Summary of IA GLOBAL INC - Yahoo! Finance

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

Forward-looking statements in this report reflect the good faith judgment of our management and the statements are based on facts and factors as we currently know them. Forward-looking statements are subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, those discussed below and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this report. Readers are urged not to place undue reliance on these forward-looking statements which speak only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of the report.

INTRODUCTION

We had revenues of $35.1 million and $12.0 million for the six months ended September 30, 2008 and 2007, respectively. We are projecting revenues of $64 million for the twelve months ended March 31, 2009 as compared to $38.7 million for the twelve months ended March 31, 2008. We have incurred a net loss $1.0 million for the six months ended September 30, 2008 as compared to a net loss of $5.7 million for the six months ended September 30, 2007.

During 2008/9, we entered into loans of $.5 million at IA Global and $3.4 million at Global Hotline. During 2008/9, we repaid loans of $.5 million at IA Global and $4.1 million at Global Hotline. We expect to continue reducing debt during FY 2008/9 with the improvement in Global Hotline operating results starting January 1, 2008. Global Hotline will need to repay or refinance $9.0 million by September 30, 2009.

Historically, our losses have been financed primarily by the sale of equity in our company, by loans from related and unrelated parties, by the issuance of convertible debentures and through the issuance of equity for services.

IA Global and each subsidiary manage their cash flow independently. IA Global funds its operations from loans, convertible debentures, inter-company borrowings, loans collateralized by stock, management service fees and dividends from its equity investments. Global Hotline funds its operations from bank debt and at times needs to refinance this bank debt. Global Hotline Philippines funds its operations from inter-company borrowings.

Each entity will need to obtain additional financing in order to continue our current operations. There can be no assurance that we will be able to secure funding for our existing operations, or that if such funding is available, whether the terms or conditions would be acceptable to us.

THE COMPANY AND OUR BUSINESS

IA Global, Inc. is a broad based services company with a dedicated focus on growth of existing business, together with expansion through mergers and acquisitions in the Pacific Rim region. Our mission is to identify and invest in business opportunities, apply our skills and resources to nurture and enhance the performance of those businesses across key business metrics, and to deliver accelerating shareholder value.

To realize this plan, we are actively expanding investments in the business process outsourcing ("BPO"), this also includes human resources and human capital elements necessary to recruit and train the very large numbers of people necessary to transact BPO, B2B and financial services sectors. These sectors demonstrate long-term growth prospects in which we, by applying our skills and resources, can add significant value to our investments. Beyond Japan, we are expanding our reach to encompass, the Philippines, Southeast Asia and the outstanding growth opportunities and synergies these markets present.

IA Global takes a long-term "Buy to Hold" approach to its acquisitions and partnerships. It is built on the belief that our people, combining pragmatic hands-on management with extensive operations and financial experience, have the expertise to grow the businesses we invest in, to optimize their potential and provide increasing returns on investment over the long run. IA Global has acquired a select portfolio of investments in Japan, Australia and the Philippines/Singapore area, targeted and developed with a sharp eye for producing outstanding growth and profitability. This has laid the foundation for an aggressive medium term plan to establish a broad network of complementary subsidiaries and majority-owned investments in the greater Pacific Rim region.

BUSINESS PROCESS OUTSOURCING

In Japan, IA Global is 100% owner of Global Hotline a Business Process Outsourcing organization, operating several major call centers providing outbound telemarketing services for telecommunications and insurance products. Since our acquisition of Global Hotline in June 2005, this business has expanded rapidly with the signing of significant multi-year contracts with major corporations.

This growth trajectory is being driven by new contracts, process improvements, infrastructure expansion, and macro economic trends such as the ongoing gains in the Japanese economy, consistent year on year growth in targeted industries, higher disposable incomes, and the increasingly rapid growth of the senior citizen demographic. As of September 30, 2008, Global Hotline employed 1,221 full and part-time personnel to support these multi-million dollar contracts. In the Philippines, we acquired 100% of Shift on April 10, 2008 and Asia Premier on May 27, 2008, multi-service call center operations that have now been merged into a single company named Global Hotline Philippines Inc.

