paul Travelers Insurance and technology companies
such as EDS, Boeing, Numara Software, Qualcomm, and Sabre Holdings. Our
education sector customer list includes over 80 educational organizations such
as Benedictine University, Columbia University, Creighton University, CSU
Fullerton, Kent State University, Idaho University, LSU, Marist College,
University of New Hampshire, National University, Rutgers University, The State
University of New York, and Tulane. We have an impressive list of state and
federal government clients such as the states of Arizona, Louisiana, Oregon, and
Utah, and we do business with the federal government, particularly the U.S.
Army, Navy, Coast Guard and the Department of Homeland Security.

AWARDS AND ACKNOWLEDGEMENTS

         We are proud of the recognition received by the Company from leading
industry experts including Forrester Research, Gartner and Frost & Sullivan.
Most recently we were awarded the Product of the Year award for 2007 by
Technology Marketing Corporation. In May of 2007, Gartner Research published the
Magic Quadrant for Web Conferencing, 2007 noting iLinc as "a visionary." In
January of 2007, iLinc was identified for the second year in a row as part of
the "Best of e-Learning" by e-Learning Magazine. In June of 2006, Forrester
Research named iLinc as a "Strong Performer" in their report titled "The
Forrester WaveTM: Web Conferencing Q2 2006" and recognized iLinc as a "Leading
Hosted Web Conferencing Provider." In January of 2006, the Company received the
2006 Excellence in Technology Award from industry analyst Frost & Sullivan in
which the firm noted that iLinc delivers "...breakthrough technology that
addresses real issues facing organizations deploying Web conferencing
enterprise-wide." Over the years we have been honored with more than 60 awards
from notable authorities such as the American Society for Training and
Development ("ASTD"), analyst Brandon Hall, and e-Learning Magazine. The list of
awards includes four National Telly Awards, six Software Service Provider of the
Year Awards and two Gold Medals from e-Learning authority Brandon Hall. We
continue to receive recognition from analysts and notable experts as we maintain
a leadership position in the conferencing and collaboration market.

TECHNOLOGY & INTELLECTUAL PROPERTY

          Our existing technology and intellectual property were originally
developed by organizations that we have acquired together with continued
enhancement on our part by our own research and development team. We utilize
copyright, trademark and patent protection whenever possible to secure our
intellectual property assets. We have a patent pending with iLinc's Green Meter
that provides information on the productivity and carbon emission savings while
using our collaboration products.

                                       6

<PAGE>

RESEARCH & DEVELOPMENT

         We invest a substantial portion of our working capital and resources in
the continued development of our software and technologies. We employ full-time
engineers, programmers and developers that are located in Troy, New York and
Phoenix, Arizona, who are constantly focused on developing new features and
enhancements to our existing software offering and expanding that offering with
new products and services. The primary focus of our research and development
efforts is on improving the functionality and performance of the iLinc Suite as
well as developing new features that meet changing market demands. In the 2007
fiscal year we invested $1.5 million, $367,000 of which we capitalized as we
began production of version 9 of our Web collaboration software. In fiscal 2008,
we invested $2.4 million, $263,000 of which we capitalized as we completed
production of version 9 of our Web collaboration software.

EMPLOYEES

         As of March 31, 2008 we employed 103 employees. The populations of our
functional organizations on March 31, 2008 included 26.5 sales and marketing
employees, 26 programming and technical support employees, 41.5 audio
conferencing operators and support employees, and nine finance, executive and
administrative employees. None of our employees are represented by collective
bargaining agreements.

DISCONTINUED OPERATIONS

         On April 28, 2008, subsequent to the fiscal 2008 year end, we entered
into an Asset Purchase Agreement (the "Agreement") with American
Teleconferencing Services Ltd. (the "Purchaser"), a subsidiary of Premiere
Global Services, Inc. The Agreement provided for the sale by iLinc of a majority
of our audio conferencing assets. The closing of the transaction occurred on May
2, 2008. On the closing date, the Purchaser paid us $3.3 million, with an
additional payment of $833,000 to be paid within ten days of the transition date
(that is anticipated to be July 25, 2008) as defined in the Agreement. As
further consideration, Purchaser will tender on or before June 1, 2009 an
earn-out payment, if any, the product of 1.25 times the amount that the
Purchaser earns in revenue from the acquired customer accounts in excess of $2.7
million during the twelve months after closing. Additionally, on May 13, 2008,
the Purchaser paid $558,000 for our identified audio conferencing accounts
receivable that were less than 90 days old, and will pay thereafter 103% of the
accounts receivable collected from those audio conferencing accounts in excess
of the initial payment. The gain on sale resulting from the transaction will be
recorded as of the closing date, and accordingly reported in the first quarter
of fiscal 2009. iLinc retained the Events portion of our audio conferencing
business (the "Events Business") and expects to sell the Events Business as well
in fiscal 2009.

         Therefore, pursuant to the criteria established by SFAS No. 144,
ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS, we have
determined that all of our audio conferencing operations (i.e., the portion sold
and the Events business retained) and related assets and liabilities should be
classified as assets and liabilities "held-for-sale" as of March 31, 2008.
Accordingly, our results of operations related to the audio conferencing
business for the years ended March 31, 2008 and 2007 have been reclassified as
income from discontinued operations.


ITEM 1A. RISK FACTORS

         You should carefully consider the risks described below. The risks and
uncertainties described below are not the only ones we face. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially and adversely affected. In that case, the trading
price of our common stock could be adversely affected.

WE FACE RISKS INHERENT IN INTERNET-RELATED BUSINESSES AND MAY BE UNSUCCESSFUL IN
ADDRESSING THESE RISKS.

         We face risks frequently encountered by companies in new and rapidly
evolving markets. We may fail to adequately address these risks and, as a
consequence, our business may suffer. To address these risks among others, we
must successfully introduce and attract new customers to our products and
services; successfully implement our sales and marketing strategy to generate
sufficient sales and revenues to sustain operations; foster existing
relationships with our customers to provide for continued or recurring business
and cash flow; and successfully address and establish new products and
technologies as new markets develop. We may not be able to sufficiently address
and overcome risks inherent in our business strategy.

                                       7

<PAGE>

OUR QUARTERLY OPERATING RESULTS ARE UNCERTAIN AND MAY FLUCTUATE SIGNIFICANTLY.

         Our operating results have varied significantly from quarter to quarter
and are likely to continue to fluctuate as a result of a variety of factors,
many of which we cannot control. Factors that may adversely affect our quarterly
operating results include: the dependence upon software purchase license sales
as opposed to the more ratable subscription model, the size and timing of
product orders; the mix of revenue from custom services and software products;
the market acceptance of our products and services; our ability to develop and
market new products in a timely manner; the timing of revenues and expenses
relating to our product sales; and revenue recognition rules. Expense levels are
based, in part, on expectations as to future revenue and to a large extent are
fixed in the short term. To the extent we are unable to predict future revenue
accurately, we may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall.

WE HAVE LIMITED FINANCIAL RESOURCES.

         We have limited financial resources at our disposal. We have long-term
obligations that are due in 2010 and 2012 that we may not be able to satisfy
from existing working capital. If we are unable to remain profitable, we will
face increasing demands for capital. We may not be successful in raising
additional debt or equity capital. As a result, we may not have sufficient
financial resources to satisfy our obligations as they come due in the short
term.

DILUTION TO EXISTING STOCKHOLDERS WILL OCCUR UPON ISSUANCE OF SHARES WE HAVE
RESERVED FOR FUTURE ISSUANCE.

         On March 31, 2008, 34,023,816 shares of our common stock were issued
and outstanding, net of treasury shares. An additional 16,832,928 shares of our
common stock were reserved for issuance that would be issued as the result of
the exercise of stock options, warrants or the conversion of convertible notes
and/or convertible and restricted preferred stock. The issuance of these
additional shares will reduce the percentage ownership of our existing
stockholders. The existence of these reserved shares coupled with other factors,
such as the relatively small public float, could adversely affect prevailing
market prices for our common stock and our ability to raise capital through an
offering of equity securities.

THE LOSS OF THE SERVICES OF OUR SENIOR EXECUTIVES AND KEY PERSONNEL WOULD LIKELY
CAUSE OUR BUSINESS TO SUFFER.

         Our success depends to a significant degree on the performance of our
senior management team. The loss of any of these individuals could harm our
business. We do not maintain key person life insurance for any officers or key
employees other than on the life of James M. Powers, Jr., our Chairman,
President and CEO, with that policy providing a death benefit to the Company of
$1.0 million. Our success also depends on the ability to attract, integrate,
motivate and retain additional highly skilled technical, sales and marketing and
professional services personnel. To the extent we are unable to attract and
retain a sufficient number of additional skilled personnel, our business will
suffer.

OUR INTELLECTUAL PROPERTY MAY BECOME SUBJECT TO LEGAL CHALLENGES, UNAUTHORIZED
USE OR INFRINGEMENT, ANY OF WHICH COULD DIMINISH THE VALUE OF OUR PRODUCTS AND
SERVICES.

         Our success depends in large part on our proprietary technology. If we
fail to successfully enforce our intellectual property rights, the value of
these rights, and consequently, the value of our products and services to our
customers, could diminish substantially. It may be possible for third parties to
copy or otherwise obtain and use our intellectual property or trade secrets
without our authorization and it may also be possible for third parties to
independently develop substantially equivalent intellectual property. Currently,
we do not have patent protection in place related to our products and services.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect trade secrets or to determine the validity and scope of the
proprietary rights of others. While we have not received any notice of any claim
of infringement of any of our intellectual property, from time to time we may
receive notice of claims of infringement of other parties' proprietary rights.
Such claims could result in costly litigation and could divert management and
technical resources. These types of claims could also delay product shipment or
require us to develop non-infringing technology or enter into royalty or
licensing agreements, which agreements, if required, may not be available on
reasonable terms, or at all.

WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE WEB CONFERENCING SOFTWARE AND
SERVICES MARKET.

                                       8

<PAGE>

         The markets for Web conferencing products and services are rapidly
evolving and intensely competitive. Competition in our market will continue to
intensify and may force us to reduce our prices, or cause us to experience
reduced sales and margins, loss of market share and reduced acceptance of our
services. Many of our competitors have larger and more established customer
bases, longer operating histories, greater name recognition, broader service
offerings, more employees and significantly greater financial, technical,
marketing, public relations and distribution resources than we do. We expect
that we will face new competition as others enter our market to develop Web
conferencing software and services. These current and future competitors may
also offer or develop products or services that perform better than ours. In
addition, acquisitions or strategic partnerships involving our current and
potential competitors could harm us in a number of ways.

WE DEPEND LARGELY ON ONE-TIME SALES TO GROW REVENUES WHICH MAKE OUR REVENUES
DIFFICULT TO PREDICT.

         While we are building revenue from our Web conferencing subscription
sales, a high percentage of our revenue remains attributable to one-time
purchases from perpetual license software sales. As a result, our inability to
continue to obtain new agreements and sales may result in lower than expected
revenue, and therefore, harm our ability to achieve or sustain operations or
profitability on a consistent basis, which could also cause our stock price to
decline. Further, because we face competition from larger, better-capitalized
companies, we could face increased downward pricing pressure that could cause a
decrease in our gross margins. Additionally, our sales cycle varies depending on
the size and type of customer considering a purchase. Potential customers
frequently need to obtain approvals from multiple decision makers within their
company and may evaluate competing products and services before deciding to use
our services. Our sales cycle, which can range from several weeks to several
months or more, combined with the license purchase model makes it difficult to
predict future quarterly revenues.

OUR OPERATING RESULTS MAY SUFFER IF WE FAIL TO DEVELOP AND FOSTER OUR VALUE
ADDED RESELLER OR DISTRIBUTION RELATIONSHIPS.

         We have an existing channel and distribution network that provides
growing revenues and contributes to our high margin software sales. These
distribution partners are not obligated to distribute our services at any
minimum level. As a result, we cannot accurately predict the amount of revenue
we will derive from our distribution partners in the future. The inability or
unwillingness of our distribution partners to sell our products to their
customers and increase their distribution of our products could result in
significant reductions in our revenue, and therefore, harm our ability to
achieve or sustain profitability on a consistent basis.

SALES IN FOREIGN JURISDICTIONS BY OUR INTERNATIONAL DISTRIBUTOR NETWORK AND US
MAY RESULT IN UNANTICIPATED COSTS.

         We have limited experience in international operations and may not be
able to compete effectively in international markets. We face certain risks
inherent in conducting business internationally, such as:

         o    our inability to establish and maintain effective distribution
              channels and partners;
         o    the varying technology standards from country to country;
         o    our inability to effectively protect our intellectual property
              rights or the code to our software;
         o    our inexperience with inconsistent regulations and unexpected
              changes in regulatory requirements in foreign jurisdictions;
         o    language and cultural differences;
         o    fluctuations in currency exchange rates;
         o    our inability to effectively collect accounts receivable; or,
         o    our inability to manage sales and other taxes imposed by foreign
              jurisdictions.

THE GROWTH OF OUR BUSINESS SUBSTANTIALLY DEPENDS ON OUR ABILITY TO SUCCESSFULLY
DEVELOP AND INTRODUCE NEW SERVICES AND FEATURES IN A TIMELY MANNER.

         With our focus on our Web conferencing products and services, our
growth depends on our ability to continue to develop new features, products and
services around that software and product line including the ability to operate
our software in non-Windows based operating systems (e.g. Linux). We may not
successfully identify, develop, and market new products and features in a timely
and cost-effective manner. If we fail to develop and maintain market acceptance
of our existing and new products to offset our continuing development costs,
then our net losses will increase and we may not be able to achieve or sustain
profitability on a consistent basis.

                                       9

<PAGE>

IF WE FAIL TO OFFER COMPETITIVE PRICING, WE MAY NOT BE ABLE TO ATTRACT AND
RETAIN CUSTOMERS.

         Because the Web conferencing market is relatively new and still
evolving, the prices for these services are subject to rapid and frequent
changes. In many cases, businesses provide their services at significantly
reduced rates, for free or on a trial basis in order to win customers. Due to
competitive factors and the rapidly changing marketplace, we may be required to
significantly reduce our pricing structure, which would negatively affect our
revenue, margins and our ability to achieve or sustain profitability on a
consistent basis. We have an existing channel and distribution network that
provides growing revenues and contributes to our high margin software sales.
These distribution partners are not obligated to distribute our services at any
particular minimum level. As a result, we cannot accurately predict the amount
of revenue we will derive from our distribution partners in the future. The
inability of our distribution partners to sell our products to their customers
and increase their distribution of our products could result in significant
reductions in our revenue, and, therefore, harm our ability to achieve or
sustain profitability on a consistent basis.

IF WE ARE UNABLE TO COMPLETE OUR ASSESSMENT AS TO THE ADEQUACY OF OUR INTERNAL
CONTROLS OVER FINANCIAL REPORTING AS REQUIRED BY SECTION 404 OF THE
SARBANES-OXLEY ACT OF 2002, INVESTORS COULD LOSE CONFIDENCE IN THE RELIABILITY
OF OUR FINANCIAL STATEMENTS, WHICH COULD RESULT IN A DECREASE IN THE VALUE OF
OUR COMMON STOCK.

         As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the
Securities and Exchange Commission adopted rules requiring non-accelerated
public companies to include in their annual reports on Form 10-K a report of
management on their company's internal control over financial reporting,
including management's assessment of the effectiveness of their company's
internal control over financial reporting as of the company's fiscal year end.
If we do not timely complete our assessment, our accounting firm may either
disclaim its opinion as it is related to management's assessment of the
effectiveness of its internal controls or may issue a qualified opinion on the
effectiveness of our internal controls. If our accounting firm disclaims its
opinion or qualifies its opinion as to the effectiveness of our internal
controls, then investors may lose confidence in the reliability of our financial
statements, which could cause the market price of our common stock to decline.

WE MAY ACQUIRE OTHER BUSINESSES THAT COULD NEGATIVELY AFFECT OUR OPERATIONS AND
FINANCIAL RESULTS AND DILUTE EXISTING STOCKHOLDERS.

         We may pursue additional business relationships through acquisitions
which may not be successful. We may have to devote substantial time and
resources in order to complete acquisitions and we therefore may not realize the
benefits of those acquisitions. Further, these potential acquisitions entail
risks, uncertainties and potential disruptions to our business. For example, we
may not be able to successfully integrate a company's operations, technologies,
products and services, information systems and personnel into our business.
These risks could harm our operating results and could adversely affect
prevailing market prices for our common stock.


ITEM 2. PROPERTIES

         We maintain corporate headquarters in Phoenix, Arizona and have
occupied that 9,100 square foot Class A facility since the Company's inception
in 1998. The Phoenix lease requires a monthly rent and operating expenses of
approximately $25,000 and will expire on February 28, 2012. On December 27,
2007, we amended the lease slightly to incorporate certain improvements made to
the space.

         We also maintain a 2,500 square foot Class B facility in Troy, New York
with an emphasis in that location on research and development and technical
support. On July 5, 2006, we amended the New York lease that now expires on June
30, 2009. The New York lease requires a monthly rent and operating expenses of
approximately $4,000.

         In addition, we maintain an 8,000 square foot Class A facility in
Springville, Utah with an emphasis on audio conferencing operations. Those Utah
operations will be shut down at the end of the lease term as a result of the
disposal of our audio conferencing assets. The lease expires December 31, 2008
and requires a monthly rent and operating expenses of approximately $8,000.

ITEM 3. LEGAL PROCEEDINGS

         None

                                       10

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 4A. EXECUTIVE OFFICERS

         The disclosure is not applicable because iLinc is a smaller reporting
company.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

MARKET INFORMATION, HOLDERS, AND DIVIDENDS

         The Company's common stock has been traded on the American Stock
Exchange system under the symbol "ILC" since February 6, 2004. The following
table sets forth the range of the reported high and low sales prices of the
Company's common stock for the years ended March 31, 2008 and 2007:

         2008                                                      HIGH    LOW
         ----                                                     ------  ------
         First Quarter .........................................  $0.80   $0.47
         Second Quarter.........................................  $0.71   $0.52
         Third Quarter..........................................  $0.79   $0.41
         Fourth Quarter.........................................  $0.54   $0.25


         2007                                                      HIGH    LOW
         ----                                                     ------  ------
         First Quarter .........................................  $0.65   $0.34
         Second Quarter.........................................  $0.54   $0.39
         Third Quarter..........................................  $0.81   $0.49
         Fourth Quarter.........................................  $0.82   $0.55

         As of June 25, 2008, the closing price of our common stock was $0.23
per share and there were approximately 320 holders of record, as shown on the
records of the transfer agent and registrar of common stock. The number of
record holders does not bear any relationship to the number of beneficial owners
of the common stock.

         The Company has not paid any cash dividends on its common stock in the
past and does not plan to pay any cash dividends on its common stock in the
foreseeable future. The Company's Board of Directors intends, for the
foreseeable future, to retain earnings to finance the continued operation and
expansion of the Company's business.

                                       11

<PAGE>

EQUITY COMPENSATION PLANS

         The table below provides information relating to our equity
compensation plans as of March 31, 2008.

<TABLE>
<S>     <C>
                                                                                           Number of Securities
                                                                                          Remaining Available for
                                                                                          Future Issuance Under
                                          Number of Securities to    Weighted-Average      Compensation Plans
                                          be Issued Upon Exercise    Exercise Price of    (Excluding Securities
                                          of Outstanding Options,  Outstanding Options,     Reflected in First
Plan Category                               Warrants and Rights     Warrants and Rights          Column)
-----------------------------------------------------------------------------------------------------------------

Equity compensation plans approved by
security holders                                 5,007,764                 $0.85                 233,213

Equity compensation plans not approved
by security holders                                ----                     ----                   ----

                                         ------------------------                        ------------------------
Total                                            5,007,764                                       233,213
                                         ========================                        ========================
</TABLE>

         In December 2001, the Company, under the initiative of the Compensation
Committee with the approval of the Board of Directors, issued its Chief
Executive Officer an incentive stock grant under the Company's Stock
Compensation Plan of 450,000 restricted shares of the Company's common stock as
a means to retain and incentivize the Chief Executive Officer. The shares were
valued at $405,000 based on the closing price of the stock on the date of grant,
which is recorded as compensation expense ratably over the vesting period. The
shares 100% vest after ten years from the date of grant. On June 23, 2006, the
Compensation Committee of the Board of Directors amended the vesting criteria
providing for vesting based upon the following price criteria: 150,000 shares
vest if the share price trades for $1.00 per share for 20 consecutive days;
150,000 shares vest if the share price trades for $2.00 per share for 20
consecutive days; and 150,000 shares vest if the share price trades for $3.00
per share for 20 consecutive days.

         In March 2008, the Company, under the initiative of the Compensation
Committee with the approval of the Board of Directors issued its Chief Executive
Officer 500,000 restricted shares, its Chief Financial Officer and General
Counsel 150,000 restricted shares, and 50,000 restricted shares to its
respective Vice Presidents of Sales, Marketing and Product and Technology, an
incentive stock grant under the Company's Stock Compensation Plan. The shares
were valued at $224,000 based on the closing price of the stock on the date of
grant, which is recorded as compensation expense ratably over the vesting
period. The shares 100% vest after ten years from the date of grant or upon
attaining the following price performance criteria: 1/3 vest if the 10-day
average closing price equals or exceeds $1.00; 1/3 vest if the 10-day average
closing price equals or exceeds $1.25; and the remaining 1/3 vest if the 10-day
average closing price equals or exceeds $1.50.

SALES OF UNREGISTERED SECURITIES

         There were no sales of unregistered securities during the fiscal year
ending March 31, 2008.

ITEM 6.  SELECTED FINANCIAL DATA

         The disclosure is not applicable because iLinc is a smaller reporting
company.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K THAT INVOLVE
WORDS LIKE "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS,"
"ESTIMATES" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995, THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND


                                       12

<PAGE>

UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
ANTICIPATED RESULTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE
BASED ON INFORMATION AVAILABLE TO US AS OF THE DATE HEREOF. WE EXPRESSLY
DISCLAIM ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR
REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, TO REFLECT ANY
CHANGE IN OUR EXPECTATIONS OR IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH
ANY SUCH STATEMENT IS BASED. OUR REPORTS ARE AVAILABLE FREE OF CHARGE AS SOON AS
REASONABLY PRACTICABLE AFTER WE FILE THEM WITH THE SEC AND MAY BE OBTAINED
THROUGH OUR WEB SITE.

