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

                                   FORM 10-QSB

/X/      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

/ /     TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT



                        Commission File Number: 00-19813

                               InfoNow Corporation
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


             Delaware                              04-3083360
             --------                              ----------
     (State of Incorporation)         (I.R.S. Employer Identification No.)

            1875 Lawrence Street, Suite 1100, Denver, Colorado 80202
            --------------------------------------------------------
                    (Address of principal executive offices)

                                  303-293-0212
                                  ------------
                           (Issuer's telephone number)

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

As of July 27, 2004, there were 9,959,370 shares of the Issuer's common stock
outstanding.

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




<PAGE>



                               INFONOW CORPORATION

                                      INDEX
                                      -----

                                                                       Page No.
                                                                       --------
                          PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

          Unaudited Balance Sheet - June 30, 2004...........................3

          Unaudited Statements of Operations - For the
            Three and Six Months Ended June 30, 2004
            and June 30, 2003...............................................4

          Unaudited Statements of Cash Flows - For the Six Months
            Ended June 30, 2004 and June 30, 2003...........................5

          Notes to Unaudited Financial Statements...........................6


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........13

ITEM 3.   CONTROLS AND PROCEDURES..........................................28


                           PART II. OTHER INFORMATION

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS............29

ITEM 5.   OTHER INFORMATION................................................30

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.................................30

          SIGNATURES.......................................................31


                                       2

<PAGE>



                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

                               INFONOW CORPORATION
                                  BALANCE SHEET
                    (In Thousands, Except Share Information)
                                   (Unaudited)

                                                                       JUNE 30,
                                                                         2004
                                        ASSETS                         --------
                                        ------
CURRENT ASSETS:
    Cash and cash equivalents                                          $  4,216
    Accounts receivable:
          Billed, net of allowance of $15                                 1,215
          Unbilled                                                          123
    Prepaid expenses and other current assets                               548
                                                                       --------
         Total current assets                                             6,102
                                                                       --------

PROPERTY AND EQUIPMENT, net                                                 525

OTHER ASSETS AND DEFERRED CHARGES                                            27
                                                                       --------

TOTAL ASSETS                                                           $  6,654
                                                                       ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
    Capital leases - current portion                                   $     72
    Accounts payable                                                        340
    Payroll related liabilities                                             379
    Other liabilities                                                        97
    Short-term deferred revenues                                          1,059
                                                                       --------
         Total current liabilities                                        1,947

    Capital leases, net of current portion                                   19
    Long-term deferred revenues                                              17
    Deferred rent                                                           181

COMMITMENTS AND CONTINGENCIES (Note 2)

STOCKHOLDERS' EQUITY:
    Preferred stock, $.001 par value; 1,712,335 shares authorized
      Series A Convertible, 213,483 shares
         authorized, none issued andoutstanding                            --
      Series B Convertible Participating Preferred Stock,
         550,000 shares authorized,  none issued and outstanding           --
    Common stock, $.001 par value; 15,000,000 shares
         authorized; 9,959,370 issued and outstanding                        10
    Additional paid-in capital                                           40,050
    Accumulated deficit                                                 (35,570)
                                                                       --------
         Total stockholders' equity                                       4,490
                                                                       --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $  6,654
                                                                       ========

                See notes to the unaudited financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>


                                                 INFONOW CORPORATION
                                               STATEMENTS OF OPERATIONS
                                     (In Thousands, Except Per Share Information)
                                                      (Unaudited)



                                               Three Months Ended June 30,         Six Months Ended June 30,
                                               ---------------------------         -------------------------

                                                 2004              2003              2004              2003
                                                 ----              ----              ----              ----
<S>                                            <C>              <C>               <C>               <C>
REVENUES:
    Service and other fees                     $  2,422          $  2,528          $  4,735          $  4,897
    Implementation fees                             379               394               947             1,585
    Software license fees                            21                 3               139                78
                                               --------          --------          --------          --------
        Total revenues                            2,822             2,925             5,821             6,560
                                               --------          --------          --------          --------

COST OF REVENUES                                  1,368             1,469             2,683             3,054
                                               --------          --------          --------          --------

GROSS MARGIN                                      1,454             1,456             3,138             3,506

OPERATING EXPENSES:

    Selling and marketing                           538               652             1,125             1,292
    Product development                             186               336               444               695
    General and administrative                      636               717             1,363             1,485
                                               --------          --------          --------          --------
        Total operating expenses                  1,360             1,705             2,932             3,472
                                               --------          --------          --------          --------