HUMAN CAPITAL AND RESOURCES

During August 2007, we closed two equity investments. These investments provide "human capital" services in the human resources sector, a sector which offers excellent growth opportunities throughout the Asia Pacific region. IA Global continues to seek additional companies and partnerships in the staffing, training, employee/ organization evaluation and assessments business throughout the region, but with a focus on Japan. Linking these investments in a network under the IA Global umbrella will generate synergies of expertise and resources, creating a regional value-chain of services to further drive aggressive growth. Our investments in Human Capital and Resources are as follows:

IA Global has a 25% stake in GPlus Media Co Ltd ("GPlus"). GPlus is a Japan based corporation with offices in Tokyo, Japan, Hong Kong and Shanghai, China. GPlus owns and operates several of Japan's best known English-Japanese websites, including GaijinPot.com, and Ecentral.jp, the official jobsite of the American Chamber of Commerce in Japan. GPlus also operates CareerEngine.org, which is a powerful network of jobsites with partners who include ShanghaiExpat.com, the American Chambers of Commerce in Shanghai and Hong Kong, as well as the Canada China Business Council.

IA Global has a 20.25% equity investment in Slate Consulting Co Ltd ("Slate"). Slate is a Japan headquartered Executive Search firm with operations and business entities in Tokyo, Hong Kong, Surrey, Canada; a call center in Manila, Philippines; and an early stage call center in Bucharest, Romania.

FINANCIAL SERVICES

In Australia, we have a 36% stake in Australian Secured Financial Limited and its affiliates, Ausec Finance Limited and ADJ Services Pty Ltd. and (collectively, "ASFL"), which raises funds through the issuance of private loans and bank debt within Australia and provide short term, secured, real property loans to businesses and investors in Australia. Through this group of companies, ASFL has created a strong financial services network leveraging its knowledge and presence in local communities to cater to a sector of the market neglected by larger financial institutions.

In Japan, we have a 20% stake in Taicom Securities Co Ltd ("Taicom"), a Japanese securities firm. Taicom is a financial services Company in Japan providing a broad range of value-added financial services and competitive products. These currently include the brokerage of Japanese commodities, derivative options, foreign currency, equities and investment trusts as well as the offering of investment consulting services to diversified clients such as individuals and corporations. Taicom offers creative solutions that meet the sophisticated trading requirements of its online and offline clients, who utilize Taicom's cutting-edge proprietary trading platform called TradePro, as well as its broad news and information gathering network.

Taicom is a member of the Osaka Stock Exchange, the Tokyo Commodity Exchange, the Tokyo Grain Exchange and the Chubu (Central Japan) Commodity Exchange. Taicom is headquartered in Tokyo and in Osaka and has three branch offices in Japan.

KEY MARKET OPPORTUNITIES

Our key market opportunities are as follows:

- We intend to aggressively grow our existing business entities during FY 2008/9.

- We intend to expand our reach to encompass, the Philippines, Southeast Asia and the outstanding growth opportunities and synergies these markets present. Our long-term "Buy to Hold" approach to our investments gives our management team time to comprehensively analyze, understand and select the companies we invest in, their sectors and competition in depth, and to accurately gauge their potential.

- We intend to actively expand our investments in the business process Outsourcing in Japan and the Philippines, human capital and resources, and B2B sectors.

- We intend to deliver profitability during FY 2008/9 on an EBITDA basis.

- We intend to enhance the performance of those businesses across key business metrics, and to deliver accelerating shareholder value.

- We intend to increase investor relation activities to increase the trading volume and share price.

PRIMARY RISKS AND UNCERTAINTIES

We are exposed to various risks related to our need for general economic, business and industry conditions, our need for additional financing, our level of indebtedness, our NYSE Alternext US listing a volatile market price for our common stock, our ASFL investment and our Global Hotline business. These risks and uncertainties are discussed in Item 1A, "Factors That May Effect Future Results."