COMPANY OVERVIEW

         We sell our software solutions to large, medium and small-sized
corporations inside and outside of the Fortune 1000. We market our products
using a direct sales force and an indirect distribution channel consisting of
agents, distributors, value added resellers and OEM partners. We allow customers
to choose between purchasing a perpetual license and subscribing to a term
license, providing for flexibility in license structures. Our revenues are a
mixture of high margin perpetual and subscription sales of licenses of software,
monthly recurring revenues from subscription licenses as well as annual
maintenance, hosting and support agreements.

         Our Web conferencing software is sold on a perpetual license or
periodic license basis. A customer may choose to acquire a one-time perpetual
license (the "Purchase Model") or may rent our software on a periodic basis
(e.g. on either a per-seat, per-month or per-minute basis) (the "Subscription
Model"). We also offer varied hosting options, so that a customer who acquires
or rents our software may either elect to host our software behind its own
firewall, or it may choose to have iLinc host it for the customer. Customers who
select the Purchase Model, whether hosted by iLinc or the customer, also
subscribe for ongoing customer support and maintenance and software upgrade
services, by entering into a support and maintenance contract with a typical
term for one year, but with multi-year options of up to five years. If a
purchase Model is selected, then the annual maintenance and support fee charged
is based upon a percentage of the purchase price (or per seat price) that varies
between 12% and 18% of the license fee paid (or on a per seat equivalent basis),
with the percentage depending upon the contractual length and the timing of
payment. If a customer chooses to have iLinc host its Purchase Model licenses,
then the annual hosting fee is based upon a percentage of the purchase price (or
per seat price) that is normally 8% to 10% of the license fee paid (or on a per
seat equivalent basis).

         Customers choosing the Subscription Model pay a fee per seat
(concurrent connection) on either a per-month or per-year basis depending upon
the length and term of the subscription agreement. Hosting and maintenance are
included as a part of the monthly or annual rental fees. Customers may also
obtain Web conferencing on a per-minute basis using the iLinc On-Demand or the
iLinc Essentials product lines. Those choosing the iLinc On-Demand or iLinc
Essentials product pay on a monthly basis.

DISCONTINUED OPERATIONS

         On April 28, 2008, subsequent to the fiscal 2008 year end, we entered
into an Asset Purchase Agreement (the "Agreement") with American
Teleconferencing Services Ltd. (the "Purchaser"), a subsidiary of Premiere
Global Services, Inc. The Agreement provided for the sale by iLinc of a majority
of our audio conferencing assets. The closing of the transaction occurred on May
2, 2008. On the closing date, the Purchaser paid us $3.3 million, with an
additional payment of $833,000 to be paid within ten days of the transition date
(that is anticipated to be July 25, 2008) as defined in the Agreement. The gain
on sale resulting from the transaction will be recorded as of the closing date,
and accordingly reported in the first quarter of fiscal 2009. iLinc retained the
Events portion of its audio conferencing business (the "Events Business") and
expects to sell the Events Business as well in fiscal 2009.

         Therefore, pursuant to the criteria established by SFAS No. 144,
ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS, we have
determined that all of our audio conferencing operations (i.e., the portion sold
and the Events Business retained) and related assets and liabilities should be
classified as assets and liabilities "held-for-sale" as of March 31, 2008.
Accordingly, our results of operations related to the audio conferencing
business for the years ended March 31, 2008 and 2007 have been reclassified as
income from discontinued operations.


                                       13

<PAGE>

PERFORMANCE MEASURES AND INDICATORS

         In evaluating our operating performance on a quarterly and annual
basis, we consider levels of revenues, gross profit, operating income and net
income to be important indicators.

         In evaluating our liquidity, we evaluate levels of current assets,
current liabilities and accounts receivable, aging of accounts receivable and
maturities of debt and obligations under long term leases. Our current assets,
including accounts receivable, at March 31, 2008 of $4.5 million were $2.4
million lower than our levels of current assets of $6.9 million at March 31,
2007. Our current liabilities at March 31, 2008 of $3.9 million were
approximately $96,000 less than our level of current liabilities at March 31,
2007 of $4.0 million. We had working capital of $1.2 million at March 31, 2008
compared to working capital of $3.5 million at March 31, 2007. Our cash and cash
equivalents and certificate of deposit balance decreased by $519,000, from $1.6
million at March 31, 2007 to $1.0 million at March 31, 2008. Our accounts
receivable, net of allowance for doubtful accounts, were $627,000 and $1.5
million at March 31, 2008 and March 31, 2007, respectively. Accounts receivable
decreased, which was consistent with decreased revenues when comparing fiscal
2008 to fiscal 2007. Prepaid and other current assets decreased by $494,000 due
in part to the timing of annual contracts that were prepaid in addition to a
decrease in the valuation of a warrant to one of our agents that is based on
meeting specific sales targets. Current liabilities decreased by a total of
$96,000. Accounts payable decreased slightly by $71,000 from $683,000 at March
31, 2007 to $612,000 at March 31, 2008. Accrued liabilities decreased by
$102,000 from $853,000 at March 31, 2007 to $751,000 at March 31, 2008,
primarily due to the decrease of accrued salaries and benefits of $46,000 and
amounts payable to third party providers of $52,000. These decreases were
slightly offset by increases in the current portion of long-term debt and
capital leases of $27,000, and an increase in deferred revenue of $24,000.
Subsequent to March 31, 2008, we sold the majority of our assets related to our
audio conferencing business for $4.1 million. As such, assets and liabilities
related to the audio conferencing business have been classified as Held for Sale
in our financial statements as at March 31, 2008 and 2007. At March 31, 2008 and
2007, assets held for sale were $3.1 million and $3.7 million, respectively.
Liabilities classified as held for sale were $778,000 and $752,000 at March 31,
2008 and 2007, respectively. At March 31, 2008 long term debt due in less than
one year, capital lease obligations due in less than one year, interest expense
for the coming year and operating lease obligations for the coming year
aggregated $95,000, $120,000, $1.0 million and $500,000 respectively. We
anticipate that cash flow from operations combined with the cash received
subsequent to March 31, 2008 for the sale of our audio conferencing assets
should be sufficient to allow us to meet these obligations without raising
additional capital.

         As indicators of future financial performance, we monitor and evaluate
non-financial measures, such as number of seats sold, average sales price per
transaction, average sales cycle, quota achievement by the direct sales staff,
the number of transactions, the percentage each product sold contributes to
total revenue, and the trends indicated by these factors.

         External factors that our management considers in analyzing our
performance include projected growth rates for our industry and rates of
penetration of use of our product categories in the corporate sector. We
consider these factors important since they permit us to better project capital
needs and growth trends that support our assertions of profitability and cash
flow. Analysis of these trends indicates that we are having decreasing success
from our direct sales staff for our perpetual licenses, but increasing success
in subscription licenses due to market driven forces. That success is likely to
translate into increasing recurring revenues over the term of the subscription,
and an increasing bottom line as we strive to contain overhead expenses. We
expect overhead to decrease in fiscal 2009, due to cost cutting and containment
measures carried out in the fourth quarter of fiscal 2008 and continuing into
fiscal 2009. We see increasing demand for Web conferencing usage in the
business, education and government sectors alike, and we expect these trends to
continue over the next three years.


                                       14

<PAGE>

         The following table shows certain items from our income statement as a
percentage of revenues:

<TABLE>
<S>     <C>
                                                                YEAR ENDED               YEAR ENDED
                                                              MARCH 31, 2008           MARCH 31, 2007
                                                         ------------------------ ------------------------
          Revenues
             Software licenses.........................  $     3,235       36.7%  $     4,177       47.8%
             Subscription and hosting services.........        2,810       31.9%        2,044       23.4%
             Software maintenance and other services...        2,768       31.4%        2,517       28.8%
                                                         ------------------------ ------------------------
               Total revenues........................          8,813      100.0%        8,738      100.0%
                                                         ------------------------ ------------------------

          Cost of revenues
             Software licenses.........................          126        1.4%          131        1.5%
             Subscription and hosting services.........          437        5.0%          383        4.4%
             Software maintenance and other services...          803        9.1%          787        9.0%
             Amortization of technology................          158        1.8%            --       0.0 %
                                                         ------------------------ ------------------------
               Total cost of revenues..................        1,524       17.3%        1,301       14.9%
                                                         ------------------------ ------------------------

          Gross profit                                         7,289       82.7%        7,437       85.1%
                                                         ------------------------ ------------------------

          Operating expenses
             Research and development..................        2,127       24.1%        1,116       12.8%
             Sales and marketing.......................        4,571       51.9%        3,343       38.3%
             General and administrative................        2,772       31.5%        2,405       27.5%
                                                         ------------------------ ------------------------
               Total operating expenses................        9,470      107.5%        6,864       78.6%
                                                         ------------------------ ------------------------
          Loss (income) from operations................  $    (2,181)    (24.8)%  $       573        6.5%
                                                         ------------------------ ------------------------
</TABLE>

RESULTS OF OPERATIONS

TAKING INTO ACCOUNT THE SALE OF OUR AUDIO CONFERENCING ASSETS ON APRIL 28, 2008,
SUBSEQUENT TO THE FISCAL 2008 YEAR END, AND THE RECLASSIFICATION OF THOSE AUDIO
CONFERENCING OPERATIONS AS DISCONTINUED OPERATIONS UNDER SFAS NO. 144:

REVENUES FROM CONTINUING OPERATIONS

         Total revenues generated from continuing operations (i.e., Web
conferencing) for the 12 months ended March 31, 2008 ("fiscal 2008") and March
31, 2007 ("fiscal 2007") were $8.8 million and $8.7 million, respectively, an
increase of $75,000 or 1%. Software license revenues decreased $942,000 or 23%
from $4.2 million in fiscal 2007 to $3.2 million in fiscal 2008, as the result
of a decrease in direct sales of $779,000 with a shift from the purchase model
to the subscription model, and a decrease in the sale of non-core off-the-shelf
courseware of $134,000. Subscription and hosting services revenues increased
$766,000 or 37% from $2.0 million in fiscal 2007 to $2.8 million in fiscal 2008,
as the result of an increase in direct subscriptions of $62,000, indirect
subscriptions of $319,000 and Web subscriptions of $207,000. In addition,
hosting revenues increased $242,000, which are driven by a combination of new
license sales and sustaining our customer base. Both subscription revenues and
hosting revenues should be recurring in nature and should continue to increase
as we increase subscription sales and renew existing maintenance, hosting and
subscription contracts from our existing customer base. Software maintenance and
other services revenues increased $251,000 or 10% from $2.5 million in fiscal
2007 to $2.8 million in fiscal 2008, as the result of an increase in maintenance
fees of $377,000 from renewals of existing customer agreements. We recognized an
increase in training, storage and recording revenues of $101,000.

         The increase in maintenance revenues were partially offset by a
decrease in our non-core custom content revenues of $174,000. This is a non-core
product line that consists of work performed by our subcontractor, Interactive
Alchemy. Our subcontractor agreement ends in the first quarter of fiscal 2009
and therefore, we expect custom content revenues and corresponding royalty
payments to phase out in the first quarter of fiscal 2009. For fiscal 2008,
software license revenues were 37% of total revenue, subscription and hosting


                                       15

<PAGE>

revenues were 32% of total revenue and software maintenance and other services
revenues were 31% of total revenue, as compared to 48%, 23% and 29%,
respectively, for fiscal 2007. We expect subscription license revenues and
indirect subscription license revenues to continue to become a larger percentage
of total revenues as total revenues increase given our focus on subscription
sales from both direct and indirect sales channels.

COST OF REVENUES FROM CONTINUING OPERATIONS

         Cost of software license revenues is driven by the types of software
licenses sold. It consists of royalty fees paid on certain off-the-shelf
products, if any, sold, and sales rebates to distribution partners on the sale
of certain software products. Cost of software license revenues for fiscal 2008
and fiscal 2007 were $126,000 and $131,000, respectively, a decrease of $5,000
or 4%. Cost of software license revenues was approximately 1.4% of total
revenues in fiscal 2008 and approximately 1.5% of total revenues in fiscal 2007.
We expect the cost of software license revenues to remain a very small
percentage of total license revenues that is not likely to exceed 2%. Cost of
license revenues will arise only from royalties which may be due from the sale
of off-the-shelf courseware.

         Cost of subscription and hosting services includes allocable expenses
resulting from the delivery of our subscription and hosted Web conferencing
services, primarily consisting of salaries, network costs and allocable expenses
of facilities, technical support costs for support services and depreciation and
amortization expense related to our subscription services. Cost of subscription
and hosting services for fiscal 2008 and fiscal 2007 were $437,000 and $383,000,
respectively, an increase of $54,000 or 14%. The increase is related to an
increase in salary and network costs as a result of an increase in sales and
customer usage. Cost of subscription and hosting services was 5% of revenues in
fiscal 2008 and 4% of revenues in fiscal 2007. We expect cost of subscription
licenses to increase as subscription revenues increase, but in proportion
thereby remaining around 4% to 5% of total revenues.

         Cost of software maintenance and other services revenues include an
allocation of technical support personnel and facilities costs allocable to
those services revenues consisting primarily of a portion of our facilities
costs, communications and depreciation expenses. However, by far the largest and
most variable component of the cost of software maintenance and other services
arises from the amount due to our third-party subcontractor, which is a fixed
percentage of non-core custom content revenue. The cost of software maintenance
and other services for fiscal 2008 and fiscal 2007 was $803,000 and $787,000,
respectively, an increase of $16,000 or 2%. Cost of software maintenance and
other services revenues was approximately 9% of total revenues in each of fiscal
2008 and fiscal 2007. We expect that cost of software maintenance and other
services revenues will decrease as a dollar amount and percentage when custom
content services come to an end in the first quarter of fiscal 2009.

         Amortization of technology consists of amortization of software and
other assets acquired through transactions closed in fiscal 2002 through 2004,
and also includes amortization of capitalized software development costs related
to iLinc version 9. Amortization of acquired technology for fiscal 2008 and
fiscal 2007 was $158,000 and $0, respectively, an increase of $158,000 which is
related to the amortization of capitalized software development costs for
version 9.

GROSS PROFIT

         Gross profit (total revenues less total cost of revenues) decreased
from $7.4 million in fiscal 2007 to $7.3 million in fiscal 2008, a decrease of
$148,000 or 2%. We expect to see gross profit increase as revenues increase in
dollar amount and as a percentage as revenues rise since most of the cost of
sales are fixed in nature (e.g., amortization).

OPERATING EXPENSES FROM CONTINUING OPERATIONS

         Total operating expenses consist of research and development expenses,
sales and marketing expenses and general and administrative expenses. We
incurred operating expenses of $9.5 million in fiscal 2008, an increase of $2.6
million or 38% from $6.9 million in fiscal 2007. This increase is due to
increases in research and development costs of $1.0 million, sales and marketing
expenses of $1.2 million, and in general and administrative expenses of
$367,000. Total operating expenses were 108% and 79% of total revenues in fiscal
2008 and 2007, respectively.

                                       16

<PAGE>

         Research and development expenses represent expenses incurred in
connection with the continued development and enhancement of our software
products and new versions of our software. Those costs consist primarily of
salaries and benefits, telecommunication allocations, rent allocations, computer
equipment allocations and allocated depreciation and amortization expense.
Research and development expenses for fiscal 2008 and fiscal 2007 were $2.1
million and $1.1 million, respectively, an increase of $1.0 million or 91%.
During the first quarter of fiscal 2007, we began capitalizing identified direct
expenses associated with a specific software development upon achieving
technological feasibility for version 9 of our Web conferencing software in
accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE
SOLD, LEASED, OR OTHERWISE MARKETED. We continued to capitalize those direct
costs until the new software product was released for distribution and sale to
our customers. We began amortizing these software development costs over a three
year period beginning July 2007. As a result, salaries and benefits expenses
increased by $691,000 as the salary and benefit costs related to the version 9
project were no longer being capitalized. An increase in headcount to support
our investment in innovation during the second and third quarters of fiscal 2008
also contributed to the increase in salaries and benefits. Professional services
increased $115,000 as a result of outsourced software development. Office
expense also increased by $154,000 as a result of an annual quality assurance
service contract accounted for as a prepaid asset that we began amortizing in
the fourth quarter of fiscal 2007, as well as other annual subscription service
and support contracts. In fiscal 2009, we expect research and development costs
to decline slightly as a percent of revenue but remain at levels relatively
consistent to fiscal 2008. Research and development expense was approximately
24% of total revenues in fiscal 2008 and approximately 13% of total revenues in
fiscal 2007.

         Sales and marketing expenses consist primarily of sales and marketing
salaries and benefits, and also include allocated travel and entertainment
costs, allocated advertising and other marketing expenses. Sales and marketing
expenses were $4.6 million and $3.3 million for fiscal 2008 and fiscal 2007,
respectively, an increase of $1.2 million or 37%. The increase was a result of
planned increases in salaries expense of $635,000 associated with increased
headcount and compensation structure, increased expenses in advertising and
marketing of $268,000, in indirect commissions and rebates of $145,000, in
professional services of $64,000 and in travel and entertainment of $59,000.
Sales and marketing expenses were 52% of total revenue in fiscal 2008 and 38% of
total revenue in fiscal 2007. In fiscal 2009, we expect sales and marketing
expenses to increase in dollar amount as revenues increase, but expect that the
percentage of sales and marketing expenses incurred in relation to total revenue
to decrease due to headcount reduction and a reduction in planned direct
advertising and marketing expenditures.

         General and administrative expenses consist of company-wide expenses
that are not directly related to research and development or sales and marketing
activities, with the bulk of those general and administrative expenses comprised
of salaries, rent and the costs directly associated with being a public company,
including accounting costs, legal costs and fees. During fiscal 2008 and 2007,
general and administrative expenses from continuing operations were $2.8 million
and $2.4 million, respectively, an increase of $367,000 or 15%. The increase is
primarily a result of increased office expenses of $89,000 resulting from
investments in annual software subscriptions for a new accounting general ledger
package, an equity administration package and a human resources package,
originally recorded as prepaid assets and amortized to office expense. General
and administrative expenses also consisted of increased salaries and benefits of
$11,000, an increase in professional services expense of $57,000 due to costs
incurred in preparation of compliance with section 404 of Sarbanes-Oxley Act, an
increase in accounting fees of $49,000, an increase in legal fees of $39,000, an
increase in board and investor relation fees of $92,000 and an increase in bad
debt expense of $52,000. These increases were partially offset by a decrease in
insurance costs of $55,000. General and administrative expenses from continuing
operations were 32% of total revenues in fiscal 2008 and 28% of total revenues
in fiscal 2007. In fiscal 2009, we expect general and administrative expenses to
decrease as a percentage of revenue but remain at levels consistent with those
experienced in fiscal 2008.

LOSS/INCOME FROM OPERATIONS

         For fiscal 2008, we reported a loss from operations of $2.2 million as
compared to income from operations of $573,000 for fiscal 2007, a decrease of
$2.8 million or 481%. We expect to increase income from operations by increasing
revenues and decreasing expenses in all three categories of operating expenses.

                                       17

<PAGE>

INTEREST EXPENSE FROM CONTINUING OPERATIONS

         Interest expense from continuing operations on outstanding debt
instruments for fiscal 2008 and fiscal 2007 was $1.2 million and $1.0 million,
respectively, an increase of $249,000 or 25%. This increase was the result of an
increase in the interest rate payable on our Senior Notes due 2010 ("Senior
Notes") from 10% to 12% beginning in January 2007 in addition to interest on
capital leases acquired during fiscal 2008. Non-cash interest expense, arising
from the beneficial conversion feature of our debt, for fiscal 2008 and fiscal
2007 was $116,000 and $531,000, respectively, a decrease of $415,000 or 78%.
This decrease resulted from an acceleration of the beneficial conversion feature
in the third quarter of fiscal 2007 based on the extension of the Senior Notes
being accounted for as a debt extinguishment.

         We expect interest expense from continuing operations to remain
consistent in fiscal 2009 with the expense incurred in fiscal 2008. We also
expect non-cash interest expense resulting from the beneficial conversion
feature of our debt to remain consistent in fiscal 2009, because the
amortization is on a straight-line basis. Should there be any debt conversions
in fiscal 2009, the interest will increase in order to accelerate the beneficial
conversion feature related to the proportion of debt converted.

INCOME TAX EXPENSE FROM CONTINUING OPERATIONS

         We recorded tax expense of $85,000 in both fiscal 2008 and 2007. This
expense resulted from the recognition of the deferred income tax liability
related to the tax deductible goodwill. We recorded a valuation allowance for
our deferred tax asset because we concluded it is not likely we would be able to
realize the tax assets due to the lack of profitable operating history. In the
event that we determine that we would be able to realize our deferred tax assets
in the future, an adjustment to the deferred tax asset would increase net income
through a tax benefit in the period such a determination was made that we have
met the more likely than not threshold for such recognition.

LOSS ON EXTINGUISHMENT OF DEBT

         In December, 2006, we negotiated a modification of the terms of our
Senior Notes, to extend the maturity date from July 15, 2007 to July 15, 2010.
In exchange for the extension, the interest rate increased from 10% per annum to
12% per annum, with the new, increased interest rate beginning to accrue on
January 16, 2007, and continuing thereafter at that rate until maturity or the
Senior Note is fully paid. All other terms and provisions of the Senior Notes
remained unchanged. In connection with this matter, the placement agent received
a commission of $87,000 together with a warrant to purchase 100,000 shares of
our common stock at an exercise price of $0.66 per share. The warrant has a
three year term which expires in December 2009. Also, in connection with this
matter, the note agent received an expense reimbursement of $14,000. In
accordance with EIFT 96-19, DEBTOR'S ACCOUNTING FOR A MODIFICATION OR EXCHANGE
OF DEBT INSTRUMENTS, the debt extension was accounted for as an extinguishment
of the existing debt and the creation of the new debt. As a result, we recorded
a one-time loss on extinguishment of debt of $162,000 resulting from the
acceleration of interest expense accounted for as debt discount and deferred
offering costs under the original terms of the senior debt. The direct expenses
of $101,000 and the estimated fair value of the warrant of $42,000 were recorded
as a deferred offering cost and both are being amortized as a component of
interest expense over the term of the Senior Notes.

 RESULTS OF DISCONTINUED OPERATIONS

       On April 28, 2008, subsequent to the fiscal 2008 year end, we entered
into an Asset Purchase Agreement (the "Agreement") with American
Teleconferencing Services Ltd. (the "Purchaser"), a subsidiary of Premiere
Global Services, Inc. The Agreement provided for the sale by iLinc of a majority
of our audio conferencing assets. The closing of the transaction occurred on May
2, 2008. On the closing date, the Purchaser paid us $3.3 million, with an
additional payment of $833,000 to be paid within ten days of the transition date
(that is anticipated to be July 25, 2008) as defined in the Agreement. The gain
on sale resulting from the transaction will be recorded as of the closing date,
and accordingly reported in the first quarter of fiscal 2009. iLinc retained the
Events portion of its audio conferencing business (the "Events Business") and
expects to sell the Events Business as well in Fiscal 2009.