INCOME (LOSS) FROM OPERATIONS                        94              (249)              206                34

OTHER INCOME (EXPENSE):
    Interest income                                   6                 6                11                12
    Interest expense                                 (2)               (5)               (5)              (10)
                                               --------          --------          --------          --------
        Total other income                            4                 1                 6                 2
                                               --------          --------          --------          --------

NET INCOME (LOSS)                              $     98          $   (248)         $    212          $     36
                                               ========          ========          ========          ========

NET INCOME (LOSS) PER COMMON SHARE:
    Basic                                      $    .01          $   (.03)         $    .02          $   --
    Fully diluted                              $    .01          $   (.03)         $    .02          $   --
                                               ========          ========          ========          ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
    Basic                                         9,914             9,318             9,866             9,318
    Fully diluted                                10,975             9,318            11,209             9,499
                                               ========          ========          ========          ========

                                    See notes to the unaudited financial statements.

                                                         4


<PAGE>



                                           INFONOW CORPORATION
                                         STATEMENTS OF CASH FLOWS
                                             (in Thousands)
                                              (Unaudited)

                                                                          SIX MONTHS ENDED JUNE 30,
                                                                          2004                 2003
                                                                         -------              -------
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                           $   212              $    36
    Adjustments to reconcile net income to net cash provided by
         operating activities:
         Depreciation and amortization                                       219                  344
         Allowance for bad debt                                               12                  (11)
         Stock based compensation                                           --                     12
         Changes in operating assets and liabilities:
             Accounts receivable                                             169                  892
             Other current assets                                             64                   25
             Other assets and deferred charges                                 1                   42
             Accounts payable                                                149                  (23)
             Payroll related and other liabilities                           (55)                 148
             Deferred revenue                                               (110)              (1,080)
                                                                         -------              -------
         Net cash provided by operating activities                           661                  385

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of property and equipment                                      (157)                (150)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from exercise of stock options                                  447                 --
    Principal payments on debt obligations                                   (34)                 (46)
                                                                         -------              -------
         Net cash provided by (used in) financing activities                 413                  (46)

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    917                  189

CASH AND CASH EQUIVALENTS, beginning of period                             3,299                2,490
                                                                         -------              -------

CASH AND CASH EQUIVALENTS, end of period                                 $ 4,216              $ 2,679
                                                                         =======              =======

SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest                                               $     5              $     8
                                                                         =======              =======

NON CASH INVESTING AND FINANCING ACTIVITIES:
    Non-cash purchases of property and equipment                         $     6              $  --
                                                                         =======              =======

                             See notes to the unaudited financial statements.

                                                   5

</TABLE>
<PAGE>


                               INFONOW CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
     -----------------------------------------------------------

     Organization and Business Activity - Unless otherwise indicated, all
     references in this Form 10-QSB to "InfoNow," the "Company," "we," or "our"
     refer to InfoNow Corporation. The Company was incorporated under the laws
     of the State of Delaware on October 29, 1990. The Company provides Channel
     Insight and Channel Management solutions, in the form of software and
     services, to companies that sell their products through complex networks of
     distributors, dealers, resellers, retailers, agents or branches (i.e.,
     "channel partners"). Companies use InfoNow's software and services to
     collaborate with their channel partners to create demand, increase
     revenues, lower operating costs, calculate sales commissions, and maximize
     the return on investment of their channel strategies.

     The accompanying interim condensed financial statements are unaudited but,
     in the opinion of management, reflect all adjustments (consisting of those
     of a normal recurring nature) necessary in order to make the financial
     statements not misleading. The results of operations for any interim period
     are not necessarily indicative of results for the full year. These
     condensed financial statements should be read in conjunction with the
     financial statements and notes thereto contained in the Company's previous
     filings with the U.S. Securities and Exchange Commission.

     Use of Estimates - The preparation of financial statements in conformity
     with accounting principles generally accepted in the United States of
     America requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates and the differences could
     be material. Significant estimates include the estimate of a customer life,
     over which deferred revenue and implementation expenses are recognized, the
     percentage of completion on customer contracts, and the allowance for
     doubtful accounts.

     Cash and Cash Equivalents - The Company considers all highly liquid
     investments with original maturity dates of three months or less to be cash
     equivalents. The Company's excess cash is maintained in a money market
     fund.

     Property and Equipment - Property and equipment are stated at cost.
     Replacements, renewals and improvements are capitalized and costs for
     repairs and maintenance are expensed as incurred. Depreciation is computed
     using the straight-line method over estimated useful lives of three to five
     years.