RESULTS OF OPERATIONS

         The following table presents certain consolidated statement of
operations information and presentation of that data as a percentage of change
from period-to-period.
(dollars in thousands)
                                                               3 Months Ended September 30,
                                                  ------------------------------------------------------
                                                    2008           2007        $ Variance     % Variance
                                                  --------       --------      ----------     ----------

Revenue ....................................      $ 15,364       $  6,462       $  8,902         137.8%
Cost of sales ..............................         3,035          2,201            834          37.9%
                                                  --------       --------       --------       --------
Gross profit ...............................        12,329          4,261          8,068         189.3%
Selling, general and administrative expenses        14,111          8,698          5,413          62.2%
                                                  --------       --------       --------       --------
Operating loss .............................        (1,782)        (4,437)         2,655          59.8%
                                                  --------       --------       --------       --------
Other Income (Expense):
Interest income ............................             1              5             (4)        -80.0%
Interest expense and amortization of
  beneficial conversion feature ............          (222)          (283)            61          21.6%
Other Income ...............................             6              1              5         500.0%
Gain (loss) on equity investment in
  Australia Secured Financial Limited ......            18            (66)            84         127.3%
Gain on equity investment in GPlus Media Co
  Ltd ......................................            21             (1)            22        2200.0%
Gain on equity investment in Slate
  Consulting Co Ltd ........................             1              2             (1)        -50.0%
Loss on equity investment in Taicom
  Securities Co Ltd ........................          (113)             -           (113)       -100.0%
Conversion of debenture expense ............             -           (120)           120         100.0%
Foreign currency transaction adjustment ....           (63)            11            (74)       -672.7%
                                                  --------       --------       --------       --------
Total other expense ........................          (351)          (451)            54          12.0%
                                                  --------       --------       --------       --------
Loss before income  taxes ..................        (2,133)        (4,888)         2,709          55.4%
Income taxes:
Current benefit ............................          (435)        (1,267)           832         -65.7%
                                                  --------       --------       --------       --------
Net loss ...................................      $ (1,698)      $ (3,621)      $  1,877          51.8%
                                                  ========       ========       ========       ========

(dollars in thousands)
                                                               6 Months Ended September 30,
                                                  ------------------------------------------------------
                                                    2008           2007        $ Variance     % Variance
                                                  --------       --------      ----------     ----------
Revenue ....................................      $ 35,052       $ 11,977       $ 23,075         192.7%
Cost of sales ..............................         6,230          3,843          2,387          62.1%
                                                  --------       --------       --------       --------
Gross profit ...............................        28,822          8,134         20,688         254.3%
Selling, general and administrative expenses        28,768         15,642         13,126          83.9%
                                                  --------       --------       --------       --------
Operating income (loss) ....................            54         (7,508)         7,562         100.7%
                                                  --------       --------       --------       --------
Other Income (Expense):
Interest income ............................            16             16              -           0.0%
Interest expense and amortization of
  beneficial conversion feature ............          (505)          (510)             5           1.0%
Other Income ...............................            68            570           (502)        -88.1%
Gain (loss) on equity investment in
  Australia Secured Financial Limited ......           275            (78)           353         452.6%
Gain on equity investment in GPlus Media Co
  Ltd ......................................            53             (1)            54        5400.0%
Gain on equity investment in Slate
  Consulting Co Ltd ........................            24              2             22        1100.0%
Loss on equity investment in Taicom
  Securities Co Ltd ........................          (220)             -           (220)       -100.0%
Conversion of debenture expense ............             -           (120)           120         100.0%
Foreign currency transaction adjustment ....           (66)            11            (77)       -700.0%
                                                  --------       --------       --------       --------
Total other expense ........................          (355)          (110)          (288)       -261.8%
                                                  --------       --------       --------       --------
Loss before income  taxes ..................          (301)        (7,618)         7,274          95.5%
Income taxes:
Current provision (benefit) ................           670         (1,870)         2,540         135.8%
                                                  --------       --------       --------       --------
Net loss ...................................      $   (971)      $ (5,748)      $  4,734          82.4%
                                                  ========       ========       ========       ========

THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2007

Net revenue for the three months ended September 30, 2008 increased $8,902,000 to $15,364,000, as compared to the three months ended September 30, 2007.