       Therefore, pursuant to the criteria established by SFAS No. 144,
ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS, we have
determined that all of our audio conferencing operations (i.e., the portion sold
and the Events business retained) and related assets and liabilities should be
classified as assets and liabilities "held-for-sale" as of March 31, 2008.
Accordingly, our results of operations related to the audio conferencing
business for the years ended March 31, 2008 and 2007 have been reclassified as
income from discontinued operations.

                                       18

<PAGE>

         A summary of the assets and liabilities of the audio conferencing
business held for sale are as follows:

                                                         -----------------------
                                                                MARCH 31
                                                         -----------------------
                                                            2008         2007
                                                         ----------   ----------
                                                             (IN THOUSANDS)
Assets:
Accounts receivable .................................    $      834   $    1,050
Property and equipment, net .........................           192          265
Goodwill ............................................         1,686        1,686
Intangible assets, net ..............................           433          677
                                                         ----------   ----------
Assets - held for sale ..............................    $    3,145   $    3,678
                                                         ----------   ----------

Liabilities:
Accounts payable ....................................    $      611   $      486
Accrued liabilities .................................           167          266
                                                         ----------   ----------
Liabilities - held for sale .........................    $      778   $      752
                                                         ==========   ==========

         A summary of the results from discontinued audio conferencing
operations for the years ended March 31, 2008 and 2007 are as follows:

                                                         -----------------------
                                                           FOR THE YEAR ENDED
                                                                MARCH 31
                                                         -----------------------
                                                            2008         2007
                                                         ----------   ----------

Audio services revenues .............................    $    5,439   $    5,457
Cost of audio services revenues......................         3,371        3,528
                                                         ----------   ----------
Gross profit ........................................         2,068        1,929
Operating expenses ..................................           591          679
                                                         ----------   ----------
Income from discontinued operations .................         1,477        1,250
Interest expense ....................................            13           --
Gain on termination of service agreements with
  Affiliated Practices ..............................            --           10
                                                         ----------   ----------
Net income from discontinued operations .............    $    1,464   $    1,260
                                                         ==========   ==========


LIQUIDITY AND CAPITAL RESOURCES

GENERAL

         Historically, we have generated cash from capital raising activities
through the sale of our common and preferred stock, and from cash flow provided
by operations. We have used cash to fund our operations but have not used cash
to prepay or reduce debt although we have that option without penalty with our
senior notes.

         Subsequent to the fiscal 2008 year end, on May 2, 2008, we closed a
transaction in which we sold a majority of our audio conferencing assets and
audio operations for $4.1 million in cash. As such, assets and liabilities
related to the audio conferencing business have been classified as Held for Sale
in our financial statements as of March 31, 2008 and 2007. We have collected
$3.33 million of the purchase price and expect to receive an additional $833,000
in July of 2008. Of course discussions of working capital at March 31, 2008 do
not take into account the $4.1 million in total cash that was received as a part
of the audio conferencing sale that was closed subsequently on May 2, 2008.

         At March 31, 2008, we had working capital of $1.2 million compared to a
working capital of $3.5 million at March 31, 2007. Total current assets were
$5.1 million at March 31, 2008 compared to $7.5 million at March 31, 2007. The
decrease in total current assets results principally from a decrease in accounts
receivable of $853,000, which is consistent with a decrease in direct license
revenues, a decrease in cash and cash equivalent and certificate of deposit of
$519,000, a decrease in prepaid and other current assets of $494,000 due in part


                                       19

<PAGE>

to the timing of annual contracts that were prepaid in addition to a decrease in
the valuation of a warrant to one of our agents that is based on meeting
specific sales targets. In addition, there was a decrease in assets held for
sale of $533,000. Our accounts receivable, net of allowance for doubtful
accounts were $627,000 and $1.5 million at March 31, 2008 and March 31, 2007,
respectively. The decrease in receivables is consistent with the decrease in
revenues year over year. Total current liabilities were $3.9 million at March
31, 2008 compared to $4.0 million at March 31, 2007. Contributing to the
decrease in current liabilities were a $102,000 decrease in accrued liabilities
primarily as a result of a decrease in accrued salaries and benefits of $46,000
and amounts payable to third party providers of $52,000, as well as reductions
of $48,000 in the current portion of long-term debt and $71,000 in trade
accounts payable. These decreases were partially offset by an increase of
$75,000 in current portion of capital lease liabilities. Deferred revenue
increased by $24,000 to $1.5 million at March 31, 2008 as the result of new
license sales and renewals of annual maintenance and hosting agreements from our
existing customer base.

         We plan to continue to focus on managing overhead while increasing
revenue through subscription sales in an effort to return to positive cash flow
and ultimately profitability in fiscal 2009. We believe that we will have
sufficient working capital and liquidity to meet our operating needs, and to
satisfy our contractual obligations in the next 12 months without the need to
raise additional capital.


CASH FLOWS FROM CONTINUING OPERATIONS

         Cash used in operating activities was $1.8 million and $1.3 million
during fiscal 2008 and 2007, respectively. In fiscal 2008, cash used in
operating activities was primarily attributable to a loss from continuing
operations of $3.6 million, offset by non-cash expenses of depreciation and
amortization of $480,000, non-cash accretion of debt discount to interest
expense of $202,000, reduction in accounts receivable of $684,000, a decrease in
prepaid expenses and other current assets of $154,000, non-cash stock option
expense of $171,000, an increase in the provision for bad debt of $169,000,
warrant expense of $21,000, an increase in deferred revenue of $24,000 and
non-cash tax expense of $85,000. These items were partially offset by a decrease
in accounts payable and accrued liabilities of $166,000.

         Cash used in operating activities was $1.3 million during fiscal 2007.
In fiscal 2007, cash used in operating activities was primarily attributable to
a loss from continuing operations of $1.2 million. The loss from continuing
operations was offset, by the non-cash accretion of debt discount to interest
expense of $380,000, non-cash expenses of depreciation and amortization of
$285,000, loss on debt extinguishment of $162,000, non-cash stock option expense
of $140,000, an increase of $442,000 in deferred revenue, an increase in the
provision for bad debts of $118,000, warrant expense of $15,000, gain on
disposal of fixed assets of $2,000, and non-cash tax expense of $85,000. These
items were offset by an increase in accounts receivable of $341,000, a decrease
in prepaid expenses and other current assets of $41,000 and a decrease in
accounts payable of $1.3 million.

CASH FLOWS FROM INVESTING ACTIVITIES

         Cash used in investing activities was $296,000 and $1.0 million in
fiscal years 2008 and 2007, respectively. Cash used in investing activities
during fiscal 2008 was primarily attributable to $263,000 in capitalized
software development costs and $181,000 in capital expenditures. This was
partially offset by $131,000 from investments in certificate of deposits,
repayment of notes receivable of $14,000 and $3,000 from the sale of fixed
assets. Cash used in investing activities during fiscal 2007 was primarily due
to $504,000 in investments in certificates of deposit, $230,000 in capital
expenditures and $367,000 in capitalized software development costs. This was
partially offset by $43,000 collection on notes receivable and $9,000 in
proceeds from the sale of software and fixed assets.

CASH FLOWS FROM FINANCING ACTIVITIES

         Cash used in financing activities was $302,000 in fiscal 2008. Cash
provided by financing activities was $1.4 million in fiscal 2007. Cash used in
financing activities in fiscal 2008 was attributable to the payment of dividends
on preferred stock in the amount of $133,000, repayment of long term debt of
$121,000 and the repayment of capital lease liabilities of $70,000, which was
partially offset by $22,000 from the proceeds from the exercise of stock
options. Cash provided by financing activities was attributable to $2.0 million
in gross proceeds from the issuance of common stock in a private placement,
which was partially offset with stock issuance costs of $263,000, repayment of
$124,000 in long term debt, payment of $157,000 in preferred stock dividends and
payment of financing costs of $101,000.

                                       20

<PAGE>

CASH FLOWS FROM DISCONTINUED OPERATIONS

         Cash provided by discontinued operations was $2.0 million and $1.6
million in fiscal 2008 and 2007, respectively.


OUTSTANDING INDEBTEDNESS AND PREFERRED STOCK

         We currently have outstanding unsecured subordinated convertible notes
with a principal balance of $5.1 million due March 29, 2012, Senior Notes with a
principal balance of $2.96 million due July 15, 2010, 105,000 issued and
outstanding shares of Series A Convertible Preferred Stock and 55,000 issued and
outstanding shares of Series B Convertible Preferred Stock. All of the foregoing
securities were issued in connection with our capital raising activities.

         Outstanding Indebtedness

         In March 2002, we completed a private placement offering (the
"Convertible Note Offering") that provided proceeds of $5.75 million that was
used to extinguish an existing line of credit. Under the terms of the
Convertible Note Offering, we issued unsecured subordinated convertible notes
(the "Convertible Notes"). The Convertible Notes bear interest at the rate of
12% per annum and require quarterly interest payments, with the principal due at
maturity on March 29, 2012. The holders of the Convertible Notes may convert the
principal into shares of our common stock at the fixed price of $1.00 per share.
We may force redemption by conversion of the principal into common stock at the
fixed conversion price, if at any time the 20 trading day average closing price
of the Company's common stock exceeds $3.00 per share. These notes are
subordinated to any present or future senior indebtedness. As a part of the
Convertible Notes offering, we also issued warrants to purchase 5,775,000 shares
of our common stock, but those warrants expired on March 29, 2005 without
exercise. The fair value of the warrants was estimated using the Black-Scholes
pricing model and a discount to the Convertible Notes of $1,132,000 was recorded
using this value, which is being amortized to interest expense over the 10-year
term of the Convertible Notes. Upon conversion, any remaining discount and
beneficial conversion feature will be expensed in full at the time of
conversion. During fiscal years 2004, 2005 and 2006, holders with a principal
balance totaling $675,000 converted their notes into 2,121,088 shares of our
common stock at prices from $0.25 to $0.30 per share. No conversion of debt or
acceleration of amortization of costs occurred during the years ended March 31,
2007 or 2008.

         In April of 2004, we completed a private placement offering of
unsecured senior notes (the "2004 Senior Note Offering") that provided gross
proceeds of $4.25 million. Under the terms of the 2004 Senior Note Offering, we
issued $3,187,000 in unsecured senior notes and 1,634,550 shares of our common
stock. The senior notes originally bore an interest rate of 10% per annum and
accrued interest is due and payable on a quarterly basis, with principal due at
maturity on July 15, 2007. The senior notes are redeemable by us at 100% of the
principal value at any time. The notes and common stock were originally issued
with a debt discount of $768,000. The fair value of the warrants was estimated
and used to calculate a discount of $119,000 of which $68,000 was allocated to
the notes and $51,000 was allocated to equity. The total discount allocated to
the notes of $836,000 is being amortized as a component of interest expense over
the original term of the notes, which was thirty-nine months. The senior notes
are unsecured obligations of our company but are senior in right of payment to
all existing and future indebtedness of our company. The common stock issued in
the 2004 Senior Note Offering was registered with the SEC pursuant to a resale
prospectus dated August 2, 2005. Effective August 1, 2005, holders with a
principal balance and accrued interest totaling $225,800 converted their senior
notes and accrued interest into 903,205 share of our common stock at a price of
$0.25 per share. No conversion of debt to equity or acceleration of amortization
of costs related to such conversions occurred during the years ended March 31,
2007 or 2008. In December, 2006, we negotiated a modification of the terms of
the senior notes to extend the maturity date to July 15, 2010. In exchange for
the three year extension, the interest rate increased to 12% per annum effective
on January 16, 2007. All other terms and provisions of the senior notes remained
unchanged. The direct expenses of the note amendment was $101,000, and the
estimated fair value of the warrant issued to the placement agent of $42,000
were recorded as a deferred offering cost and both are being amortized as a
component of interest expense over the remaining term of the senior notes.

         Preferred Stock

         On September 16, 2003, we completed our private placement of Series A
convertible preferred stock with detachable warrants to purchase 750,000 shares
of common stock, providing $1,500,000 in gross proceeds. We originally issued
150,000 shares of Series A Preferred Stock that converts to 3,000,000 shares of
common stock. The warrants were immediately exercisable at a price of $1.50 per
share and expired on September 16, 2006. We pay an 8% dividend to holders of the


                                       21

<PAGE>

Series A Preferred Stock, and the dividend is cumulative. The Series A Preferred
Stock is non-voting and non-participating. The shares of Series A Preferred
Stock will not be registered under the Securities Act of 1933, as amended, and
were offered in a private placement providing exemption from registration. The
cash proceeds of the private placement of Series A Preferred Stock were
allocated pro rata between the relative fair values of the Series A Preferred
Stock and warrants at issuance using the Black-Scholes valuation model for
valuing the warrants. The aggregate value of the warrants and the beneficial
conversion discount of $247,000 were considered a deemed dividend in the
calculation of loss per share. During fiscal years 2005 and 2006, holders of
35,000 shares converted to 700,000 shares of common stock. During fiscal 2007,
holders of 12,500 shares of Series A Preferred Stock converted those shares into
250,000 shares of the Company's common stock. During fiscal 2008, holders of
10,000 shares of Series A Preferred Stock converted those shares into 200,000
shares of the Company's common stock. The underlying common stock that would be
issued upon conversion of the preferred stock and upon exercise of the
associated warrants has been registered with the SEC and may be sold pursuant to
a resale prospectus.

         On December 31, 2005, we completed our private placement of Series B
convertible preferred stock, with detachable warrants. We originally issued
70,000 shares of Series B Preferred Stock that converts to 2,800,000 shares of
common stock, if all converted and warrants to purchase 700,000 shares of common
stock. The Series B Preferred Stock bears an 8% dividend. The dividend is
cumulative, and the Series B Preferred Stock is non-voting and
non-participating. The shares of Series B Preferred Stock will not be registered
under the Securities Act of 1933, as amended, and were offered in a private
placement providing exemption from registration. The warrants that are
exercisable at an exercise price equal to $0.50 per share expire on September
30, 2008. The aggregate value of the warrants of $55,000 is considered a deemed
dividend in the calculation of earnings/loss per share. During the 2007 fiscal
year, holders of 10,500 shares of Series B Preferred Stock converted those
shares into 420,000 shares of our common stock. During the 2008 fiscal year,
holders of 4,500 shares of Series B Preferred Stock converted those shares into
180,000 shares of our common stock. The underlying common stock that would be
issued upon conversion of the preferred stock and upon exercise of the
associated warrants has been registered with the SEC and may be sold pursuant to
a resale prospectus.

         On June 9, 2006, we completed a private placement of 5,405,405
unregistered, restricted shares of common stock providing $2.0 million in gross
cash proceeds. We have used the proceeds for working capital and general
corporate purposes. We paid our placement agent an underwriting commission of
$185,000 of which $25,000 was recorded as deferred offering costs, and incurred
additional offering expenses of approximately $103,000. Pursuant to the
registration rights agreement between the parties, we filed a Registration
Statement on Form S-3 to enable the resale of the shares by the investors which
was declared effective on September 29, 2006.

OFF BALANCE SHEET TRANSACTIONS

         There are no off-balance sheet transactions, arrangements, obligations
(including contingent obligations) or other relationships of the Company with
unsolicited entities or other persons that have or may have a material effect on
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources of the Company.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosure of contingent assets and liabilities. The more
significant areas requiring use of estimates relate to revenue recognition,
accounts receivable and notes receivable valuation reserves, realizability of
intangible assets, realizability of deferred income tax assets and the
evaluation of contingencies and litigation. Management bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. The results of such estimates form the basis
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may materially
differ from these estimates under different assumptions or conditions.

                                       22

<PAGE>

         We consider an accounting policy to be critical if it requires an
accounting estimate that requires us to make assumptions about matters that are
highly uncertain at the time the accounting estimate is made. In addition,
different estimates that we reasonably could have used for the accounting
estimate in the current period, or changes in the accounting estimate that are
reasonably likely to occur from period to period would have a material impact on
the presentation of our financial condition, changes in financial condition or
results of operations. We believe there are a number of accounting policies that
are critical to understanding our historical and future performance. The
critical accounting policies include revenue recognition, sales reserves,
allowance for doubtful accounts, software development costs, intangible assets,
income taxes and stock-based compensation.

         These critical accounting policies that affect the Company's more
significant judgments and estimates used in the preparation of its consolidated
financial statements are described below.

REVENUE RECOGNITION

         Our revenues are generally classified into three main categories:
software license revenues, subscription and hosting services revenues and
software maintenance and other services revenues. Software license revenues are
generated from the sale of our iLinc suite of Web conferencing software on a
software purchase model basis and from the sale of our off-the-shelf courseware.
Subscription and hosting services revenues are generated from the sale of our
iLinc Suite of Web conferencing software on an Application Service Provider
("ASP") model basis and the sale of our iLinc Suite software on a per-minute
basis, as well as, all service contracts that might include hosting services.
Software maintenance and other services revenues are generated from the sale of
maintenance contracts related to our iLinc suite of Web conferencing software on
a purchase model.

SALES OF SOFTWARE LICENSES

         Because we offer the iLinc Suite software in one of two forms, the
first being a purchase model and the second being a subscription model, we have
separate revenue recognition policies applicable to each licensing model. With
each sale of our Web conferencing products and services, we execute written
contracts with our customers that govern the terms and conditions of each
software license sale, hosting agreement, maintenance and support agreement, and
other services arrangements.

         In connection with our sales of software licenses, whether on a
purchase model basis or periodic license basis, we adopted Statement of Position
("SOP") 97-2, SOFTWARE REVENUE RECOGNITION as issued by the American Institute
of Certified Public Accountants. In accordance with SOP 97-2, we recognize
revenue from the sale of software licenses if all of the following conditions
are met: first, there is persuasive evidence of an arrangement with the
customer; second, the product has been delivered to the customer; third, the
amount of the fees to be paid by the customer is fixed or determinable; and,
fourth, collection of the fee is probable.

         Each of these factors, particularly the determination of whether a fee
is fixed and determinable and the collectability of the resulting receivable,
requires the application of the judgment and the estimates of management.
Therefore, significant management judgment is utilized and estimates must be
made in connection with the revenue we recognize in any accounting period. We
analyze various factors, including a review of the nature of the license or
product sold, the terms of each specific transaction, the vendor specific
objective evidence of the elements required by SOP 97-2, any contingencies that
may be present, our historical experience with like transactions or with like
products, the creditworthiness of the customer and other current market and
economic conditions. Changes in our judgment based upon these factors and others
could impact the timing and amount of revenue that we recognize, and ultimately
the results of operations and our financial condition. Therefore, the
recognition of revenue is a key component of our results of operations.

         At the time of the sale of our software licenses on a purchase license
basis, we assess whether the fee associated with the transaction is fixed or
determinable based on the payment terms associated with the transaction before
recording immediate revenue recognition, assuming all other elements of revenue
recognition are present. Billings to our customers are generally due within 60
to 90 days, with payment terms up to 180 days available to customers. We believe
that we have sufficient history of collecting all amounts within these normal
payment terms and to conclude that the fee is fixed or determinable at the time
of the perpetual license sale. We consider all arrangements with payment terms
longer than 180 days not to be fixed or determinable and for arrangements
involving the extended payment terms exceeding 180 days, revenue recognition
occurs when payments are collected, assuming all other elements of revenue
recognition are present.

                                       23

<PAGE>

         In addition, in assessing whether collection is probable or not for a
given transaction, and therefore whether we should recognize the revenue, we
make estimates regarding the creditworthiness of the customer. Initial
creditworthiness is assessed through internal credit check processes, such as
credit applications or third party reporting agencies. Creditworthiness for
transactions to existing customers primarily relies upon a review of their prior
payment history. We do not request collateral or other security from our
customers. If we determine that collection of a fee is not reasonably assured,
we defer the fee and recognize revenue at the time collection becomes reasonably
assured, which is generally upon the receipt of payment or other change in
circumstance.

         As part of our perpetual license model, we offer both a concurrent seat
and an Enterprise license. Under the iLinc Enterprise model, customers pay a
one-time up-front fee for unlimited, organization-wide Web conferencing, with
revenue recognized at the time of the sale of the Enterprise Unlimited perpetual
license. The annual maintenance and support fees and hosting fees associated
with an iLinc Enterprise Unlimited license are based upon a fixed rate per seat
license that is active on each annual anniversary of the iLinc Enterprise
Unlimited license agreement and that is approximately equivalent to the 12% to
18% charged for concurrent seat perpetual license contracts. Customers may
expand the number of active seats available to them at any time with a
corresponding increase in annual maintenance and hosting fees being charged with
the additional revenue recognized on a straight-line basis over the period of
the contract.

SALES OF CONCURRENT LICENSES ON A SUBSCRIPTION AND PER-MINUTE BASIS

         In addition to that purchase model software sale, we also offer a
subscription license model. A subscription license may be obtained on a
concurrent seat basis, a named user basis or a pay-per-minute basis. Under the
concurrent seat basis, customers subscribe to a certain number of concurrent
connections (or seats) for a fixed period, often a year. Under the named user
basis, customers enroll certain designated named users (or hosts) which have an
assigned room for a period of time, again often a year but also on a
month-to-month basis as well. Under both the concurrent seat and named user
basis, we recognize the revenue associated with these monthly, fixed-fee
subscription arrangements each month on a straight-line basis over the term of
the agreement. Pay-per-minute customers pay as they use the product with a
per-minute rate varying by the service used. The per-minute basis, and fees that
include overage for use on a per-minute basis in excess of a customers'
concurrent or name-user seats are charged at the end of each month and recorded
as revenue at the end of each month as the services are provided. Customers with
contractually established minimum per-minute fees are assessed the greater of
the established minimum or the actual usage at the end of each month.
Pay-per-minute customers often provide payment with credit cards.

SALES OF MAINTENANCE, HOSTING, AND OTHER RELATED SERVICES

         We offer with each sale of our software products a software
maintenance, upgrade, and support arrangement. These contracts may be elements
in a multiple-element arrangement or may be sold on a stand-alone basis.
Revenues from maintenance and support services are recognized ratably on a
straight-line basis over the term that the maintenance service is provided.
Maintenance contracts typically provide for 12-month terms with maintenance
contracts available up to 36 months. The Company typically charges 12% to 18% of
the software purchase price for a 12-month contract with discounts available for
longer-term agreements. The annual maintenance and support fees and hosting fees
associated with an iLinc Enterprise license are based upon a fixed rate per seat
license that is active on each annual anniversary of the iLinc Enterprise
license agreement and that is approximately equivalent to the 12% to 18% charged
for concurrent seat perpetual license contracts.

         We also typically charge 8% to 10% for hosting of purchase model
software sales for customers who do not wish to install and host the iLinc Suite
on their own premises or that of a co-location facility. Charges for hosting are
likewise spread ratably over the term of the hosting agreement, with the typical
hosting agreement having a term of 12 months, with renewal on an annual basis.

         Revenues from consulting, training, and education services are
recognized either as the services are performed, ratably over a subscription
period, or upon completing a project milestone if defined in the agreement.
These consulting, training, and education services, are not considered essential
to the functionality of our products as these services do not alter the product
capabilities, do not require specialized skills, and are often performed by our
customers or our VAR's customers without access to those services.

                                       24

<PAGE>

         Implementation, consulting, training, translation and other event-type
services may also be sold in conjunction with the sale of our software products.
Those services are generally recognized as the services are performed or earlier
when all other revenue recognition criteria have been met. Although we may
provide implementation, training and consulting services on a time and materials
basis, a significant portion of these services have been provided on a fixed-fee
basis.

         Should the sale of our software involve an arrangement with multiple
elements (for example, the sale of a software license along with the sale of
maintenance and support to be delivered over the contract period), we allocate
revenue to each component of the arrangement using the residual-value method
based on the fair value of the undelivered elements. We defer revenue from the
arrangement equivalent to the fair value of the undelivered elements and
recognize the remaining amount at the time of the delivery of the product or
when all other revenue recognition criteria have been met. Fair values for the
ongoing maintenance and support obligations are based upon separate sales of
renewals of maintenance contracts. Fair value of services, such as training or
consulting, is based upon separate sales of these services to other customers.
Thus, these types of arrangements require us to make judgments about the fair
value of undelivered arrangements.

SALES OF CUSTOM CONTENT DEVELOPMENT SERVICES

         A component of our software maintenance and other services revenue is
derived from custom content development services. These custom content
development services are primarily outsourced to a subcontractor, Interactive
Alchemy. Our agreement with our subcontractor ended in May 2008 and therefore we
do not expect to earn custom content revenue after May 2008. For contracts and
revenues related exclusively to custom content development services, that were
earned in fiscal 2008 and 2007, we recognized revenue and profit as work
progressed on custom content service contracts using the
percentage-of-completion method. Customers sometimes requested modifications to
projects in progress which resulted in revisions to cost estimates and profit
recognition. If this arose, the provision for any estimated losses on
uncompleted custom content service contracts were made in the period in which
such losses became evident. There were no such losses at March 31, 2007 or 2008
for any custom content development services.

SALES BY OUR PARTNERS

         We have engaged organizations within the United States of America and
in other countries that market and sell our products and services through their
sales distribution channels that are value added resellers (VARs). The VARs
primarily sell, on a non-exclusive basis, our iLinc suite of Web conferencing
products and services. Our VAR contracts have terms of two to five years and are
automatically renewed for an additional like term unless either party terminates
the agreement for breach or other financial reasons. Each VAR purchases the
product from us and resells the product to its customers. Under those VAR
agreements, we record only the amount paid by the VAR as revenue and recognize
revenue when all revenue recognition criteria have been met. We also engage
organizations that act as mere agents or distributors of its products
("Agents"), without title passing to the Agent and with the Agent only receiving
a commission on the consummation of the sale to our customer. We record revenue
on sales by Agents on a gross basis before commissions due to the Agent and only
when all revenue recognition criteria are met as would be with a sale by us
directly to a customer not involving an agent.

SALES RESERVE

         The sales reserve is an estimate for losses on receivables resulting
from customer credits, cancellations and terminations and is recorded, if at
all, as a reduction in revenue at the time of the sale. Increases to sales
reserve are charged to revenue, reducing the revenue otherwise reportable. The
sales reserve estimate is based on an analysis of the historical rate of
credits, cancellations and terminations. The accuracy of the estimate is
dependent on the rate of future credits, cancellations and terminations being
consistent with the historical rate. If the rate of actual credits,
cancellations and terminations is different than the historical rate, revenue
would be different from what was reported. As of March 31, 2008 and 2007, we did
not believe that an accrual for sales reserves was necessary, and we will
continue to assess the adequacy of the sales reserve account balance on a
quarterly basis.

                                       25

<PAGE>

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         We record an allowance for doubtful accounts to provide for losses on
accounts receivable due to customer credit risk. Increases to the allowance for
doubtful accounts are charged to general and administrative expense as bad debt
expense. Losses on accounts receivable due to financial distress or failure of
the customer are charged to the allowance for doubtful accounts. The allowance
estimate is based on an analysis of the historical rate of credit losses. The
accuracy of the estimate is dependent on the future rate of credit losses being
consistent with the historical rate. If the rate of future credit losses is
greater than the historical rate, then the allowance for doubtful accounts may
not be sufficient to provide for actual credit losses.

         The allowance for doubtful accounts is $30,000 and $117,000,
respectively, as of March 31, 2008 and 2007 and is based on our historical
collection experience. Any adjustments to these accounts are reflected in the
income statement for the current period, as an adjustment to revenue in the case
of the sales reserve and as a general and administrative expense in the case of
the allowance for doubtful accounts.

SOFTWARE DEVELOPMENT COSTS

         We account for software development costs in accordance with Statements
of Financial Accounting Standards ("SFAS") No. 86, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, whereby costs for
the development of new software products and substantial enhancements to
existing software products are expensed as incurred until technological
feasibility has been established, at which time any additional costs are
capitalized. Technological feasibility is established upon completion of a
working model. Costs of maintenance and customer support are charged to expense
when related revenue is recognized or when those costs are incurred, whichever
occurs first. In May of 2006, we began production of version 9 of our Web
conferencing software. In accordance with SFAS No. 86, we began capitalizing
certain direct and indirect software development costs that included expenses
related to employee payroll costs, consultant fees, dedicated computer hardware
costs and specialized software license costs associated with this project. As of
March 31, 2008 and 2007, we capitalized costs totaling $631,000 and $367,000,
respectively. Version 9 was completed and released to customers in June 2007. In
July 2007, we began amortization of these capitalized costs, using straight-line
amortization over a three year period.

INTANGIBLE ASSETS

         On April 1, 2002, we adopted SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS and as a result, our goodwill is no longer amortized. SFAS No.
142 requires that goodwill be tested annually (or more frequently if impairment
indicators arise) for impairment. We have made acquisitions of companies having
operations or technology in areas within our strategic focus and have recorded
goodwill and other intangible assets associated with our acquisitions. Future
adverse changes in market conditions or poor operating results of the underlying
acquired operations could result in losses or an inability to recover the
carrying value of the goodwill and other intangible assets thereby possibly
requiring an impairment charge in the future. We have determined that impairment
of that goodwill and intangible assets was not required. Our management believes
no such impairment exists at March 31, 2008.

         Debt issuance costs are amortized using the straight-line method over
the term of the related debt obligations.

         Other intangibles primarily consist of the allocation of purchase
consideration, specifically related to purchased software and customer
relationship intangibles from acquisitions in 2002 and 2004. Such other
intangibles are amortized over their expected benefit period of 24 to 72 months.

INCOME TAXES

         We utilize the liability method of accounting for income taxes in
accordance with SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under this method,
deferred taxes are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured using the
enacted marginal tax rates currently in effect when the differences reverse.

         We recorded a valuation allowance for our deferred tax asset because we
concluded it is not likely we would be able to realize the tax assets due to the
lack of profitable operating history of our implementation of the Web
conferencing business plan. In the event we were to determine that we would be
able to realize our deferred tax assets in the future, an adjustment to the
deferred tax asset would increase net income through a tax benefit in the period
such a determination was made that we have met the more likely than not
threshold for such recognition.

                                       26

<PAGE>

         The Company is subject to income taxes in the U.S. Significant judgment
is required in evaluating uncertain tax positions and determining the company's
provision for income taxes. Effective April 1, 2007, the Company adopted
Financial Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES --
AN INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN 48"). FIN 48 contains a
two-step approach to recognize and measure uncertain tax positions accounted for
in accordance with FAS 109. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50 percent
likely of being realized upon settlement.

         Although the Company believes it has adequately reserved for its
uncertain tax positions, no assurance can be given that the final tax outcome of
these matters will not be different. The Company adjusts these reserves in light
of changing facts and circumstances, such as the closing of a tax audit or the
refinement of an estimate. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences will impact the
provision for income taxes in the period in which such determination is made.
The provision for income taxes includes the impact of reserve provisions as well
as related interest and penalties.

STOCK-BASED COMPENSATION

         In December 2004, the FASB issued SFAS No. 123R, SHARE-BASED PAYMENT
("SFAS 123R"). Under this new standard, companies will no longer be able to
account for share-based compensation transactions using the intrinsic method in
accordance with APB 25. Instead, companies are required to account for such
transactions using a fair-value method and to recognize the expense over the
service period. SFAS 123R became effective for us for periods beginning after
March 31, 2006 and allows for several alternative transition methods. We adopted
SFAS 123R effective April 1, 2006, which requires recognition of compensation
expense for all stock option or other equity-based awards that vest or become
exercisable after the option's effective date. We elected the modified
prospective application transition method of adoption and, as such, prior period
financial statements have not been restated. Under this method, the fair value
of all stock options granted or modified after adoption must be recognized in
the Consolidated Statement of Operations and total compensation cost related to
non-vested awards not yet recognized, as determined under the original
provisions of SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, must also be
recognized in the Consolidated Statement of Operations as vesting occurs.

GUARANTEES AND INDEMNIFICATIONS

         We provide a limited 90-day warranty for certain of our software
products. Historically, claims by customers under this limited warranty have
been very minimal, and as such, no warranty accrual has been provided for in the
consolidated financial statements.

         In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45
GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS -- AN INTERPRETATION OF FASB
STATEMENTS NO. 5, 57 AND 107 AND RESCISSION OF FIN 34. The following is a
summary of our agreements that we have determined are within the scope of FIN
No. 45.

         Under our bylaws, we have agreed to indemnify our officers and
directors for certain events or occurrences arising as a result of the officers
or directors serving in such capacity. The term of the indemnification period is
for the officer's or director's lifetime. The maximum potential amount of future
payments we could be required to make under these indemnification agreements is
unlimited. However, we have a director and officer liability insurance policy
that limits our exposure and enables us to recover a portion of any future
amounts paid. As a result of our insurance policy coverage, we believe the
estimated fair value of these indemnification agreements is minimal and have no
liabilities recorded for these agreements as of March 31, 2008.

         We enter into indemnification provisions under (i) our agreements with
other companies in our ordinary course of business, typically with business
partners, contractors, and customers, landlords and (ii) our agreements with
investors. Under these provisions we generally indemnify and hold harmless the
indemnified party for losses suffered or incurred by the indemnified party as a
result of our activities or, in some cases, as a result of the indemnified
party's activities under the agreement. The maximum potential amount of future
payments we could be required to make under these indemnification provisions is
unlimited. We have not incurred material costs to defend lawsuits or settle
claims related to these indemnification agreements. As a result, we believe the
estimated fair value of these agreements is minimal. Accordingly, we have no
liabilities recorded for these agreements as of March 31, 2008.

                                       27

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         On February 15, 2007, the FASB issued SFAS No. 159, THE FAIR VALUE
OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES (SFAS No. 159). Under this
Standard, we may elect to report financial instruments and certain other items
at fair value on a contract-by-contract basis with changes in value reported in
earnings. This election is irrevocable. SFAS No. 159 provides an opportunity to
mitigate volatility in reported earnings that is caused by measuring hedged
assets and liabilities that were previously required to use a different
accounting method than the related hedging contracts when the complex provisions
of SFAS No. 133 hedge accounting are not met. SFAS No. 159 is effective for
years beginning after November 15, 2007. Early adoption within 120 days of the
beginning of our 2009 fiscal year is permissible, provided we have not yet
issued interim financial statements for 2009 and have adopted SFAS No. 157.
Management is currently evaluating the potential impact of adopting this
Standard.

         In December 2007, the Financial Accounting Standards Board, or FASB,
issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES--AN AMENDMENT OF FASB STATEMENT NO. 133. This standard requires
companies to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. We have not yet adopted
the provisions of SFAS No. 161, but do not expect it to have a material impact
on our consolidated financial position, results of operations or cash flows.

         In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No.
110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123R, SHARE-BASED PAYMENT. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understood that such detailed information about employee
exercise behavior may not have been widely available by December 31, 2007.
Accordingly, the staff will continue to accept, under certain circumstances, the
use of the simplified method beyond December 31, 2007. We currently use the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. We do not believe that this
will have an impact on our consolidated financial position, results of
operations or cash flows.

         In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING
INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS--an amendment of ARB No. 51. This
statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). We will adopt
this Statement beginning April 1, 2009. We do not believe that this will have an
impact on our consolidated financial position, results of operations or cash
flows.

                                       28

<PAGE>

         In December 2007, the FASB, issued FAS No. 141 (revised 2007), BUSINESS
COMBINATIONS. This Statement replaces FASB Statement No. 141, BUSINESS
COMBINATIONS, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL
STATEMENTS. We will adopt this statement beginning April 1, 2009. We do not
believe that this will have an impact on our consolidated financial position,
results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


         The disclosure is not applicable because iLinc is a smaller reporting
company.


                                       29

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA


                          INDEX TO FINANCIAL STATEMENTS

                                                                         PAGE(S)
                                                                         -------
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm.................   31

Consolidated Balance Sheets at March 31, 2008 and 2007..................   32
Consolidated Statements of Operations
      for the years ended March 31, 2008 and 2007 ......................   33
Consolidated Statements of Shareholders' Equity
     for the years ended March 31, 2008 and 2007........................   34
Consolidated Statements of Cash Flows
     for the years ended March 31, 2008 and 2007........................   35
Notes to Consolidated Financial Statements..............................   36

FINANCIAL STATEMENTS SCHEDULE:

All other schedules are omitted because they are not applicable.


                                       30

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------


To the Stockholders and Board of Directors
of iLinc Communications, Inc. and Subsidiaries:


We have audited the accompanying consolidated balance sheets of iLinc
Communications, Inc. and subsidiaries as of March 31, 2008 and 2007 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of iLinc
Communications, Inc. and subsidiaries as of March 31, 2008 and 2007 and the
consolidated results of its operations and cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States
of America.

As discussed in Note 10 to the consolidated financial statements, effective
April 1, 2007, the Company adopted FASB Interpretation No. 48, ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES - AN INTERPRETATION OF FASB NO. 109.

As discussed in Note 16 to the consolidated financial statements, the Company
recorded a cumulative effect adjustment as of April 1, 2006, in connection with
the adoption of SEC Staff Accounting Bulletin No. 108, "Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements."

/s/  Moss Adams LLP
     Scottsdale, Arizona
     June 27, 2008


                                       31

<PAGE>

<TABLE>
<S>     <C>
                   ILINC COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                                     MARCH 31,       MARCH 31,
                                                                       2008            2007
                                                                   ------------    ------------
ASSETS
Current assets:
  Cash and cash equivalents ....................................   $        669    $      1,057
  Certificates of deposit ......................................            373             504
   Accounts receivable, net of allowance for doubtful
    accounts of $30 and $117, at March 31, 2008 and 2007,
    respectively ...............................................            627           1,480
  Note receivable ..............................................             --              14
  Prepaid expenses and other current assets ....................            272             766
   Held for sale - assets ......................................          3,145           3,678
                                                                   ------------    ------------
      Total current assets .....................................          5,086           7,499

  Property and equipment, net ..................................            566             426
  Goodwill .....................................................          9,520           9,520
  Intangible assets, net .......................................            869             879
  Other assets .................................................             14              14
                                                                   ------------    ------------
      Total assets .............................................   $     16,055    $     18,338
                                                                   ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt ...........................   $         95    $        143
   Accounts payable trade ......................................            612             683
   Accrued liabilities .........................................            751             853
   Current portion of capital lease liabilities ................            120              45
   Deferred revenue ............................................          1,507           1,483
    Held for sale - liabilities ................................            778             752
                                                                   ------------    ------------
      Total current liabilities ................................          3,863           3,959

  Long-term debt, less current maturities, net of discount and
      beneficial conversion feature of $791 and $993, at
      March 31, 2008 and 2007, respectively ....................          7,535           7,406

  Capital lease liabilities, less current maturities ...........            256             223
  Deferred tax liability .......................................            384             299
                                                                   ------------    ------------
      Total liabilities ........................................         12,038          11,887

Commitments and contingencies

Shareholders' equity:
   Preferred stock series A and B, 10,000,000 shares authorized:
   Preferred stock series A, $.001 par value, 105,000 and
     115,000 shares issued and outstanding, liquidation
     preference of $1,050,000 and $1,150,000, at March 31,
     2008 and 2007, respectively ...............................             --              --
   Preferred stock series B, $.001 par value, 55,000 and
     59,500 shares issued and outstanding, liquidation
     preference of $550,000 and $595,000, at March 31, 2008
     and 2007, respectively ....................................             --              --
   Common  stock, $.001 par value, 100,000,000 shares
     authorized, 35,456,228 and 35,017,843 issued, at March
     31, 2008 and 2007, respectively ...........................             35              35
   Additional paid-in capital ..................................         46,498          46,614
   Accumulated deficit .........................................        (41,108)        (38,790)
   Less: 1,432,412 treasury shares at cost .....................         (1,408)         (1,408)
                                                                   ------------    ------------
      Total shareholders' equity ...............................          4,017           6,451

      Total liabilities and shareholders' equity ...............   $     16,055    $     18,338
                                                                   ============    ============

 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       32

<PAGE>

                   ILINC COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                             YEAR ENDED      YEAR ENDED
                                                           MARCH 31, 2008  MARCH 31, 2007
                                                            ------------    ------------
Revenues
   Software licenses ....................................   $      3,235    $      4,177
   Subscription and hosting services ....................          2,810           2,044
   Software maintenance and other services ..............          2,768           2,517
                                                            ------------    ------------
       Total revenues ...................................          8,813           8,738
                                                            ------------    ------------

Cost of revenues
   Software licenses ....................................            126             131
   Subscription and hosting services ....................            437             383
   Software maintenance and other services ..............            803             787
   Amortization of technology ...........................            158              --
                                                            ------------    ------------
     Total cost of revenues .............................          1,524           1,301
                                                            ------------    ------------

Gross profit ............................................          7,289           7,437
                                                            ------------    ------------

Operating expenses
   Research and development .............................          2,127           1,116
   Sales and marketing ..................................          4,571           3,343
   General and administrative ...........................          2,772           2,405
                                                            ------------    ------------
     Total operating expenses ...........................          9,470           6,864
                                                            ------------    ------------
(Loss) income from operations ...........................         (2,181)            573
                                                            ------------    ------------

Interest expense ........................................         (1,242)           (993)
Amortization of beneficial debt conversion ..............           (116)           (531)
                                                            ------------    ------------
      Total interest expense ............................         (1,358)         (1,524)
Net gain  on settlement of debt and other obligations ...             --               8
Loss on extinguishment of debt ..........................             --            (162)
Interest income (charges) and other .....................            (24)            (14)
                                                            ------------    ------------
Loss from continuing operations before income taxes .....         (3,563)         (1,119)
Income taxes ............................................            (85)            (85)
                                                            ------------    ------------

Loss from continuing operations .........................         (3,648)         (1,204)
Income from discontinued operations .....................          1,464           1,260
                                                            ------------    ------------
Net (loss) income .......................................         (2,184)             56
   Series A and B preferred stock dividends .............           (134)           (153)
   Imputed preferred stock dividends ....................             --              --
                                                            ------------    ------------
Loss available to common shareholders ...................   $     (2,318)   $        (97)
                                                            ============    ============
 (Loss) income per common share, basic and diluted
   From continuing operations ...........................   $      (0.11)   $      (0.04)
   From discontinued operations .........................           0.04            0.04
                                                            ------------    ------------
     (Loss) income per common share .....................   $      (0.07)   $       0.00
                                                            ============    ============

Number of shares used in calculation of (loss)
income per share:
   Basic and diluted ....................................         33,881          32,110
                                                            ============    ============

 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       33

<PAGE>

                                           ILINC COMMUNICATIONS, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                         (IN THOUSANDS)


                                     CONVERTIBLE
                                   PREFERRED STOCK         COMMON STOCK      ADDITIONAL                             TOTAL
                                 --------------------   -------------------    PAID-IN   ACCUMULATED  TREASURY  SHAREHOLDERS'
                                  SHARES      AMOUNT     SHARES     AMOUNT     CAPITAL     DEFICIT     STOCK       EQUITY
                                 --------    --------   --------   --------   --------    --------    --------    --------
Balances, April 1, 2006 ......        197    $     --     28,923   $     29   $ 44,228    $(38,479)   $ (1,408)   $  4,370

Cumulative effect of
   adjustments from
   adoption of SAB 108 .......         --          --         --         --         --        (214)         --        (214)
Adjusted Balances, April
   1, 2006 ...................        197    $     --     28,923   $     29   $ 44,228    $(38,693)   $ (1,408)   $  4,156

Warrant grant ................         --          --         --         --         57          --          --          57
Series A preferred stock
   dividends .................         --          --         --         --         --        (101)         --        (101)
Series B preferred stock
   dividends .................         --          --         --         --         --         (52)         --         (52)
Vesting of restricted
   stock grant ...............         --          --         --         --         41          --          --          41
Fair value of unvested
   warrant issued in agent
   agreement .................         --          --         --         --        467          --          --         467
Stock option compensation
   expense ...................         --          --         --         --        110          --          --         110
Conversion of Preferred A
   stock to common stock .....        (12)         --        250         --         --          --          --          --
Conversion of Preferred B
   stock to common stock .....        (10)         --        420          1         (1)         --          --          --
Issuance of common stock
   in private placement ......         --          --      5,405          5      1,995          --          --       2,000
Costs incurred in connection
   with issuance of common
   stock in private
   placement .................         --          --         --         --       (288)         --          --        (288)
Stock option exercises .......         --          --         19         --          5          --          --           5
Net income ...................         --          --         --         --         --          56          --          56
                                 --------    --------   --------   --------   --------    --------    --------    --------
Balances, March 31, 2007 .....        175    $     --     35,017   $     35   $ 46,614    $(38,790)   $ (1,408)   $  6,451
Warrant grant ................         --          --         --         --         21          --          --          21
Series A preferred stock
   dividends .................         --          --         --         --         --         (87)         --         (87)
Series B preferred stock
   dividends .................         --          --         --         --         --         (47)         --         (47)
Vesting of restricted
   stock grant ...............         --          --         --         --         41          --          --          41
Fair value of unvested
   warrant issued in agent
   agreement .................         --          --         --         --       (344)         --          --        (344)
Stock option compensation
   expense ...................         --          --         --         --        143          --          --         143
Conversion of Preferred A
   stock to common stock .....        (10)         --        200         --         --          --          --          --
Conversion of Preferred B
   stock to common stock .....         (5)         --        180         --         --          --          --          --
Stock option exercises .......         --          --         59         --         23          --          --          23
Net loss .....................         --          --         --         --         --      (2,184)         --      (2,184)
                                 --------    --------   --------   --------   --------    --------    --------    --------
Balances, March 31, 2008 .....        160    $     --     35,456   $     35   $ 46,498    $(41,108)   $ (1,408)   $  4,017
                                 ========    ========   ========   ========   ========    ========    ========    ========

                         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.