The increase was due to the expansion of the Global Hotline business with the signing of the following significant contracts with major corporations:

1. KDDI Network and Solutions signed on January 1, 2007 and was increased effective July 1, 2007 and April 1, 2008.

2. NTT signed on May 21, 2007 and was effective October 1, 2007.

3. Increased revenues from other Global Hotline contracts.

4. We experienced a decrease in AIG revenues of $2.4 million from the three months ended June 30, 2008 due to their financial difficulties. While these contracts are in effect, personnel have been allocated to other contracts at this time.

COST OF SALES

Cost of sales for the three months ended September 30, 2008 increased $834,000 to $3,035,000 as compared to the three months ended September 30, 2007. The increase resulted from outside agent and outsourcing and other costs of $712,000 related to the expansion of the Global Hotline business with the signing of significant contracts with major corporations discussed above and $122,000 related to the Global Hotline Philippines businesses acquired in April and May, 2008.

EXPENSES

Selling, general and administrative expenses for the three months ended September 30, 2008 increased $5,413,000 to $14,111,000 as compared to the three months ended September 30, 2007. This was due to increased operating expenses of $86,000 related to the implementation of SFAS 123R at IA Global, $118,000 related to the Global Hotline Philippines businesses acquired in April and May, 2008 and $5,059,000 at Global Hotline for additional staff, hiring expenses and training. The Global Hotline increase was due to the expansion of the Global Hotline business with the signing of significant contracts with major corporations.

Global Hotline opened a fifth and sixth call center in Tokyo and Osaka, Japan in late August and October, 2007, respectively to support its new contracts. In addition, Global Hotline opened four smaller call centers in 2008 to support its customer contracts.

For 2008/9 and 2007/8, the selling, general and administrative expenses consisted primarily of employee and independent contractor expenses, rent, overhead, equipment and depreciation, amortization of identifiable intangible assets and intellectual property, professional and consulting fees, sales and marketing costs, investor relations, legal, stock option and other general and administrative costs.

OTHER INCOME/EXPENSE

Other income/ expense for the three months ended September 30, 2008 was $351,000 as compared to other expense of $451,000 for the three months ended September 30, 2007. The other income/expense increase was primarily related to interest expense and amortization of the beneficial conversion feature of $222,000, a net loss on equity investments of $73,000 and a foreign currency translation adjustment of $63,000.

The 2007/8 other expense was primarily related to interest expense and amortization of beneficial conversion feature of $283,000, a net loss on equity investments of $65,000 and conversion of debenture expense of $120,000.

NET LOSS

Net loss for the three months ended September 30, 2008 was $1,698,000 as compared to a net loss from of $3,621,000 for the three months ended September 30, 2007. Increased gross margin of $8,068,000 was offset by increased operating expenses of $5,413,000 and income taxes of $832,000. The increased operating expenses primarily reflect additional staff, hiring costs and training. The increase resulted from costs related to the expansion of the Global Hotline business with the signing of significant multi-year contracts with major corporations.

The nature of Global Hotline's business model is such that revenues lag expenses by approximately 6-8 months.

SIX MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER
30, 2007

Net revenue for the six months ended September 30, 2008 increased $23,075,000 to $35,052,000, as compared to the six months ended September 30, 2007.

The increase was due to the expansion of the Global Hotline business with the signing of the following significant contracts with major corporations:

1. KDDI Network and Solutions signed on January 1, 2007 and was increased effective July 1, 2007 and April 1, 2008.

2. NTT signed on May 21, 2007 and was effective October 1, 2007.

3. American Life Insurance Company, a Japanese company which is a subsidiary of AIG, signed and effective on August 8, 2007, September 20, 2007 and December 1, 2007.

4. Increased revenues from other Global Hotline contracts.

5. We experienced a decrease in AIG revenues of $2.4 million from the three months ended June 30, 2008 due to their financial difficulties. While these contracts are in effect, personnel have been allocated to other contracts at this time.