                                                               34

<PAGE>

                           ILINC COMMUNICATIONS, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (IN THOUSANDS)

                                                                  FOR THE YEAR    FOR THE YEAR
                                                                 ENDED MARCH 31, ENDED MARCH 31,
                                                                      2008            2007
                                                                  ------------    ------------
Cash flows from continuing operating activities:
Net (loss) income .............................................   $     (2,184)   $         56
Less:  Income from discontinued operations ....................         (1,464)         (1,260)
                                                                  ------------    ------------
Net loss from continuing operations ...........................   $     (3,648)   $     (1,204)
Adjustments to reconcile loss from continuing operations to
cash provided by (used in) continuing operating activities:
   Provision for bad debts ....................................            169             118
   Gain on disposal of fixed assets ...........................             --               2
   Loss on debt extinguishment ................................             --             162
   Depreciation and amortization ..............................            480             285
   Warrant expense ............................................             21              15
   Deferred income tax expense ................................             85              85
   Stock compensation expense .................................            171             140
   Net gain on settlement of debt and other obligations .......             --              (8)
   Accretion of debt discount to interest expense .............            202             380
Changes in operating assets and liabilities, net of
business acquisitions:
     Decrease (increase) in accounts receivable ...............            684            (341)
     Decrease (increase) in prepaid expenses and other
     current assets ...........................................            152             (41)
     (Increase) in other assets ...............................             --              (4)
     (Decrease) in accounts payable and accrued liabilities ...           (166)         (1,321)
     Increase  in deferred revenue ............................             24             442
                                                                  ------------    ------------
        Net cash used in operating activities .................         (1,826)         (1,290)
                                                                  ------------    ------------

Cash flows from investing activities:
   Capital expenditures .......................................           (181)           (230)
   Capitalization of software development costs ...............           (263)           (367)
   Investment in certificates of deposit ......................            131            (504)
   Proceeds from sale of software and fixed assets ............              3               9
   Repayment of notes receivable ..............................             14              43
                                                                  ------------    ------------
        Net cash used in investing activities .................           (296)         (1,049)
                                                                  ------------    ------------

Cash flows from financing activities:
   Proceeds from issuance of common stock .....................             --           2,000
   Proceeds from issuance of preferred stock ..................             --              --
   Preferred stock dividends ..................................           (134)           (157)
   Proceeds from issuance of long-term debt ...................             --              --
   Stock issuance expense .....................................             --            (263)
   Proceeds from exercise of stock options ....................             23               5
   Proceeds from exercise of stock warrants ...................             --              --
   Repayment of long-term debt ................................           (121)           (124)
   Repayment of capital lease liabilities .....................            (70)             (3)

   Financing costs incurred ...................................             --            (101)
                                                                  ------------    ------------
        Net cash (used in) provided by financing activities ...           (302)          1,357
                                                                  ------------    ------------

Cash flows from continuing operations .........................         (2,424)           (982)
Net cash flow provided by operating activities from
   discontinued operations ....................................          2,016           1,646
Net cash flow provided by (used in) investing activities
   from discontinued operations ...............................             20             (10)
Net cash flow used in financing activities from
   discontinued operations ....................................             --             (63)
                                                                  ------------    ------------
        Net change in cash and cash equivalents ...............           (388)            591
Cash and cash equivalents, beginning of period ................          1,057             466
                                                                  ------------    ------------

Cash and cash equivalents, end of period ......................   $        669    $      1,057
                                                                  ============    ============


            THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
                            SEE SUPPLEMENTAL SCHEDULE IN FOOTNOTE 14.


                                               35
</TABLE>

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       ORGANIZATION AND NATURE OF OPERATIONS AND BASIS OF PRESENTATION

         Headquartered in Phoenix, Arizona, iLinc Communications, Inc., is a
leading provider of Web conferencing software and services. The Company's
four-product iLinc Suite, comprised of LearnLinc, MeetingLinc, ConferenceLinc,
and SupportLinc, is an award winning virtual classroom, Web conferencing and
collaboration suite of software. The Company's software is based on a
proprietary architecture and code that finds its origins as far back as 1994, in
what the Company believes to be the beginnings of the Web conferencing industry.
Versions of the iLinc Suite have been translated into six languages, and it is
currently available in version 10. The Company's customers may choose from
several different pricing and licensing options for the iLinc Suite depending
upon their needs. Uses for the four-product suite of Web collaboration software
include online business meetings, sales presentations, training sessions,
product demonstrations and technical support assistance. The Company markets its
products using a direct sales force and an indirect distribution channel
consisting of agents, value added resellers and OEM partners. The Company allows
its customers to choose between purchasing a perpetual license and subscribing
to a term license. The Company's revenues are a mixture of high margin perpetual
and subscription licenses of software, monthly recurring revenues from
subscription licenses, as well as annual maintenance, hosting and support
agreements and other products and services.

         The Company maintains corporate headquarters in Phoenix, Arizona and
has occupied that 9,100 square foot Class A facility since the Company's
inception in 1998. The Phoenix lease requires a monthly rent and operating
expenses of approximately $25,000 and will expire on February 28, 2012. On
December 27, 2007, the Company amended the lease slightly to incorporate certain
improvements made to the space. The Company also maintains a 2,500 square foot
Class B facility in Troy, New York with an emphasis in that location on research
and development and technical support. On July 5, 2006, the Company amended the
New York lease that now expires on June 30, 2009. The New York lease requires a
monthly rent and operating expenses of approximately $4,000. In addition, the
Company maintains an 8,000 square foot Class A facility in Springville, Utah
with a historical emphasis on audio conferencing operations. The Utah facility
will be closed upon the transition of audio conferencing operations.

         The Company began operations in March of 1998 in a different industry,
with its formation including the simultaneous rollup of fifty private businesses
and a simultaneous initial public offering. The Company changed its name to
iLinc Communications, Inc. in February 2004.


2.       DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

       On April 28, 2008, subsequent to the fiscal 2008 year end, the Company
entered into an Asset Purchase Agreement (the "Agreement") with American
Teleconferencing Services Ltd. (the "Purchaser"), a subsidiary of Premiere
Global Services, Inc. The Agreement provided for the sale by the Company of a
majority of its audio conferencing assets. The closing of the transaction
occurred on May 2, 2008. On the closing date, the Purchaser paid the Company
$3.3 million, with an additional payment of $833,000 to be paid within ten days
of the transition date (anticipated to be July 25, 2008) as defined in the
Agreement. As further consideration, Purchaser will tender on or before June 1,
2009 an earn-out payment, if any, the product of 1.25 times the amount that the
Purchaser earns in revenue from the acquired customer accounts in excess of $2.7
million during the twelve months after closing. Additionally, on May 13, 2008,
the Purchaser paid $558,000 for the Company's identified audio conferencing
accounts receivable that was less than 90 days old, and will pay thereafter 103%
of the accounts receivable collected from those audio conferencing accounts in
excess of the initial payment. The gain on sale resulting from the transaction
will be recorded as of the closing date, and accordingly reported in the first
quarter of fiscal 2009. The Company retained the Events portion of its audio
conferencing business (the "Events Business"), but expects to sell that portion
of the business during fiscal 2009. The Company sold its audio conferencing
assets due to continued price pressure for the market's perception of a
commoditized product in regards to audio conferencing, and as a result the
Company experienced continued margin contraction. The Company sold these assets
to provide cash to enable it to focus on its Web conferencing product.

         Therefore, pursuant to the criteria established by SFAS No. 144,
ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF LONG-LIVED ASSETS, the Company has
determined that all of its audio conferencing operations (i.e., the portion sold
and the Events business retained) and related assets and liabilities should be
classified as assets and liabilities "held-for-sale" as of March 31, 2008. And,
the Company's results of operations related to its audio conferencing business
for the years ended March 31, 2008 and 2007 have been reclassified as income
from discontinued operations.

                                       36

<PAGE>

         A summary of the assets and liabilities of the audio conferencing
business held for sale are as follows:

                                                      -------------------------
                                                        MARCH 31      MARCH 31
                                                      -----------   -----------
                                                         2008           2007
                                                      -----------   -----------
                                                            (IN THOUSANDS)
    Assets:
    Accounts receivable ............................  $       834   $     1,050
    Property and equipment, net ....................          192           265
    Goodwill .......................................        1,686         1,686
    Intangible assets, net .........................          433           677
                                                      -----------   -----------
    Assets - held for sale .........................  $     3,145   $     3,678
                                                      ===========   ===========

    Liabilities:
    Accounts payable ...............................  $       611   $       486
    Accrued liabilities ............................          167           266
                                                      -----------   -----------
    Liabilities - held for sale ....................  $       778   $       752
                                                      ===========   ===========


         A summary of the results from discontinued operations for the years
ended March 31, 2008 and 2007 are as follows:

                                                      -------------------------
                                                          FOR THE YEAR ENDED
                                                               MARCH 31
                                                      -------------------------
                                                         2008           2007
                                                      -----------   -----------
    Audio services revenues ........................  $     5,439   $     5,457
    Cost of audio services revenues ................        3,371         3,528
                                                      -----------   -----------
    Gross profit ...................................        2,068         1,929
    Operating expenses .............................          591           679
                                                      -----------   -----------
    Income from discontinued operations ............        1,477         1,250
    Interest expense ...............................           13            --
    Gain on termination of service agreements with
      Affiliated Practices .........................           --            10
                                                      -----------   -----------
    Net income from discontinued operations ........  $     1,464   $     1,260
                                                      ===========   ===========

There was no tax effect within the discontinued operations.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RECLASSIFICATION OF PREVIOUSLY REPORTED FIGURES

       The consolidated statement of operations for the twelve months ended
March 31, 2007 has a reclassification of revenues and cost of revenues derived
from subscription and hosting services and audio services. Revenues and cost of
revenues from these sources were combined in the prior year's financial
statements and have been retroactively reclassified for comparative purposes.
All audio services revenues and cost of revenues, as well as audio services
operating expenses have been reclassified as discontinued operations.

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements of the Company include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and
liabilities. The more significant areas requiring use of estimates and judgment
relate to revenue recognition, accounts receivable and notes receivable
valuation reserves, realizability of intangible assets, realizability of
deferred income tax assets and the evaluation of contingencies and litigation.


                                       37

<PAGE>

Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. The
results of such estimates form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may materially differ from these estimates under
different assumptions or conditions.

REVENUE RECOGNITION

         The Company's revenues are generally classified into three main
categories: software license revenues, subscription and hosting services
revenues and software maintenance and other services revenues. Software license
revenues are generated from the sale of the Company's iLinc suite of Web
conferencing software on a software purchase model basis and from the sale of
its off-the-shelf courseware. Subscription and hosting services revenues are
generated from the sale of its iLinc Suite of Web conferencing software on a
subscription basis, the sale of its iLinc Suite software on a per-minute basis,
as well as, all service contracts that might include hosting. Software
maintenance and other services revenues are generated from the sale of
maintenance contracts related to its iLinc suite of Web conferencing software on
a purchase model basis, training, recording and storage fees and from the sale
of professional services that are associated with its custom content development
services.

Sales of Software Licenses

         Because the Company offers the iLinc Suite software in one of two
forms, the first being a purchase model and the second being a subscription
model, the Company has separate revenue recognition policies applicable to each
licensing model. With each sale of its Web conferencing products and services,
the Company executes written contracts with its customers that govern the terms
and conditions of each software license sale, hosting agreement, maintenance and
support agreement and other services arrangements.

         In connection with the Company's sales of software licenses, whether on
a purchase model basis or periodic license basis, the Company adopted Statement
of Position ("SOP") 97-2, SOFTWARE REVENUE RECOGNITION, as issued by the
American Institute of Certified Public Accountants. In accordance with SOP 97-2,
the Company recognizes revenue from the sale of software licenses if all of the
following conditions are met: first, there is persuasive evidence of an
arrangement with the customer; second, the product has been delivered to the
customer; third, the amount of the fees to be paid by the customer is fixed or
determinable; and, fourth, collection of the fee is probable.

         Each of these factors, particularly the determination of whether a fee
is fixed and determinable and the collectability of the resulting receivable,
requires the application of the judgment and the estimates of management.
Therefore, significant management judgment is utilized and estimates must be
made in connection with the revenue the Company recognizes in any accounting
period. The Company analyzes various factors, including a review of the nature
of the license or product sold, the terms of each specific transaction, the
vendor specific objective evidence of the elements required by SOP 97-2, any
contingencies that may be present, its historical experience with like
transactions or with like products, the creditworthiness of the customer, and
other current market and economic conditions. Changes in its judgment based upon
these factors and others could impact the timing and amount of revenue that the
Company recognizes, and ultimately the results of operations and its financial
condition. Therefore, the recognition of revenue is a key component of its
results of operations.

         At the time of the sale of its software license on a purchase license
basis, the Company assesses whether the fee associated with the transaction is
fixed or determinable based on the payment terms associated with the transaction
before recording immediate revenue recognition, assuming all other elements of
revenue recognition are present. Billings to its customers are generally due
within 60 to 90 days, with payment terms up to 180 days available to certain
customers. The Company believes that it has sufficient history of collecting all
amounts within these normal payment terms and to conclude that the fee is fixed
or determinable at the time of the perpetual license sale.

         In addition, in assessing whether collection is probable or not for a
given transaction, and therefore whether the Company should recognize the
revenue, the Company makes estimates regarding the creditworthiness of the
customer. Initial creditworthiness is assessed through internal credit check
processes, such as credit applications or third party reporting agencies.


                                       38

<PAGE>

Creditworthiness for transactions to existing customers primarily relies upon a
review of their prior payment history. The Company does not request collateral
or other security from its customers. If the Company determines that collection
of a fee is not reasonably assured, it defers the fee and recognizes revenue at
the time collection becomes reasonably assured, which is generally upon the
receipt of payment or other change in circumstance.

Sales of Concurrent Licenses on an ASP and Per-Minute Basis

         In addition to the purchase model software sale, the Company also
offers a subscription license and a pay-per-minute usage based model. Under its
subscription model, a customer may subscribe to a certain number of concurrent
connections (or seats) for a fixed period, often a year. Under this subscription
method, the Company recognizes the revenue associated with these monthly,
fixed-fee subscription arrangements each month on a straight-line basis over the
term of the agreement in accordance with EITF 00-03 APPLICATION OF AICPA SOP
97-2 TO ARRANGEMENTS THAT INCLUDE THE RIGHT TO USE SOFTWARE STORED ON ANOTHER
ENTITY'S HARDWARE. Pay-per-minute fees that include usage fees and overage fees
are charged at the end of each month and recorded as revenue at the end of each
month as the services are provided.

Sales of Maintenance, Hosting and Other Related Services

         The Company offers with each sale of its software products a software
maintenance, upgrade and support arrangement. These contracts may be elements in
a multiple-element arrangement or may be sold on a stand-alone basis. Revenues
from maintenance and support services are recognized ratably on a straight-line
basis over the term that the maintenance service is provided. Maintenance
contracts typically provide for 12-month terms with maintenance contracts
available up to 36 months. The Company typically charges 12% to 18% of the
software purchase price for a 12-month contract with discounts available for
longer-term agreements. The Company also typically charges 8% to 10% of the
software purchase price for hosting of purchase model software sales for
customers who do not wish to install and host the iLinc Suite on their own
premises or that of a co-location facility. Charges for hosting are likewise
spread ratably over the term of the hosting agreement, with the typical hosting
agreement having a term of 12 months, with renewal on an annual basis. The
annual maintenance and support fees and hosting fees associated with an iLinc
Enterprise license are based upon a fixed rate per seat license that is active
on each annual anniversary of the iLinc Enterprise license agreement and that is
approximately equivalent to the 12% to 18% charged for concurrent seat perpetual
license contracts.

         Revenues from consulting, training and education services are
recognized either as the services are performed, ratably over a subscription
period, or upon completing a project milestone if defined in the agreement.
These consulting, training and education services are not considered essential
to the functionality of its products as these services do not alter the product
capabilities, do not require specialized skills and are often performed by its
customers or its VAR's customers without access to those services.

         Implementation, recording, storage, consulting, training, translation
and other event type services may also be sold in conjunction with the sale of
its software products. Those services are generally recognized as the services
are performed or earlier when all other revenue recognition criteria have been
met. Although the Company may provide implementation, training and consulting
services on a time and materials basis, a significant portion of these services
have been provided on a fixed-fee basis.

         Should the sale of its software involve an arrangement with multiple
elements (for example, the sale of a software license along with the sale of
maintenance and support to be delivered over the contract period), the Company
allocates revenue to each component of the arrangement using the residual value
method based on the fair value of the undelivered elements. The Company defers
revenue from the arrangement equivalent to the fair value of the undelivered
elements and recognizes the remaining amount at the time of the delivery of the
product or when all other revenue recognition criteria have been met. Fair
values for the ongoing maintenance and support obligations are based upon
separate sales of renewals of maintenance contracts. Fair value of services,
such as training or consulting, is based upon separate sales of these services
to other customers. Thus, these types of arrangements require us to make
judgments about the fair value of undelivered arrangements.

                                       39

<PAGE>

Sales by VARs and Agents

         The Company has engaged organizations within the United States of
America and in other countries that market and sell its products and services
through their sales distribution channels that are value added resellers (VARs).
The VARs primarily sell, on a non-exclusive basis, its iLinc suite of Web
conferencing products and predominately sell purchase-model perpetual licenses
for installation and hosting by the VAR's customer. The Company's VAR contracts
have terms of two to five years and are automatically renewed for an additional
like term unless either party terminates the agreement for breach or other
financial reasons. Each VAR purchases the product from the Company and resells
the product to its customers. Under those VAR agreements, the Company records
only the amount paid by the VAR as revenue and recognizes revenue when all
revenue recognition criteria have been met. The Company also engages
organizations that act as mere agents or distributors of its products
("Agents"), without title passing to the Agent and with the Agent only receiving
a commission on the consummation of the sale to its customer. The Company
records revenue on sales by Agents on a gross basis before commissions due to
the Agent and only when all revenue recognition criteria are met as would be
with a sale by the Company directly to a customer not involving an agent.

Sales Reserve

         The sales reserve is an estimate for losses on receivables resulting
from customer credits, cancellations and terminations and is recorded, if at
all, as a reduction in revenue at the time of the sale. Increases to sales
reserve are charged to revenue, reducing the revenue otherwise reportable. The
sales reserve estimate is based on an analysis of the historical rate of
credits, cancellations and terminations. The accuracy of the estimate is
dependent on the rate of future credits, cancellations and terminations being
consistent with the historical rate. If the rate of actual credits,
cancellations and terminations is different than the historical rate, revenue
would be different from what was reported. As of March 31, 2008 and 2007, the
Company did not believe that an accrual for sales reserve was necessary, but
continues to assess the adequacy of the sales reserve account balance on a
quarterly basis.

Allowance for Doubtful Accounts

         The Company records an allowance for doubtful accounts to provide for
losses on accounts receivable due to customer credit risk. Increases to the
allowance for doubtful accounts are charged to general and administrative
expense as bad debt expense. Losses on accounts receivable due to financial
distress or failure of the customer are charged to the allowance for doubtful
accounts. The allowance estimate is based on an analysis of the historical rate
of credit losses. The accuracy of the estimate is dependent on the future rate
of credit losses being consistent with the historical rate. If the rate of
future credit losses is greater than the historical rate, then the allowance for
doubtful accounts may not be sufficient to provide for actual credit losses.

         The allowance for doubtful accounts for iLinc Web conferencing product
sales was $30,000 and $117,000 as of March 31, 2008 and 2007, respectively, and
is based on its historical collection experience. Any adjustments to these
accounts are reflected in the income statement for the current period, as an
adjustment to revenue in the case of the sales reserve and as a general and
administrative expense in the case of the allowance for doubtful accounts.

BARTER TRANSACTIONS

         In accordance with Accounting Principles Board ("APB") Opinion No. 29,
ACCOUNTING FOR NONMONETARY TRANSACTIONS, and SFAS No. 153, EXCHANGES ON
NONMONETARY ASSETS, for the 12 months ended March 31, 2007, the Company recorded
license sale revenues as a result of certain barter transactions that involved
the exchange of hardware or services from various providers. As the exchanges
related to either dissimilar assets or were similar but otherwise recognizable
assets, thus the exchange was considered a culmination of the earnings process,
and therefore the Company recorded the sale of its software as software license
revenue at the exchanged fair value of the hardware or services received. There
were no material barter transactions in the 12 months ended March 31, 2008.

         On September 28, 2006, the Company entered into a reciprocal OEM
agreement with a provider of TDM and IP capable conferencing bridges and media
servers. The provider purchased a private label OEM license in a barter exchange
in which the Company acquired hardware conferencing bridges for use by the
Company. The Company recognized $225,000 of license revenue related to this
barter transaction. The Company recorded an asset with a value of $255,000, paid
$30,000 and recorded $30,000 of depreciation expense through March 31, 2007, and
$50,000 in depreciation expense for the year ended March 31, 2008. Depreciation
expense is included in discontinued operations. This conferencing bridge is
included in Held for Sale Assets at March 31, 2008 and 2007.

                                       40

<PAGE>

         On December 12, 2006, the Company entered into a reciprocal services
agreement with a provider of testing services. The provider purchased iLinc
Suite seats and an annual event room license in a barter exchange in which the
Company acquired services and access to computer hardware for scale testing of
the Company's software. The Company recognized $60,000 of license revenue during
the year and deferred $75,000 of license revenue and $17,000 for maintenance and
hosting revenue that are being recognized ratably over a 12 month period. The
Company also recorded a prepaid asset of $152,000 and amortized it over the 12
month period of the service contract. Amortization expense through March 31,
2007 and 2008 of $51,000 and $101,000, respectively, has been recorded.

SOFTWARE DEVELOPMENT COSTS

         The Company accounts for software development costs in accordance with
SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR
OTHERWISE MARKETED, whereby costs for the development of new software products
and substantial enhancements to existing software products are expensed as
incurred until technological feasibility has been established, at which time any
additional costs are capitalized. Technological feasibility is established upon
completion of a working model. Costs of maintenance and customer support are
charged to expense when related revenue is recognized or when those costs are
incurred, whichever occurs first. In May, 2006, the Company began production of
version 9 of its Web conferencing software. In accordance with SFAS No. 86, the
Company began capitalizing certain direct and indirect software development
costs that included expenses related to employee payroll costs, consultant fees,
dedicated computer hardware costs and specialized software license costs
associated with this project. As of March 31, 2008, the Company capitalized
costs totaling $631,000. Version 9 was complete and released to customers in
June 2007. The Company began amortization of these capitalized costs, using
straight-line amortization over a three year period beginning July 2007. All
other software development costs have been charged to research and development
expense in the accompanying consolidated statements of operations.

ADVERTISING COSTS

         Advertising costs are expensed as incurred. The Company's advertising
expense at March 31, 2008 and 2007 was $125,000 and $35,000, respectively.

CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid debt investments with remaining
maturities of three months or less at the date of acquisition to be cash
equivalents.

         The Company maintains cash balances at various financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000. The Company's accounts at these
institutions may, at times, exceed the federally insured limits. At March 31,
2008 and 2007, the Company had approximately $600,000 and $857,000,
respectively, in excess of FDIC insured limits.

CERTIFICATE OF DEPOSIT

         The Company holds a certificate of deposit at a financial institution.
This certificate has a maturity of eight months from the date of acquisition,
which precludes it from being accounted for as a cash equivalent.

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful life of the various
classes of depreciable assets as follows:

       Furniture & Fixtures                 5 years
       Equipment                            3-5 years
       Computer Equipment                   3-5 years
       Leasehold Improvements               shorter of 5 years or lease term

         Maintenance and repairs are charged to expense whereas renewals and
major replacements are capitalized. Gains and losses from dispositions are
included in general and administrative operating expenses.

INTANGIBLE ASSETS

                                       41

<PAGE>

         On April 1, 2002, the Company adopted SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS and as a result, the Company's goodwill is no longer
amortized. SFAS No. 142 requires that goodwill be tested annually (or more
frequently if impairment indicators arise) for impairment. Upon application of
SFAS No. 142, the Company determined there was no impairment of goodwill at
March 31, 2008. The Company has made acquisitions of companies having operations
or technology in areas within its strategic focus and has recorded goodwill and
other intangible assets associated with the acquisitions (see Note 6). Future
adverse changes in market conditions or poor operating results of the underlying
acquired operations could result in losses or an inability to recover the
carrying value of the goodwill and other intangible assets thereby possibly
requiring an impairment charge in the future.

         Debt issuance costs, which are included in other intangible assets, are
amortized using the straight-line method which approximates the same results had
the interest method been used, over the term of the related debt obligations. At
March 31, 2008 and 2007, debt issuance costs, net of accumulated amortization,
were $396,000 and $512,000, respectively. Amortization of debt issuance costs
have been reflected in interest expense in the accompanying consolidated
statements of operations and total $116,000 and $149,000 for the years ended
March 31, 2008 and 2007, respectively. These intangibles are amortized over
their expected lives of between 39 months and 120 months. The $116,000 of
amortization for the year ended March 31, 2008 includes $76,000 related to the
March 2002 Convertible Note Offering and $40,000 related to the 2004 Private
Placement Offering. The $149,000 of amortization for the year ended March 31,
2007 includes $76,000 related to the March 2002 Convertible Note Offering,
$63,000 related to the 2004 Private Placement Offering, and $10,000 related to
the refinanced 2004 Private Placement Offering. As a result of the debt
extension of the Senior Notes from the 2004 Private Placement Offering treated
as a debt extinguishment in accordance with EITF 96-19 DEBTOR'S ACCOUNTING FOR A
MODIFICATION OR EXCHANGE OF DEBT INSTRUMENTS, in December 2006 the Company wrote
off $272,000 of gross deferred financing costs and $232,000 of accumulated
amortization of deferred financing costs as part of a loss on extinguishment of
debt. Other intangibles primarily consist of the LearnLinc purchase
consideration, that was allocated to purchased software and customer
relationship intangibles (see Note 6). Such other intangibles are amortized over
their expected benefit period of 24 to 72 months.

LONG-LIVED ASSETS

         The Company reviews for the impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The carrying amount of a long-lived asset is considered
impaired when anticipated undiscounted cash flows expected to result from the
use of the asset and its eventual disposition are less than its carrying amount.
No impairment charges were recorded for the years ended March 31, 2008 and 2007.

CUSTOMER CONCENTRATIONS

         Accounts receivable represent license agreements entered into and
services rendered by the Company with its customers. The Company performs
periodic credit reports before recognizing sales to certain customers, but does
not receive collateral related to the receivables.

         Revenues included one customer with transactions approximating 13% and
10% of net revenues for the years ended March 31, 2008 and 2007, respectively.
Revenues from international customers for the years ended March 31, 2008 and
2007 approximated $565,000 and $419,000, respectively.

         Accounts receivable balances for two customers totaled approximately
18% and 14%, respectively, at March 31, 2008 and accounts receivable balances
for two customers totaled approximately 18% and 11% of the total balance
outstanding at March 31, 2007.

SALES TAX

         In June 2006, the Financial Accounting Standards Board ratified the
consensus reached on Emerging Issues Task Force ("EITF") Issue No. 06-03, How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (that is, Gross versus Net Presentation).
The EITF reached a consensus that the presentation of taxes on either a gross or
net basis is an accounting policy decision that requires disclosure. EITF 06-03
is effective for the first interim or annual reporting period beginning after
December 15, 2006. Taxes collected from the Company's customers are and have
been recorded on a net basis. As such, the adoption of EITF 06-03 did not have
an effect on the Company's financial position or results of operations.

                                       42

<PAGE>

INCOME TAXES

         The Company utilizes the liability method of accounting for income
taxes in accordance with SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under this
method, deferred taxes are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured using the
enacted marginal tax rates currently in effect when the differences reverse. The
Company recorded a valuation allowance for its deferred tax asset because it
concluded it is not likely it would be able to realize the tax assets due to the
lack of profitable operating history of its implementation of the Web
conferencing business plan. In the event the Company was to determine that it
would be able to realize its deferred tax assets in the future, an adjustment to
the deferred tax asset would increase net income through a tax benefit in the
period such a determination was made that the Company has met the more likely
than not threshold for such recognition.

         The Company is subject to income taxes in the U.S. Significant judgment
is required in evaluating uncertain tax positions and determining the company's
provision for income taxes. Effective April 1, 2007, the Company adopted
Financial Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES --
AN INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN 48"). FIN 48 contains a
two-step approach to recognize and measure uncertain tax positions accounted for
in accordance with FAS 109. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50 percent
likely of being realized upon settlement.

         Although the Company believes it has adequately reserved for its
uncertain tax positions, no assurance can be given that the final tax outcome of
these matters will not be different. The Company adjusts these reserves in light
of changing facts and circumstances, such as the closing of a tax audit or the
refinement of an estimate. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences will impact the
provision for income taxes in the period in which such determination is made.
The provision for income taxes includes the impact of reserve provisions as well
as related interest and penalties.


STOCK-BASED COMPENSATION

         In December 2004, the FASB issued SFAS No. 123R, SHARE-BASED PAYMENT
("SFAS 123R"). Under this new standard, companies will no longer be able to
account for share-based compensation transactions using the intrinsic method in
accordance with Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES "APB 25." Instead, companies are required to account for
such transactions using a fair-value method and to recognize the expense over
the service period. SFAS 123R became effective for the Company for periods
beginning after March 31, 2006 and allows for several alternative transition
methods. The Company adopted SFAS 123R, effective April 1, 2006, which requires
recognition of compensation expense for all stock option or other equity-based
awards that vest or become exercisable after the option's effective date. The
Company elected the modified prospective application transition method of
adoption and, as such, prior period financial statements have not been restated.
Under this method, the fair value of all stock options granted or modified after
adoption must be recognized in the Consolidated Statement of Operations and
total compensation cost related to non-vested awards not yet recognized, as
determined under the original provisions of SFAS 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION must also be recognized in the Consolidated Statement of Operations
as vesting occurs.

         Prior to April 1, 2006, the Company accounted for share-based
compensation using the intrinsic value method prescribed by APB 25, and related
interpretations and elected the disclosure option of SFAS No. 123 as amended by
SFAS No. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION - COMPENSATION AND
DISCLOSURE. Under the prior method, the Company measured compensation expense
for stock options as the excess, if any, of the estimated fair market value of
the Company's stock at the date of grant over the exercise price and provided
pro forma disclosure of net income and earnings per share in the notes to the
financial statements.

                                       43

<PAGE>

LOSS/INCOME PER SHARE

         Basic loss/income per share are computed by dividing net loss/income
available to common shareholders by the weighted-average number of common shares
outstanding for each reporting period presented. Diluted loss/income per share
is computed similar to basic loss/income per share while giving effect to all
potential dilutive common stock equivalents that were outstanding during each
reporting period. For the twelve months ended March 31, 2008 options and
warrants to purchase 5,605,428 shares of common stock were excluded from the
computation of diluted earnings per share because of their anti-dilutive effect.
For the twelve months ended March 31, 2007, options and warrants to purchase
4,936,216 shares of common stock were excluded from the computation of diluted
earnings per share because of their anti-dilutive effect.

         Additionally, for the twelve months ended March 31, 2008 and 2007,
preferred stock and debt convertible into 9,400,000 and 9,780,000 shares of
common stock, respectively, were excluded from the computation of diluted
loss/income per share because inclusion of such would be anti-dilutive.
Furthermore, restricted stock grants of 1,250,000 and 450,000 shares have been
excluded from the loss/income per share calculations for the twelve months ended
March 31, 2008 and 450,000 shares have been excluded for the year ended March
31, 2007 because the measurement date stock price exceeds the average stock
price for all periods presented.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of cash and cash equivalents, accounts receivables
and accounts payable approximate fair values due to the short-term maturities of
these instruments. The carrying amounts of the Company's long-term borrowings
and notes receivables as of March 31, 2008 and 2007 approximate their fair value
based on the Company's current incremental borrowing rates for similar type of
borrowing arrangements.

GUARANTEES AND INDEMNIFICATIONS

         The Company provides a limited 90-day warranty for certain of its
software products. Historically, claims by customers under this limited warranty
have been minimal, and as such, no warranty accrual has been provided for in the
Company's consolidated financial statements.

         In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45
GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS -- AN INTERPRETATION OF FASB
STATEMENTS NO. 5, 57 AND 107 AND RESCISSION OF FIN 34. The following is a
summary of the Company's agreements that the Company has determined are within
the scope of FIN No. 45.

         Under its bylaws, the Company has agreed to indemnify its officers and
directors for certain events or occurrences arising as a result of the officer's
or director's serving in such capacity. The term of the indemnification period
is for the officer's or director's lifetime. The maximum potential amount of
future payments the Company could be required to make under these
indemnification agreements is unlimited. However, the Company has a director and
officer liability insurance policy that limits its exposure and enables it to
recover a portion of any future amounts paid. As a result of its insurance
policy coverage, the Company believes the estimated fair value of these
indemnification agreements is minimal and has no liabilities recorded for these
agreements as of March 31, 2008.

         The Company enters into indemnification provisions under (i) its
agreements with other companies in its ordinary course of business, typically
with business partners, contractors, and customers, landlords and (ii) its
agreements with investors. Under these provisions the Company generally
indemnifies and holds harmless the indemnified party for losses suffered or
incurred by the indemnified party as a result of the Company's activities or, in
some cases, as a result of the indemnified party's activities under the
agreement. The maximum potential amount of future payments the Company could be
required to make under these indemnification provisions is unlimited. The
Company has not incurred material costs to defend lawsuits or settle claims
related to these indemnification agreements. As a result, the Company believes
the estimated fair value of these agreements is minimal. Accordingly, the
Company has no liabilities recorded for these agreements as of March 31, 2008.

                                       44

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         On February 15, 2007, the FASB issued SFAS No. 159, THE FAIR VALUE
OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES (SFAS No. 159). Under this
Standard, the Company may elect to report financial instruments and certain
other items at fair value on a contract-by-contract basis with changes in value
reported in earnings. This election is irrevocable. SFAS No. 159 provides an
opportunity to mitigate volatility in reported earnings that is caused by
measuring hedged assets and liabilities that were previously required to use a
different accounting method than the related hedging contracts when the complex
provisions of SFAS No. 133 hedge accounting are not met. SFAS No. 159 is
effective for years beginning after November 15, 2007. Early adoption within 120
days of the beginning of the Company's 2009 fiscal year is permissible, provided
the Company has not yet issued interim financial statements for 2009 and has
adopted SFAS No. 157. Management is currently evaluating the potential impact of
adopting this Standard.

         In December 2007, the Financial Accounting Standards Board, or FASB,
issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES--AN AMENDMENT OF FASB STATEMENT NO. 133. This standard requires
companies to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.

         In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No.
110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123R, SHARE-BASED PAYMENT. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.

         In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING
INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS--an amendment of ARB No. 51. This
statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning April 1, 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.

                                       45

<PAGE>

         In December 2007, the FASB, issued FAS No. 141 (revised 2007), BUSINESS
COMBINATIONS. This Statement replaces FASB Statement No. 141, BUSINESS
COMBINATIONS, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL
STATEMENTS. The Company will adopt this statement beginning April 1, 2009. It is
not believed that this will have an impact on the Company's consolidated
financial position, results of operations or cash flows.

4.       NOTE RECEIVABLE

         In September 2006, a note receivable, relating to royalty payments past
due in the amount of $54,000 was executed with the Company's subcontractor,
Interactive Alchemy. The note bore interest of 7.5% and was due in four monthly
installments of $14,000 beginning in December 2006. At March 31, 2007,
Interactive Alchemy had paid $42,000 on the note, with the final payment of
$14,000 plus interest remaining. On May 25, 2007, Interactive Alchemy paid the
note plus interest in full.

5.       PROPERTY AND EQUIPMENT, NET

         Property and equipment consisted of the following:

                                                                MARCH 31,
                                                         ----------------------
                                                          2008            2007
                                                         -------        -------
                                                            (IN THOUSANDS)
Furniture and fixtures ...........................       $   281        $   248
Equipment ........................................           291            291
Computer equipment ...............................         1,427          1,222
Leasehold improvements ...........................            31             31
                                                         -------        -------
   Total property and equipment...................         2,030          1,792
Less: accumulated depreciation ...................        (1,464)        (1,366)
                                                         -------        -------
   Property and equipment, net ...................       $   566        $   426
                                                         =======        =======

Depreciation expense for the years ended March 31, 2008 and 2007 was $207,000
and $138,000, respectively.


6.       GOODWILL AND INTANGIBLE ASSETS, NET

         Goodwill consisted of the following:

                                                                MARCH 31,
                                                         -----------------------
                                                           2008            2007
                                                         -------          ------
                                                             (IN THOUSANDS)
    Goodwill......................................       $9,520           $9,520
                                                         ======           ======

         There were no changes in the carrying amount of the goodwill for the
years ended March 31, 2008 and 2007. As a result of the sale of our audio
conferencing assets, $1,686,000 of goodwill has been classified in assets held
for sale.

         In accordance with SFAS 142, the Company does not amortize goodwill.
SFAS 142 requires that goodwill be tested annually (or more frequently if
impairment indicators arise) for impairment. The Company has established the
date of March 31st on which to conduct its annual impairment test. Future
adverse changes in market conditions or poor operating results of the underlying
acquired operations could result in losses or an inability to recover the
carrying value or the goodwill and other intangible assets thereby possibly
requiring an impairment charge in the future. The Company's management believes
that no impairment exists at March 31, 2008.

                                       46

<PAGE>

<TABLE>
<S>     <C>

                                            -------------------------------------------------------------
                                                                   MARCH 31, 2008
                                            -------------------------------------------------------------
                                              WEIGHTED
                                               AVERAGE
                                              REMAINING  GROSS CARRYING     ACCUMULATED
                                                LIVES        AMOUNT         AMORTIZATION          NET
                                            -------------------------------------------------------------
                                               (YEARS)                     (IN THOUSANDS)
    AMORTIZED INTANGIBLE ASSETS:
       Deferred financing costs                 3.61     $         919     $        (523)      $     396
       Purchased software                       0.00               675              (675)             --
       Customer relationships                   0.00                32               (32)             --
       Capitalized software development costs   2.25               630              (157)            473
                                                         ------------------------------------------------
                                                         $       2,256     $      (1,387)      $     869
                                                         ================================================

                                            -------------------------------------------------------------
                                                                   MARCH 31, 2007
                                            -------------------------------------------------------------
                                              WEIGHTED
                                               AVERAGE
                                              REMAINING  GROSS CARRYING     ACCUMULATED
                                                LIVES        AMOUNT         AMORTIZATION          NET
                                            -------------------------------------------------------------
                                               (YEARS)                     (IN THOUSANDS)

    AMORTIZED INTANGIBLE ASSETS:

       Deferred financing costs                 4.57     $         919     $        (407)      $     512
       Purchased software                       0.00               675              (675)             --
       Customer relationships                   0.00                32               (32)             --
       Capitalized software development costs   3.00               367                --             367
                                                         ------------------------------------------------
                                                         $       1,993     $      (1,114)      $     879
                                                         ================================================

AGGREGATE AMORTIZATION EXPENSE FOR INTANGIBLES (IN THOUSANDS) :

                                                     For the year ended March 31, 2008     $273
                                                     For the year ended March 31, 2007     $149

ESTIMATED AMORTIZATION EXPENSE (IN THOUSANDS):
                                                       Fiscal Year
                                                       -----------
                                                           2009         $       326
                                                           2010                 326
                                                           2011                 142
                                                           2012                  75
                                                           2013                  --
                                                        Thereafter               --
                                                                        ------------
                                                                        $       869
                                                                        ============
</TABLE>

         As a result of the debt extension treated as a debt extinguishment in
accordance with EITF 96-19, DEBTOR'S ACCOUNTING FOR A MODIFICATION OR EXCHANGE
OF DEBT INSTRUMENTS, in December 2006 the Company wrote-off $272,000 of gross
deferred financing costs and $232,000 of accumulated amortization of deferred
financing costs as part of the loss on extinguishment of debt.

CAPITALIZATION OF SOFTWARE DEVELOPMENT COSTS

         In May of 2006, the Company began production of version 9 of its Web
conferencing software. In accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, the Company began
capitalizing certain direct and indirect software development costs that
included expenses related to employee payroll costs, consultant fees, dedicated
computer hardware costs and specialized software license costs associated with
this project, since technological feasibility was achieved in May 2006. Version
9 was completed and released to customers in June 2007 and at that time the
accrued balance of software development costs totaled $630,000. The Company
capitalized $263,000 and $367,000 of software development costs for the years
ended March 31, 2008 and 2007, respectively. The Company began amortization of
these capitalized software development costs, using the straight-line
amortization over a three year period beginning July 1, 2007. As of March 31,
2008, the net unamortized capitalized direct and indirect software development
costs were $473,000.

                                       47

<PAGE>

7.       ACCRUED LIABILITIES

         Accrued liabilities consisted of the following:

                                                                  MARCH 31,
                                                             ------------------
                                                              2008        2007
                                                             -------    -------
                                                               (IN THOUSANDS)
      Accrued state sales tax ............................   $    46    $    34
      Accrued interest ...................................       265        290
      Amounts payable to third party providers ...........        --         52
      Amounts payable to Interactive Alchemy .............       113         62
      Accrued salaries and related benefits ..............       294        340
      Other ..............................................        33         75
                                                             -------    -------
         Total accrued liabilities .......................   $   751    $   853
                                                             =======    =======

8.       LONG-TERM DEBT

         Long-term debt consisted of the following:

                                                                  MARCH 31,
                                                             ------------------
                                                              2008        2007
                                                             -------    -------
                                                               (IN THOUSANDS)

    2002 Convertible redeemable subordinated notes .......   $ 5,100    $ 5,100
    2004 Senior unsecured promissory notes ...............     2,962      2,962
    Shareholders' notes payable ..........................        --         51
    Notes payable ........................................       359        429
                                                             -------    -------
                                                               8,421      8,542

    Less:   Current portion of long-term debt ............       (95)      (143)
                 Discount ................................      (396)      (497)
                 Beneficial conversion feature ...........      (395)      (496)
                                                             -------    -------
    Long-term debt, net of current portion ...............   $ 7,535    $ 7,406
                                                             =======    =======


         In March 2002, we completed a private placement offering (the
"Convertible Note Offering") that provided proceeds of $5.75 million that was
used to extinguish an existing line of credit. Under the terms of the
Convertible Note Offering, we issued unsecured subordinated convertible notes
(the "Convertible Notes"). The Convertible Notes bear interest at the rate of
12% per annum and require quarterly interest payments, with the principal due at
maturity on March 29, 2012. The holders of the Convertible Notes may convert the
principal into shares of our common stock at the fixed price of $1.00 per share.
We may force redemption by conversion of the principal into common stock at the
fixed conversion price, if at any time the 20 trading day average closing price
of the Company's common stock exceeds $3.00 per share. These notes are
subordinated to any present or future senior indebtedness. As a part of the
Convertible Notes offering, we also issued warrants to purchase 5,775,000 shares
of our common stock, but those warrants expired on March 29, 2005 without
exercise. The fair value of the warrants was estimated using the Black-Scholes
pricing model and a discount to the Convertible Notes of $1,132,000 was recorded
using this value, which is being amortized to interest expense over the 10-year
term of the Convertible Notes. Upon conversion, any remaining discount and
beneficial conversion feature will be expensed in full at the time of
conversion. During fiscal years 2004, 2005 and 2006, holders with a principal
balance totaling $675,000 converted their notes into 2,121,088 shares of our
common stock at prices from $0.25 to $0.30 per share. No conversion of debt or
acceleration of amortization of costs occurred during the years ended March 31,
2007 or 2008.