COST OF SALES

Cost of sales for the six months ended September 30, 2008 increased $2,387,000 to $6,230,000 as compared to the six months ended September 30, 2007. The increase resulted from outside agent and outsourcing and other costs of $2,171,000 related to the expansion of the Global Hotline business with the signing of significant contracts with major corporations discussed above and $217,000 related to the Global Hotline Philippines businesses acquired in April and May, 2008.

EXPENSES

Selling, general and administrative expenses for the six months ended September 30, 2008 increased $13,126,000 to $28,768,000 as compared to the six months ended September 30, 2007. This was due to increased operating expenses of $172,000 related to the implementation of SFAS 123R at IA Global, $185,000 related to the Global Hotline Philippines businesses acquired in April and May, 2008 and $12,542,000 at Global Hotline for additional staff, hiring costs and training. The Global Hotline increase was due to the expansion of the Global Hotline business with the signing of significant contracts with major corporations.

OTHER INCOME/EXPENSE

Other income/ expense for the six months ended September 30, 2008 was $355,000 as compared to other expense of $110,000 for the six months ended September 30, 2007. The other income/expense increase was primarily related to interest expense and amortization of the beneficial conversion feature of $505,000, a foreign currency translation adjustment of $66,000, offset by a net gain on equity investments of $132,000 and other income of $68,000.

The 2007 other expense was primarily related to interest expense and amortization of beneficial conversion feature of $510,000, net loss on equity investments of $77,000 and conversion of debenture expense of $120,000, offset by other income of $570,000.

NET LOSS

Net loss for the six months ended September 30, 2008 was $971,000 as compared to a net loss from of $5,748,000 for the six months ended September 30, 2007. Increased gross margin of $20,688,000, offset by increased operating expenses of $13,126,000 and income taxes of $2,540,000. The increased operating expenses primarily reflect additional staff, hiring costs and training. The increase resulted from costs related to the expansion of the Global Hotline business with the signing of significant multi-year contracts with major corporations.

The nature of Global Hotline's business model is such that revenues lag expenses by approximately 6-8 months.

LIQUIDITY AND CAPITAL RESOURCES

We had cash of approximately $2.5 million, net working capital of approximately $(1.1) million and debt of $16.5 million as of September 30, 2008. Global Hotline will need to repay or refinance $9.0 million by September 30, 2009.

Each entity will need to obtain additional financing in order to continue our current operations, service our debt repayments and acquire businesses. There can be no assurance that we will be able to secure funding, or that if such funding is available, whether the terms or conditions would be acceptable to us.

Since inception, we have financed our operations primarily through sales of our equity securities in our initial public offering and from several private placements, loans and capital contributions, primarily from related parties. Net cash proceeds from these items have totaled approximately $20.5 million as of September 30, 2008, with approximately $8.8 million raised in the initial public offering, $8.5 million raised in private placements, $3.6 million raised in the conversion of debt and $0.7 million used for the share repurchase program. In addition, we have issued equity for non-cash items totaling $33.1 million, including $7.0 million from the ASFL equity investment, $5.2 million from the Taicom equity investment, $1.4 million each from the GPlus and Slate equity investments, $.3 and $.2 million related to the Asia Premier and Shift acquisition, respectively, $7.1 million issued for services, $3.6 million related to a beneficial conversion feature, $3.9 million from debenture conversions, and $3.1 million related to the Global Hotline acquisition. Additional funding was obtained from notes payable and long term debt of approximately $16.5 million.

OPERATING ACTIVITIES

Net cash provided by operating activities for the six months ended September 30, 2008 was $3.9 million. This amount was primarily related to a net loss of $1.0 million, an increase in notes receivable of $1.5 million and a decrease in other liabilities of $1.3 million, offset by depreciation, amortization and other non-cash expenses of $1.0 million, a decrease in accounts receivable of $4.4 million, prepaid expenses of $1.4 million.

INVESTING ACTIVITIES

Net cash used in investing activities for the six months ended September 30, 2008 was $1.1 million. This amount relates to capital expenditures of $1.1 million.

FINANCING ACTIVITIES

Net cash used in financing activities for the six months ended September 30, 2008 was $1.0 million.

During the six months ended September 30, 2008, IA Global entered into . . .