         In April of 2004, we completed a private placement offering of
unsecured senior notes (the "2004 Senior Note Offering") that provided gross
proceeds of $4.25 million. Under the terms of the 2004 Senior Note Offering, we
issued $3,187,000 in unsecured senior notes and 1,634,550 share of our common
stock. The senior notes originally bore an interest rate of 10% per annum and
accrued interest is due and payable on a quarterly basis, with principal due at
maturity on July 15, 2007. The senior notes are redeemable by us at 100% of the
principal value at any time. The notes and common stock were originally issued
with a debt discount of $768,000. The fair value of the warrants was estimated
and used to calculate a discount of $119,000 of which $68,000 was allocated to
the notes and $51,000 was allocated to equity. The total discount allocated to


                                       48

<PAGE>

the notes of $836,000 is being amortized as a component of interest expense over
the original term of the notes, which was thirty-nine months. The senior notes
are unsecured obligations of our company but are senior in right of payment to
all existing and future indebtedness of our company. The common stock issued in
the 2004 Senior Note Offering was registered with the SEC pursuant to a resale
prospectus dated August 2, 2005. Effective August 1, 2005, holders with a
principal balance and accrued interest totaling $225,800 converted their senior
notes and accrued interest into 903,205 shares of our common stock at a price of
$0.25 per share. No conversion of debt to equity or acceleration of amortization
of costs related to such conversions occurred during the years ended March 31,
2007 or 2008. In December, 2006, we negotiated a modification of the terms of
the senior notes to extend the maturity date to July 15, 2010. In exchange for
the three year extension, the interest rate increased to 12% per annum effective
on January 16, 2007. All other terms and provisions of the senior notes remained
unchanged. The direct expenses of the note amendment was $101,000, and the
estimated fair value of the warrant issued to the placement agent of $42,000
were recorded as a deferred offering cost and both are being amortized as a
component of interest expense over the remaining term of the senior notes.

         In connection with a previous acquisition, the Company assumed an
unsecured credit line with an original principal balance of $400,000. On April
1, 2007, the note with a principal balance of $398,000 was modified to provide
for fixed payments of principal, due in 60 equal monthly installments plus
variable interest, with the final payment due April 1, 2012. The note had a
principal balance of $336,000 at March 31, 2008.

         The aggregate maturities of long-term debt excluding capital leases for
each of the next five years subsequent to March 31, 2008 are as follows (IN
THOUSANDS):

          2009 ...................................................   $    95
          2010 ...................................................        78
          2011 ...................................................     3,048
          2012 ...................................................     5,193
          2013 ...................................................         7
          Thereafter .............................................        --
                                                                     -------
                                                                     $ 8,421
                                                                     =======

9.       CAPITALIZATION

PREFERRED STOCK

         The Company has the authority to issue ten million shares of preferred
stock, par value $.001 per share.

         On September 16, 2003, we completed our private placement of Series A
convertible preferred stock with detachable warrants to purchase 750,000 shares
of common stock, providing $1,500,000 in gross proceeds. We originally issued
150,000 shares of Series A Preferred Stock that converts to 3,000,000 shares of
common stock. The warrants were immediately exercisable at a price of $1.50 per
share and expired on September 16, 2006. We pay an 8% dividend to holders of the
Series A Preferred Stock, and the dividend is cumulative. The Series A Preferred
Stock is non-voting and non-participating. The shares of Series A Preferred
Stock will not be registered under the Securities Act of 1933, as amended, and
were offered in a private placement providing exemption from registration. The
cash proceeds of the private placement of Series A Preferred Stock were
allocated pro rata between the relative fair values of the Series A Preferred
Stock and warrants at issuance using the Black-Scholes valuation model for
valuing the warrants. The aggregate value of the warrants and the beneficial
conversion discount of $247,000 were considered a deemed dividend in the
calculation of loss per share. During fiscal years 2005 and 2006, holders of
35,000 shares converted to 700,000 shares of common stock. During fiscal 2007,
holders of 12,500 shares of Series A Preferred Stock converted those shares into
250,000 shares of the Company's common stock. During fiscal 2008, holders of
10,000 shares of Series A Preferred Stock converted those shares into 200,000
shares of the Company's common stock. The underlying common stock that would be
issued upon conversion of the preferred stock and upon exercise of the
associated warrants has been registered with the SEC and may be sold pursuant to
a resale prospectus.

         On December 31, 2005, we completed our private placement of Series B
convertible preferred stock, with detachable warrants. We originally issued
70,000 shares of Series B Preferred Stock that converts to 2,800,000 shares of
common stock, if all converted and warrants to purchase 700,000 shares of common
stock. The Series B Preferred Stock bears an 8% dividend. The dividend is
cumulative, and the Series B Preferred Stock is non-voting and
non-participating. The shares of Series B Preferred Stock will not be registered
under the Securities Act of 1933, as amended, and were offered in a private


                                       49

<PAGE>

placement providing exemption from registration. The warrants that are
exercisable at an exercise price equal to $0.50 per share expire on September
30, 2008. The aggregate value of the warrants of $55,000 is considered a deemed
dividend in the calculation of earnings/loss per share. During the 2007 fiscal
year, holders of 10,500 shares of Series B Preferred Stock converted those
shares into 420,000 share of our common stock. During the 2008 fiscal year,
holders of 4,500 shares of Series B Preferred Stock converted those shares into
180,000 shares of our common stock. The underlying common stock that would be
issued upon conversion of the preferred stock and upon exercise of the
associated warrants has been registered with the SEC and may be sold pursuant to
a resale prospectus.

COMMON STOCK

         As of March 31, 2008, the Company is authorized to issue 100 million
shares of common stock with a $0.001 par value. As of March 31, 2008 the Company
had 35,456,228 issued and 1,432,412 shares held in treasury. The Company has
acquired treasury stock from certain affiliated practices for the payment of
receivables and purchase of property and equipment as a part of its discontinued
operations.

         In December 2001, the Company, under the initiative of the Compensation
Committee with the approval of the Board of Directors, issued its Chief
Executive Officer an incentive stock grant under the Company's Stock
Compensation Plan of 450,000 restricted shares of the Company's common stock as
a means to retain and incentivize the Chief Executive Officer. The shares were
valued at $405,000 based on the closing price of the stock on the date of grant,
which is recorded as compensation expense ratably over the vesting period. The
shares 100% vest after ten years from the date of grant. On June 23, 2006 the
Board of Directors, at the recommendation of the Compensation Committee, amended
the vesting performance criteria hurdles as follows: 150,000 shares vest if the
share price trades for $1.00 per share for 20 consecutive days; 150,000 shares
vest if the share price trades for $2.00 per share for 20 consecutive days; and
150,000 shares vest if the share price trades for $3.00 per share for 20
consecutive days.

         On April 18, 2006, 704,839 shares were released from escrow related to
the acquisition of Glyphics. Of that amount, 396,706 were returned to iLinc
Communications due to the Company assuming obligations of $377,815 greater than
scheduled in the purchase agreement. The remaining 308,133 shares were issued to
the Glyphics shareholders at $0.39 per share based on the closing price of the
agreement date of April 18, 2006. These shares were recorded as outstanding on
March 31, 2006 pursuant to the terms of the Escrow Agreement.

         On June 9, 2006, the Company completed a private placement of 5,405,405
unregistered, restricted shares of common stock providing $2.0 million in gross
cash proceeds. The Company has used the proceeds for working capital and general
corporate purposes. The Company paid its placement agent an underwriting
commission of $185,000 of which $25,000 was recorded as deferred offering costs,
and incurred additional offering expenses of approximately $103,000. Pursuant to
the registration rights agreement between the parties, the Company filed a
Registration Statement on Form S-3 to enable the resale of the shares by the
investors which was declared effective on September 29, 2006.

         In March 2008, the Company, under the initiative of the Compensation
Committee with the approval of the Board of Directors issued its Chief Executive
Officer 500,000 restricted shares, its Chief Financial Officer 150,000
restricted shares, and 50,000 restricted shares to its respective Vice
Presidents of Sales, Marketing and Product and Technology, an incentive stock
grant under the Company's Stock Compensation Plan. The shares were valued at
$224,000 based on the closing price of the stock on the date of grant, which is
recorded as compensation expense ratably over the ten year term. The shares 100%
vest after ten years from the date of grant or upon attaining the following
price performance criteria: 1/3 vest if the 10-day average closing price equals
or exceeds $1.00; 1/3 vest if the 10-day average closing price equals or exceeds
$1.25; and the remaining 1/3 vest if the 10-day average closing price equals or
exceeds $1.50.


10.      INCOME TAXES

         Significant components of the provision for income taxes were as
follows (IN THOUSANDS):

                                       50

<PAGE>

                                                     YEAR ENDED       YEAR ENDED
                                                      MARCH 31,        MARCH 31,
                                                        2008             2007
                                                     -----------     -----------
        Current tax expense:
           Federal .............................     $        --     $        --
           State ...............................              --              --
                                                     -----------     -----------
             Total current .....................              --              --
                                                     -----------     -----------

        Deferred tax expense:
           Federal .............................              85              85
           State ...............................              --              --
                                                     -----------     -----------
             Total deferred ....................              85              85
                                                     -----------     -----------

        Expense for income taxes ...............     $        85     $        85
                                                     ===========     ===========

         The Company incurred tax expense of $85,000 for the years ended March
31, 2008 and 2007 related to recognition of deferred tax liability from
amortization of tax goodwill from the Quisic and LearnLinc acquisitions.

         Significant components of the Company's deferred tax assets
(liabilities) were as follows (IN THOUSANDS):

                                                               MARCH 31,
                                                       ------------------------
                                                         2008            2007
                                                       --------        --------
    Deferred tax assets:
       Reserves for uncollectible accounts .........   $     39        $     45
       Deferred revenue ............................         92              87
       Accrued expenses ............................         63              55
       Property and equipment ......................        102             235
        Intangible assets ..........................         18              28
       Stock based compensation ....................        123              58
       Net operating loss carryforward .............     15,816          14,952
                                                       --------        --------
          Total deferred tax assets ................   $ 16,253        $ 15,460
                                                       --------        --------

    Deferred tax liabilities:
       Glyphics book/tax differences ...............       (168)           (262)
       Beneficial conversion feature of debt........       (153)             --
       Intangible assets ...........................       (384)           (299)
                                                       --------        --------
         Total deferred tax liabilities ............       (705)           (561)
                                                       --------        --------

    Net deferred tax asset .........................     15,548          14,899
       Less: valuation allowance ...................    (15,932)        (15,198)
                                                       --------        --------
           Net deferred tax asset ..................   $   (384)       $   (299)
                                                       ========        ========

         The differences between the statutory federal tax rate and the
Company's effective tax rate on continuing operations were as follows (IN
THOUSANDS):

                                                         YEAR ENDED  YEAR ENDED
                                                          MARCH 31,   MARCH 31,
                                                            2008        2007
                                                         ----------  ----------

   Tax (benefit) at U.S. Statutory rate (34%) .........  $     (743) $       48
   State income taxes (benefit), net of federal tax ...        (101)          7
   Permanent book/tax difference ......................          27          68
   Prior year true-up .................................         164      (1,610)
   Change in valuation allowance, net .................         738       1,572
                                                         ----------  ----------
      Total tax expense (benefit) .....................  $       85  $       85
                                                         ==========  ==========

                                       51

<PAGE>

         At March 31, 2008, the Company had federal and State of Arizona net
operating loss carry-forwards available to reduce future taxable income of
approximately $44,120,000 and $7,115,137, respectively, which begin to expire in
2013 and 2009, respectively. The Company has certain net operating losses in
other states relating to its acquisitions. The Company is currently quantifying
such net operating losses and evaluating the Company's ability to use them. The
Company has recorded a valuation allowance for its deferred tax assets due to
the lack of profitable operating history. The Company recorded a valuation
allowance for its deferred tax asset because it concluded it is not likely it
would be able to realize the tax assets due to the lack of profitable operating
history of its implementation of the Web conferencing business plan. In the
event the Company was to determine that it would be able to realize its deferred
tax assets in the future, an adjustment to the deferred tax asset would increase
net income through a tax benefit in the period such a determination was made the
Company has met the more likely than not threshold for such recognition. To the
extent the valuation allowance is removed in the future on acquired deferred tax
assets, the offset will be to goodwill and not net income.

         In accordance with Internal Revenue Code Section 382, the annual
utilization of net operating loss carry-forwards and credits existing prior to a
change in control, as defined, in the Company or a company the Company has
acquired may be substantially limited. Accordingly, the utilization of a
substantial portion of the Company's net operating loss carry-forwards may be
limited, such as net operating loss carry-forwards that are either related to
the acquisition of ThoughtWare Technologies, Learning-Edge, Inc., Glyphics, and
other acquired entities, or are related to current operations during which
change in control events may have occurred. The net change in the valuation
allowance for the years ended March 31, 2008 and 2007 was $738,000 and
$1,572,000, respectively.

         As a result of the Company's capital transactions, utilization of the
Company's net operating losses will be subject to limitations and all of the
amount may not be available to offset future income for tax purposes. To date
the Company has not completed a "Section 382" analysis.

         In June 2006, the FASB issued Interpretation 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN
48), which became effective for years beginning after December 15, 2006. FIN 48
addressed the determination of how tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, the Company must recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by taxing authorities, based on the technical merits of
the position. The Company's assessments of its tax positions in accordance with
FIN 48 did not result in changes that had a material impact on results of
operations, financial condition or liquidity. While the Company does not have
any interest and penalties related to unrecognized tax benefits, the Company's
policy is to recognize such expenses as tax expense. The Company is subject to
examination by tax authorities from 1998 for federal tax purposes and from 2003
for state purposes.


11.      STOCK OPTION PLANS AND WARRANTS

STOCK OPTION PLANS

         The Company grants stock options under its amended and restated Stock
Compensation Plan (the "Plan"). The Company calculates the fair value of options
on the day of grant and amortizes the fair value over the vesting period. Under
the Plan, the Company is authorized to issue up to 5,500,000 shares of common
stock to directors, officers and employees in the form of stock options and
stock awards.

         There were 3,757,764 and 3,138,552 options outstanding under the Plan,
at March 31, 2008 and 2007, respectively. The Compensation Committee of the
Board of Directors administers the Plan. Stock options granted to employees have
a contractual term of ten years (subject to earlier termination in certain
events) and have an exercise price no less than the fair market value of the
Company's common stock on the date of grant. The options vest at varying rates
over a one to five year period.

         The Company estimates the fair value of stock options granted using the
Black-Scholes option valuation model approach. The Company amortizes the fair
value on a straight-line basis. All options are amortized over the requisite
service periods of the awards, which are generally the vesting periods. The
expected term of the options granted represents the period of time that they are
outstanding. Management estimated the expected term of the options granted based
on the period of time the options will be outstanding. Management has determined
that there were no meaningful differences in option exercise activity based on
the demographics tested. The Company estimates the volatility of its options at
the date of grant based on the historic volatility of its common stock for the
period of time that is commensurate to the options' expected life. The Company
bases the risk-free interest rate that it uses in the Black-Scholes option
valuation model on the implied yield in effect at the time of the option grant
on U.S. Treasury bond issues with equivalent remaining terms. The Company has


                                       52

<PAGE>

never paid a cash dividend on its common stock and does not anticipate paying
any cash dividends in the foreseeable future. Consequently, the Company uses an
expected dividend yield of zero in the Black-Scholes option valuation model.
SFAS 123R requires the Company to estimate forfeitures at the time of grant and
revise those estimates in subsequent periods if actual forfeitures differ from
those estimates. The Company uses historical data to estimate pre-vesting option
forfeitures and record shared-based compensation expense only for those awards
that are expected to vest.

         In accordance with SFAS 123R, the Company recognized $185,000 of
compensation expense related to vesting of stock option awards and restricted
stock grants in the year ended March 31, 2008. The Company recognized $151,000
of compensation expense related to stock options and vesting of stock grants in
the year ended March 31, 2007. The following table summarizes stock-based
compensation expense related to employee stock options and vesting of employee
stock grants under SFAS 123R for the years ended March 31, 2008 and 2007, which
was allocated as follows (in thousands except per share amounts).

<TABLE>
<S>     <C>
                                                               --------------   --------------
                                                                FOR THE YEAR     FOR THE YEAR
                                                                    ENDED           ENDED
                                                               MARCH 31, 2008   MARCH 31, 2007
                                                               --------------   --------------
Stock-based compensation expense for stock options included:
  Cost of sales ............................................   $            7   $            3
  Research and development .................................               23               11
  Sales and marketing ......................................               51               43
  General and administrative ...............................               49               42
   Discontinued operations .................................               13               11
                                                               --------------   --------------
         Total .............................................              143              110

Stock-based compensation expense restricted employee
  stock grants included in general and administrative costs                41               41
                                                               --------------   --------------
Stock-based compensation expense related to employee
  stock options and employee stock grants included in net
  income from operations ...................................              184              151
Tax benefit ................................................               --               --
                                                               --------------   --------------

Stock-based compensation expense related to employee stock
  options and employee stock grants, net of tax ............   $          184   $          151
                                                               --------------   --------------

Decrease in basic earnings per share .......................   $           --   $           --
Decrease in diluted earnings per share .....................   $           --   $           --
</TABLE>

         As stock-based compensation expense recognized in the Consolidated
Statements of Operations for the years ended March 31, 2008 and 2007 is based on
options ultimately expected to vest, it has been reduced for expected
forfeitures.

         The Company calculates the value of each employee stock option,
estimated on the date of grant, using the Black-Scholes model in accordance with
SFAS 123R. The weighted average fair value of employee stock options granted
during the 12 months ended March 31, 2008 and 2007 was $0.43 per share and $0.43
per share, respectively, using the following weighted-average assumptions:

                                                    2008               2007
                                                    ----               ----
     Risk free interest rate                    2.3% - 4.95%       4.43% - 5.11%
     Dividend yield                                  0%                  0%
     Volatility factors of the expected
        market price of the Company's
        common stock                             90% - 102%         90% - 109%
     Weighted-average expected life of
        options                                 5 - 10 years         10 years


                                       53

<PAGE>

         Stock option activity for the year ended March 31, 2008 was as follows:

<TABLE>
<S>     <C>
                                                                                       WEIGHTED
                                                                                       AVERAGE
                                                                       WEIGHTED      CONTRACTUAL      AGGREGATE
                                                 SHARES SUBJECT TO      AVERAGE          LIFE      INTRINSIC VALUE
                                                      OPTIONS       EXERCISE PRICE    (IN YEARS)    (IN THOUSANDS)
Options outstanding at April 1, 2006..........          2,637,864        $1.07
       Options granted........................            731,000        $0.47
       Options exercised......................            (19,270)       $0.25
       Options forfeited and expired..........           (211,042)       $0.38
                                                ------------------
Options outstanding at March 31, 2007.........          3,138,552        $0.98           6.14            $443
                                                ------------------
Options exercisable at March 31, 2007.........          2,381,859        $1.15           6.21            $276
                                                ------------------

Options outstanding at April 1, 2007..........          3,138,552        $0.98
   Options granted............................          1,474,875        $0.43
   Options exercised..........................            (58,385)       $0.39
   Options forfeited and expired..............           (797,278)       $1.68
                                                ------------------
Options outstanding at March 31, 2008.........          3,757,764        $0.63           7.00            $  7
                                                ------------------
Options exercisable at March 31, 2008.........          2,260,678        $0.78           5.36            $  6
                                                ------------------

         The aggregate intrinsic value in the table above represents total
pretax intrinsic value (the difference between the Company's closing stock price
on March 31, 2008 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had
all option holders exercised their options on March 31, 2008. During the year
ended March 31, 2008, 58,385 options were exercised by employees of the Company.
Total intrinsic value of options exercised for the years ended March 31, 2008
and 2007 was $14,000 and $5,000, respectively. The Company issues new shares of
common stock upon the exercise of stock options. At March 31, 2008, 233,213
shares were available for future grants under the Plan. At March 31, 2008, the
Company had approximately $654,000 of total unrecognized compensation expense,
net of estimated forfeitures, related to stock options that will be recognized
over the weighted average period of 2.75 years.


         The following table summarizes information about stock options
outstanding at March 31, 2008:

                                         OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                           -------------------------------------------  ---------------------
                                        WEIGHTED                                    WEIGHTED
                                        AVERAGE     WEIGHTED AVERAGE                 AVERAGE
                            NUMBER OF   EXERCISE  REMAINING CONTRACTUAL  NUMBER OF  EXERCISE
                             SHARES      PRICE        LIFE (YEARS)        SHARES      PRICE
                           ----------- --------- ---------------------  ----------- ---------

     $   0.24 - $   0.36    1,121,001   $  0.27          9.3               257,210   $  0.25
     $   0.39 - $   0.59    1,331,137   $  0.47          5.5             1,134,935   $  0.48
     $   0.60 - $   0.90      953,528   $  0.64          8.1               516,435   $  0.65
     $   0.92 - $   1.38      102,125   $  1.02          5.4               102,125   $  1.02
     $   1.94 - $   2.91      205,000   $  1.98          1.5               205,000   $  1.98
     $   6.13 - $   9.19       44,973   $  6.92          0.9                44,973   $  6.92
                           -----------                                   ----------
                            3,757,764                                    2,260,678
                           ===========                                   ==========
</TABLE>

WARRANTS

         The following table summarizes information about stock purchase
warrants outstanding at March 31, 2008:

                                       54

<PAGE>

<TABLE>
<S>     <C>
                                         WARRANTS OUTSTANDING            WARRANTS EXERCISABLE
                           -------------------------------------------  ---------------------
                                        WEIGHTED                                    WEIGHTED
                                        AVERAGE     WEIGHTED AVERAGE                 AVERAGE
                            NUMBER OF   EXERCISE  REMAINING CONTRACTUAL  NUMBER OF  EXERCISE
                             SHARES      PRICE        LIFE (YEARS)        SHARES      PRICE
                           ----------- --------- ---------------------  ----------- ---------

    $  0.32  -  $ 0.32         50,000  $   0.32            1.0              50,000  $   0.32
    $  0.40  -  $ 0.40         50,000  $   0.40            1.0              50,000  $   0.40
    $  0.42  -  $ 0.42        543,182  $   0.42            3.2             543,182  $   0.42
    $  0.44  -  $ 0.44        132,972  $   0.44            2.5             132,972  $   0.44
    $  0.50  -  $ 0.50        700,000  $   0.50            0.5             700,000  $   0.50
    $  0.55  -  $ 0.55         50,000  $   0.55            1.0              50,000  $   0.55
    $  0.66  -  $ 0.66        150,000  $   0.66            1.8             150,000  $   0.66
    $  1.50  -  $ 1.50        171,510  $   1.50            2.8             171,510  $   1.50
                           -----------                                  -----------
                            1,847,664                                    1,847,664
                           ===========                                  ===========
</TABLE>

         On July 1, 2006, the Company issued a warrant for up to 1,000,000
shares of the Company's common stock, par value $0.001 per share, with an
exercise price of $0.55 per share to an agent of the Company in connection with
an agent agreement effective June 30, 2006. The warrant expires on July 1, 2011.
The warrant is subject to vesting provisions based on net collected revenue
targets achieved through the agent and certain value added resellers over a five
year period. As of March 31, 2008, none of the revenue targets had been
achieved. Therefore, no expense was recorded in the fiscal year. In accordance
with EITF 96-18, ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN
EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS AND SERVICES, the
Company recorded a prepaid asset and corresponding additional paid-in capital of
$123,000 as the fair value of the 1,000,000 shares at March 31, 2008 using the
Black-Scholes pricing model with the following assumptions: contractual and
expected life of 3.25 years, volatility of 92%, dividend yield of 0% and a
risk-free rate of 1.79%. Subsequent to March 31, 2008, on April 25, 2008, the
Company extended the timeframe on meeting the first vesting provision, which
originally expired on July 1, 2008 by an additional twelve months to July 1,
2009.

         In January 2005, in connection with the restructuring of the payments
on loan obligations due in connection with the acquisition of Glyphics, the
Company issued a warrant for 50,000 shares with an exercise price of $0.55 to
Dr. John D. Rhodes, III. The loan was guaranteed by Dr. Rhodes. The warrant was
set to expire in January 2007. The fair value of the warrant of $8,000 was
estimated using the Black-Scholes pricing model with the following assumptions:
contractual and expected life of two years, volatility of 72%, dividend yield of
0% and a risk-free rate of 3.1%. In June 2005, in connection with the
restructuring of the payments and his continuing personal guarantee, the Company
issued an additional warrant for 50,000 shares to Dr. Rhodes with an exercise
price of $0.32. The warrant was set to expire in June 2007. The fair value of
the warrant of $6,500 was estimated using the Black-Scholes pricing model with
the following assumptions: contractual and expected life of two years,
volatility of 71%, dividend yield of 0%, and a risk-free rate of 3.6%. On April
1, 2006 in connection with the restructuring of the payments and his continuing
personal guarantee, the Company issued an additional warrant to Dr. Rhodes for
50,000 shares with an exercise price of $0.40. The warrant expires in April
2009. The fair value of the warrant of $15,000 was estimated using the
Black-Scholes pricing model with the following assumptions: contractual and
expected life of three years, volatility of 125%, dividend yield of 0% and a
risk-free rate of 4.83%. In April 2006, the expiration dates of the warrants
that had been issued in 2005 were extended to March 31, 2009. Based on an
analysis using the Black-Scholes pricing model, no adjustment was made to the
fair value of the two extended warrants. On April 1, 2007 in connection with the
restructuring of the payments and his continuing personal guarantee, the Company
issued an additional warrant for 50,000 shares to Dr. Rhodes with an exercise
price of $0.66. The warrant expires in April 2010. The fair value of the warrant
of $21,000 was estimated using the Black-Scholes pricing model with the
following assumptions: contractual and expected life of three years, volatility
of 101%, dividend yield of 0% and a risk-free rate of 4.54%.


                                       55

<PAGE>

12.      COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

         The Company leases a portion of its property and equipment under the
terms of capital and operating leases. Currently, the Company has capital leases
for computer hardware and software ranging in terms from 3 to 5 years. The
capital leases bear interest at varying rates ranging from 10.2% to 15.4% and
require monthly payments.

         Assets recorded under capital leases, at March 31, 2008 and 2007
consisted of the following (IN THOUSANDS):

                                                 MARCH 31, 2008   MARCH 31, 2007
      Cost ...................................   $         452    $         227
      Less: accumulated depreciation .........            (135)              (5)
                                                 -------------    -------------
      Total ..................................   $         317    $         222
                                                 =============    =============

         Future minimum lease payments under capital leases and non-cancelable
operating leases with initial or remaining terms of one or more years consisted
of the following at March 31, 2008 (IN THOUSANDS):

                                                            CAPITAL   OPERATING
      2009..............................................   $    159   $     500
      2010..............................................        156         386
      2011..............................................         77         382
      2012..............................................         42         350
      2013..............................................         17          --
      Thereafter........................................         --          --
                                                           --------   ---------
      Total minimum obligations.........................        451   $   1,618
                                                                      =========
      Less: amount representing interest................        (75)
                                                           --------
      Present value of minimum obligations..............        376
                                                           --------
      Less: current portion.............................       (120)
                                                           ========
      Long-term obligation at March 31, 2008............   $    256
                                                           ========

         The Company incurred rent expense in continuing operations of $342,000
and $328,000 in fiscal 2008 and 2007, respectively. The Company occupies space
in Phoenix, Arizona, where the Company is headquartered and in Troy, New York,
with an emphasis in that location on research and development and technical
support. The Company also leases space in Springville, Utah where its audio
conferencing operations were located. Rent expense incurred with the
Springville, Utah location was $165,000 and $180,000 in fiscal 2008 and 2007,
and was included in results from discontinued operations in the Statement of
Operations.

         On May 5, 2006, the Company amended the lease on its Phoenix location,
which was set to expire February 28, 2007. The term was extended to February 28,
2012, and square footage and the related expense were reduced as a result of the
amendment. In addition, a cancellation clause was added. Under the cancellation
terms, the Company may cancel the lease, with nine months' notice effective
February 28, 2009 or February 28, 2010 with a nine-month or six-month base rent
penalty, respectively. On December 27, 2007, the Company amended the lease
slightly to incorporate certain improvements made to the space. After this
amendment, the Phoenix lease requires a monthly rent and operating expense of
approximately $25,000.

         On July 5, 2006, the Company amended the lease on its New York
location, which had expired December 31, 2005. The new lease term is effective
July 1, 2006 through June 30, 2009. Under the terms of the new lease the monthly
rent and operating expenses are approximately $4,000.

         The lease related to the Springville location expires in December 31,
2008 and requires a monthly rent and operating expenses of approximately $8,000.

SUBCONTRACTOR AGREEMENT

                                       56

<PAGE>

         The Company had an agreement with its custom content subcontractor,
Interactive Alchemy, which provided for the provision of custom content services
to the Company's customers. The subcontractor agreement expired on May 1, 2008.
Under the agreement, the subcontractor provided custom content development
services to the Company in exchange for a fixed percentage of the Company's
custom content revenue. The amount to be paid under the agreement was limited to
a cap of $450,000 in Fiscal 2008. On September 28, 2007, the agreement was
modified in order to further clarify the rights and obligations between the
Company and its subcontractor at the end of the agreement. The Company recorded
gross custom content revenue for its customers with a corresponding fixed
percentage commission due to its subcontractor as a cost of sale.

EMPLOYMENT AGREEMENTS

         The Company has entered into employment agreements with Mr. Powers, Mr.
Dunn, and Mr. Moulton. All are officers, and Mr. Powers is also Chairman of the
Board of Directors. Each of these agreements provides for an annual base salary
in an amount not less than the initial specified amount and entitles the
employee to participate in all of the Company's compensation plans. Each
agreement establishes a base annual salary and provides the eligibility for an
annual award of bonuses based on the management incentive compensation plan (as
adopted and amended by the Compensation Committee of the Board of Directors from
year to year), and is subject to the right of the Company to terminate their
respective employment at any time without cause. Mr. Powers' and Mr. Dunn's
employment agreements provide for continuous employment for a one-year term that
renews automatically unless otherwise terminated. Mr. Dunn's employment
agreement permits Mr. Dunn to work outside the corporate offices, and Mr. Dunn
relocated to Houston in June of 2005. Under each of the employment agreements,
if the Company terminates the employee's employment without cause (as therein
defined), Mr. Powers, Mr. Dunn, and Mr. Moulton will be entitled to a payment
equal to 12 months' salary. Mr. Moulton's agreement was amended to expire on
December 31, 2008 as a part of the audio conferencing sale effective in fiscal
2009 upon transition of the audio business. Additionally, Mr. Powers' and Mr.
Dunn's employment agreements provide for a severance payment equal to one (1)
year's compensation in the event of termination of employment following a
"change in control" of the Company (as defined therein) except that should Mr.
Dunn obtain employment with the successor organization in a comparable position,
then the Company shall not be responsible for the severance payment. Each of the
foregoing agreements also contains a covenant limiting competition with iLinc
for one year following termination of employment. The aggregate potential
payment under such agreements would be $575,000 as of March 31, 2008.

13.      RELATED PARTY TRANSACTIONS

         On March 13, 2008, Kent Petzold, a member of the Company's Board of
Directors, purchased a Convertible Redeemable Subordinated Note. The mother of
James M. Powers, Jr., the Company's chief executive officer also purchased a
Convertible Redeemable Subordinated Note. Both notes had a principal balance of
$50,000 and were purchased at a discount from the original note holder. The
terms and conditions of these transactions were commensurate with the terms and
conditions of other notes sold by the original note holder on March 13, 2008.

14.      SUPPLEMENTAL CASH FLOW INFORMATION

                                                           YEAR ENDED YEAR ENDED
                                                            MARCH 31,  MARCH 31,
                                                              2008       2007
                                                           ---------- ----------
                                                              (in thousands)
Cash paid
   Interest .............................................. $    1,040 $    1,045
Supplemental information on non-cash transactions
   Warrants revalued/issued in connection with 3rd
     party distribution agreement ........................       (344)       467
   Accounts receivable converted into note receivable ....         --         54
   Warrants issued in connection with debt refinancing ...         --         42
   Addition of fixed assets and prepaid maintenance
     with capital leases .................................        184        268
   Addition of assets with barter transactions ...........         --        241
   Repayment of accrued liabilities with deferred
     revenue .............................................         --          8
   Conversion of preferred stock to common stock .........         --          1
   SAB 108 prior period adjustment .......................         --        214


                                       57

<PAGE>

15.      SUBSEQUENT EVENTS

         See Note 2 for discussion of the sale of the Company's audio
conferencing assets, which occurred on April 28, 2008.

         Subsequent to March 31, 2008, a holder of 30,000 shares of Series A
Preferred Stock converted their shares to 600,000 of common stock. The
conversion of the Preferred Stock was in accordance with the terms of the
Preferred Stock agreement and increased the number of shares outstanding by
600,000.

16.      IMPACT OF STAFF ACCOUNTING BULLETIN NO. 108 (SAB108)

         In September 2006, the SEC issued SAB 108. SAB 108 expresses SEC staff
views regarding the process by which misstatements in financial statements are
evaluated for purposes of determining whether those misstatements are material
to our financial statements. SAB 108 was effective for fiscal years ending after
November 15, 2006. The transition provisions of the bulletin permit the Company
to adjust its beginning accumulated deficit for the cumulative effect of
immaterial errors relating to prior years. The Company adopted SAB 108 in the
fourth quarter of fiscal 2007, with an effective date of April 1, 2006.
Traditionally, there have been two widely-recognized methods for quantifying the
effects of financial statement misstatements: the "roll-over" method and the
"iron curtain" method. The roll-over method focuses primarily on the impact of a
misstatement on the income statement, including the reversing effect of prior
year misstatements, but its use can lead to the accumulation of misstatements in
the balance sheet. The iron curtain method focuses primarily on the effect of
correcting the period-end balance sheet with less emphasis on the reversing
effects of prior year errors on the income statement. We previously used the
roll-over method for quantifying identified financial statement misstatements.

         In SAB 108, the SEC staff established an approach that requires
quantification of financial statement misstatements based on the effect of the
misstatements on each of our financial statements and the related financial
statement disclosures. This model is commonly referred to as a "dual approach"
because it requires quantification of errors under both the iron curtain and the
roll-over methods. In accordance with the bulletin, we have adjusted beginning
accumulated deficit for 2007 in the accompanying financial statements for the
items described below.

         INCOME TAXES - For income tax purposes, the Company is amortizing the
goodwill recognized on the assets it acquired by acquisition in 2002 and 2004.
For book purposes, this goodwill is not amortized. This difference in book and
tax accounting results in a deferred income tax liability. SFAS No. 109 requires
the expected timing of future reversals of deferred tax liabilities to be taken
into account when evaluating the realizability of deferred tax assets.
Generally, the reversal of deferred tax liabilities related to indefinite-lived
intangible assets and goodwill normally should not be considered a source of
future taxable income when assessing the realization of deferred tax assets. The
Company historically has had no net deferred income tax assets because the
Company has recorded a valuation allowance for its deferred tax asset as it
concluded it is not likely it would be able to realize the tax assets due to the
lack of profitable operating history. As such, the recognition of the deferred
income tax liability related to the tax deductible goodwill would have resulted
in a charge to the income tax provision. The effect of not recording a deferred
income tax provision for this matter was not material to the statements of
operations in any individual year. However, the accumulated difference on the
balance sheet has become material to the balance sheet. Therefore, in order to
correct the net deferred income tax liability for the tax deductible goodwill,
the Company adjusted the beginning accumulated deficit for fiscal 2007 by
$214,000.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Effective January 1, 2007, Epstein, Weber & Conover, PLC ("Epstein
Weber") combined its practice with Moss Adams LLP ("Moss Adams") and therefore
resigned as the independent registered public accounting firm for iLinc
Communications, Inc. (the "Company"). According to information provided to the
Company, all of the partners of Epstein Weber have become partners of Moss
Adams.


ITEM 9A. CONTROLS AND PROCEDURES.

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

                                       58

<PAGE>

         The Company's management, with the participation of our chief executive
officer and chief financial officer, carried out an evaluation of the
effectiveness of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and
15-d-15(e)) as of the end of the period covered by this report (the "Evaluation
Date"). Based upon that evaluation, the chief executive officer and chief
financial officer concluded that as of the Evaluation Date, the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act (i) is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms and (ii) is
accumulated and communicated to the Company's management, including its chief
executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure.

         The Company's management, including its chief executive officer and
chief financial officer, does not expect that the Company's disclosure controls
and procedures or its internal controls will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected.

     (b) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         The Company's management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act). The Company's management assessed the
effectiveness of its internal control over financial reporting as of March 31,
2008. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework. Management has concluded that, as of March 31,
2008, the Company's internal control over financial reporting is effective based
on these criteria. This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by its
registered public accounting firm pursuant to temporary rules of the SEC that
permit the Company to provide only management's report in this annual report.

     (c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         There were no changes in the Company's internal controls over financial
reporting that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.



 ITEM 9B. OTHER

         The disclosure is not applicable because iLinc is a smaller reporting
company.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this item with respect to the Company's
directors and executive officers and compliance by the Company's directors,
executive officers and certain beneficial owners of the Company's common stock
with Section 16(a) of the Exchange Act will be set forth under the captions
"Election of Directors" and "Section 16 Reports" in the Company's definitive
Proxy Statement (the "2008 Proxy Statement") for its 2008 annual meeting of
stockholders, which sections are incorporated herein by reference. The Company's
Code of Ethics is incorporated herein by this reference and available at the
Company' Web site located at www.ilinc.com.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this item will be set forth in the section
entitled "Executive Compensation" in the 2008 Proxy Statement, which section is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED SHAREHOLDER MATTERS

                                       59

<PAGE>

         The information required by this item will be set forth in the section
entitled "Security Ownership of Certain Beneficial Owners and Management" in the
2008 Proxy Statement, which section is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
         INDEPENDENCE

         The information required by this item will be set forth in the section
entitled "Certain Transactions" in the 2008 Proxy Statement, which section is
incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information required by this item will be set forth in the section
entitled "Audit and Non Audit Fees" in the 2008 Proxy Statement, which section
is incorporated herein by reference.


                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)   FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms.

Consolidated Balance Sheets as of March 31, 2008 and 2007.

Consolidated Statements of Operations for the years ended March 31, 2008 and
2007.

Consolidated Statements of Shareholders' Equity for the years ended March 31,
2008 and 2007.

Consolidated Statements of Cash Flows for the years ended March 31, 2008 and
2007.

Notes to the Consolidated Financial Statements.

(a)(2)   FINANCIAL STATEMENT SCHEDULES

         The disclosure is not applicable because iLinc is a smaller reporting
company.

(a)(3)   EXHIBITS.

              (a) EXHIBITS

   EXHIBIT
    NUMBER    DESCRIPTION OF EXHIBITS
   -------    -----------------------

    3.1(1)     Restated Certificate of Incorporation of the Company
    3.2(17)    Bylaws of the Company, as amended
    3.3(2)     Restated Certificate of Incorporation of the Company
    3.4(2)     Amendment of Bylaws of the Company
    3.5(3)     Restated Certificate of Incorporation of the Company
    3.6(9)     Certificate of Designations of Series A Preferred Stock
    3.7(10)    Certificate of Amendment of Restated Certificate of Incorporation
               of the Company
    3.8        Revised Certificate of Designations of Series B Preferred Stock
    4.1(1)     Form of certificate evidencing ownership of common stock of the
               Company
    4.6(2)     Form of certificate evidencing ownership of common stock of the
               Company
    4.7(3)     Form of Convertible Redeemable Subordinated Note
    4.9(9)     Form of Redeemable Warrant (2003 Private Placement Offering)
   *10.1       The Company's amended and restated stock compensation plan
   *10.9(2)    Employment Agreement dated November 12, 2000 between the Company
               and James M. Powers, Jr.
   *10.11(14)  Employment Agreement dated February 15, 2001 between the Company
               and James L. Dunn, Jr. with Amendments
    10.17(7)   Asset Purchase Agreement by and among the Company and Mentergy,
               Inc.
    10.18(15)  Subcontractor Agreement between the Company and Interactive
               Alchemy, Inc. with Amendments
    10.20(12)  Note Purchase Agreement dated February 12, 2004 between the
               Company and certain creditors
    10.21(12)  Unit Purchase and Agency Agreement dated April 19, 2004 between
               the Company and Cerberus Financial, Inc.


                                       60

<PAGE>

    10.22(12)  Placement Agency Agreement dated March 10, 2004 between the
               Company and Peacock, Hislop, Staley, and Given, Inc.
    10.23(11)  Asset Purchase Agreement and Plan of Reorganization by and
               between the Company and Glyphics Communications, Inc.
    *10.24(13) Employment Agreement dated June 1, 2004 between the Company and
               Gary L. Moulton, as amended
    10.25(15)  Securities Purchase Agreements effective June 9, 2006
    10.26(15)  Registration Rights Agreements effective June 9, 2006
    10.27(16)  Amendment to Unit Purchase and Agency Agreement
    10.28(18)  Asset Purchase Agreement by and between American Teleconferencing
               Services, Ltd. d/b/a Premier Global Services and the Company
    14.1(13)   Code of Ethics
    16(8)      Letter re Change in Certifying Accountant
    +21.1      Subsidiaries of the Registrant
    +23.1      Consent of Independent Registered Public Accounting Firm
    +31.1      Chief Executive Officer Section 302 Certification
    +31.2      Principal Financial Officer Section 302 Certification
    +32.1      Chief Executive Officer Section 906 Certification
    +32.2      Principal Financial Officer Section 906 Certification


(1)      Previously filed as an exhibit to iLinc's Registration Statement on
         Form S-1 (No. 333-37633), and incorporated herein by reference.
(2)      Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
         for the year ended March 31, 2001.
(3)      Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
         for the year ended March 31, 2002.
(4)      Previously filed as an exhibit to iLinc's Form 8-K filed October 16,
         2001.
(5)      Previously filed as an exhibit to iLinc's Form 8-K filed January 30,
         2002.
(6)      Previously filed as an exhibit to iLinc's Form 8-K filed July 2, 2002.
(7)      Previously filed as an exhibit to iLinc's Form 8-K filed December 20,
         2002.
(8)      Previously filed as an exhibit to iLinc's Form 8-K filed January 24,
         2007.
(9)      Previously filed as an exhibit to iLinc's Quarterly Report on Form 10-Q
         for the fiscal quarter ended December 31, 2003.
(10)     Previously filed as an exhibit to iLinc's Quarterly Report on Form 10-Q
         for the fiscal quarter ended December 31, 2003.
(11)     Previously filed as an exhibit to iLinc's Form 8-K filed June 14, 2004.
(12)     Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
         for the year ended March 31, 2004.
(13)     Previously filed as an exhibit to iLinc's Quarterly Report on Form 10-Q
         for the fiscal quarter ended December 31, 2004.
(14)     Previously filed as an exhibit to iLinc's Quarterly Report on Form 10-Q
         for the fiscal quarter ended December 31, 2005.
(15)     Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
         for the year ended March 31, 2006 and amendment furnished herewith.
(16)     Previously filed as an exhibit to iLinc's Form 8-K filed December 12,
         2006.
(17)     Previously filed as an exhibit to iLinc's Quarterly Report on Form 10-Q
         for the fiscal quarter ended December 31, 2007
(18)     Previously filed as an exhibit to iLinc's Form 8-K filed May 2, 2008.


*        Management contract or compensatory plan or arrangement required to be
         filed as an exhibit pursuant to the requirements of Item 15 of Form
         10-K.
+        Furnished herewith as an Exhibit


                                       61

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned; thereunto duly authorized, in the City of
Phoenix, State of Arizona, on June 27, 2008.


                                            ILINC COMMUNICATIONS, INC.


                                        By: /s/ JAMES M. POWERS, JR.
                                            ------------------------------------
                                            James M. Powers, Jr.,
                                            Chairman of the Board, President and
                                            Chief Executive Officer


                                        By: /s/ JAMES L. DUNN, JR.
                                            ------------------------------------
                                            James L. Dunn, Jr.
                                            Senior Vice President and
                                            Chief Financial Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.

<TABLE>
<S>     <C>
NAME                            CAPACITY                                         DATE
----                            --------                                         ----

/s/ JAMES M. POWERS, JR.       Chairman of the Board, President and Chief        June 27, 2008
-----------------------------  Executive Officer (Principal Executive Officer)
James M. Powers, Jr.

/s/ JAMES H. COLLINS           Director                                          June 27, 2008
-----------------------------
James H. Collins

/s/ KENT PETZOLD               Director                                          June 27, 2008
-----------------------------
Kent Petzold

/s/ DANIEL T. ROBINSON, JR.    Director                                          June 27, 2008
-----------------------------
Daniel T. Robinson, Jr.

/s/ MICHAEL T. FLYNN           Director                                          June 27, 2008
-----------------------------
Michael T. Flynn
</TABLE>


                                       62