     Revenue Recognition - The Company offers its software and services to
     clients in two forms. The first (and historical) method utilizes an
     application service provider, or ASP, model. Under this business model the

                                       6

<PAGE>


     Company sells the right to use its software for the term of a specific
     agreement, and it implements and hosts that solution to meet specific
     client requirements. Accordingly, the Company charges the client an
     implementation fee, a managed service fee and, in many cases, variable
     monthly fees. The implementation fee and related direct costs are deferred
     and recognized ratably over the longer of the expected customer life or
     contract term. Managed service fees and variable monthly fees are
     recognized as services are performed.

     The second method of delivering our software and services is via a
     license-hosted model. Under this model, the Company sells its clients a
     perpetual license for its software. The client can install the software on
     their own in-house systems, or, as is most often the case, the Company will
     host the software and perform related services under a managed services
     agreement.

     Sales of solutions under the license-hosted model typically include a
     software license fee, an implementation fee, a software maintenance fee, a
     managed service fee and, in many cases, variable monthly fees. The Company
     establishes vendor specific objective evidence, or "VSOE," of fair value
     for the software maintenance fee and managed service fee elements of a
     contract based on the following two considerations: 1) they are sold
     independently of the other elements in a contract, and independently of
     each other; and 2) these services generally are, and have historically
     been, renewed in subsequent years (independent of the other elements) at
     the same fees charged when all elements are sold together. Therefore, the
     VSOE of fair value for each of such services can be properly determined by
     reference to the applicable customers' contractual fee rates relating to
     those services. The Company is not, however, currently able to establish
     VSOE of fair value for the software license and implementation fee elements
     of its contracts. Therefore, it uses the residual value method to recognize
     revenue in accordance with Statement of Position 97-2, Software Revenue
     Recognition ("SOP 97-2"). Using this method, revenue from the managed
     service and software maintenance elements of a contract is recognized
     ratably over the term of the managed service arrangement and the software
     maintenance arrangement, respectively. Since the Company is currently
     unable to establish VSOE of fair value for the software license fee and
     implementation fee components of a contract and the installation services
     are essential to the functionality of the software, the Company applies
     contract accounting to both the software license and implementation
     elements of the arrangement in accordance with Accounting Research Bulletin
     No. 45, Long-Term Construction-Type Contracts ("ARB 45") and Statement of
     Position 81-1, Accounting for Performance of Construction-Type and Certain
     Production-Type Contracts ("SOP 81-1"). Accordingly, license and
     implementation revenues are recognized on a percentage of completion basis.
     As changes occur in the estimate of completion percentage, revenue
     recognition is adjusted accordingly. The estimate of completion percentage
     is based on the ratio of the actual effort spent on a project as of the
     financial statement date to the estimate of total effort to complete the
     implementation. Losses are recognized immediately if projected direct costs
     exceed anticipated revenues. Revenue from variable monthly fees is
     recognized as services are performed.

     The Company has historically sold its solutions primarily through direct
     sales efforts; however, when the Company sells solutions through a reseller
     channel it recognizes revenue consistent with the methods described above.

     Income Taxes - The Company accounts for its income tax assets and
     liabilities in accordance with SFAS No. 109, Accounting for Income Taxes
     ("SFAS No. 109"). SFAS No. 109 requires recognition of deferred tax assets

                                       7

<PAGE>


     and liabilities for the expected future income tax consequences of
     transactions. Under this method, deferred tax assets and liabilities are
     determined based on the difference between the financial statement and tax
     basis of assets and liabilities using enacted tax rates in effect for the
     year in which the differences are expected to reverse. Net deferred tax
     assets are then reduced by a valuation allowance for amounts that do not
     satisfy the realization criteria of SFAS No. 109. As a result of the
     valuation allowance, the Company had no net deferred tax assets at June 30,
     2004.

     Stock Compensation Expense - The Company records its stock compensation
     expense in accordance with SFAS No. 123, Accounting for Stock-Based
     Compensation ("SFAS No. 123"). SFAS No. 123 specifies a fair value based
     method to measure compensation cost of issued stock options and similar
     instruments issued using a Black-Scholes model or other comparable method.
     However, the Company has elected an option under SFAS No. 123 that allows a
     company to continue to recognize compensation cost for employees and
     directors in accordance with the guidance in Accounting Principles Board
     No. 25 and disclose the pro forma results of operations as if SFAS No. 123
     had been applied to the financial statements. Transactions in which the
     Company issues stock options or other equity instruments to acquire goods
     or services from non-employees are accounted for in accordance with SFAS
     No. 123. The Company accounts for stock compensation for employees via the
     intrinsic value method and for non-employees via the fair value method. The
     intrinsic value method results in no compensation expense for new stock
     option grants because the market value and strike price of the stock option
     grant are the same on the grant date. Had compensation cost for the
     Company's plans been determined consistent with SFAS No. 123, the Company's
     net loss and loss per share would have been increased to the pro forma
     amounts indicated below:

                                                     Three Months Ended June 30,
                                                             2004        2003
                                                             ----        ----
                                                         (In thousands, except
                                                            per share amounts)
     Net Income (Loss)
        As reported                                        $    98      $  (248)
        Add: Stock-based employee compensation
          expense included in reported net
          income, net of tax effect                           --             12
        Deduct: Total stock-based employee
          compensation expense determined under
          fair value based method for all
          awards, net of tax effect                           (848)        (268)
                                                           -------      -------
        Pro forma                                          $  (750)     $  (504)
                                                           =======      =======

     Earnings per share:
          Basic and diluted-as reported                    $   .01      $  (.03)
          Basic and diluted-pro forma                      $  (.08)     $  (.05)

                                       8

<PAGE>


                                                       Six Months Ended June 30,
                                                             2004        2003
                                                             ----        ----
                                                           (In thousands, except
                                                            per share amounts)
     Net Income
         As reported                                       $   212      $    36
         Add: Stock-based employee compensation
           expense included in reported net
           income, net of tax effect                          --             12
         Deduct: Total stock-based employee
           compensation expense determined under
           fair value based method for all
           awards, net of tax effect                        (1,190)        (709)
                                                           -------      -------
         Pro forma                                         $  (978)     $  (661)
                                                           =======      =======

      Earnings per share:
           Basic and diluted-as reported                   $   .02      $  --
           Basic and diluted-pro forma                     $  (.10)     $  (.07)


     During the six months ended June 30, 2004, the Company received $447,000 of
     proceeds from the exercise of 318,871 options by employees and former
     employees pursuant to the terms of the original options. During the six
     months ended June 30, 2003, the Company received $169 of proceeds from the
     exercise of 222 options by former employees pursuant to the terms of the
     original options.

     Net Income Per Common Share - Earnings per share is presented in accordance
     with the provisions of SFAS No. 128, Earnings Per Share. Basic earnings per
     share ("EPS") is calculated by dividing the income or loss available to
     common stockholders by the weighted average number of common shares
     outstanding for the period. Diluted EPS reflects the potential dilution
     that could occur if securities or other contracts to issue common stock
     were exercised or converted into common stock. Stock options, warrants
     outstanding and their equivalents are included in diluted earnings per
     share computations through the "treasury stock method" unless they are
     antidilutive.





                                       9
<PAGE>


     The components of basic and diluted earnings per share were as follows:

                                                     Three Months Ended June 30,

                                                         2004         2003
                                                         ----         ----
                                                       (In thousands, except
                                                        per share amounts)

     Net income (loss) available for common
        shareholders (A)                               $    98      $  (248)
                                                       =======      =======
     Weighted average common shares
        outstanding (B)                                  9,914        9,318
     Dilutive effect of employee stock
         based compensation                              1,061         --
                                                       -------      -------
     Common stock and common stock
         equivalents (C)                                10,975        9,318
                                                       =======      =======

     Earnings per share:
     Basic (A/B)                                       $   .01      $  (.03)
     Diluted (A/C)                                     $   .01      $  (.03)



                                                       Six Months Ended June 30,

                                                         2004        2003
                                                         ----        ----
                                                        (In thousands, except
                                                         per share amounts)
     Net income available for common
        shareholders (A)                               $   212      $    36
                                                       =======      =======
     Weighted average common shares
        outstanding (B)                                  9,866        9,318
     Dilutive effect of employee stock
        based compensation                               1,343          181
                                                       -------      -------
     Common stock and common stock
        equivalents (C)                                 11,209        9,499
                                                       =======      =======

     Earnings per share:
     Basic (A/B)                                       $   .02      $  --
     Diluted (A/C)                                     $   .02      $  --


     For the three months ended June 30, 2004 and 2003, options to purchase
     2,260,000 and 3,552,000 shares, respectively, of common stock were
     outstanding, but were not included in the computation of diluted EPS
     because the options' exercise price was greater than the average market
     price of the common shares. For the six months ended June 30, 2004 and
     2003, options to purchase 1,668,000 and 3,552,000 shares, respectively, of
     common stock were outstanding, but were not included in the computation of
     diluted EPS because the options' exercise price was greater than the
     average market price of the common shares.

     Reclassifications - The Company's Statement of Cash Flows contains
     categories for changes in Accounts Payable and Payroll Related and Other
     Liabilities. In the Company's quarterly report filed on Form 10-QSB for the

                                       10

<PAGE>


     six months ended June 30, 2003, the change in Accounts Payable included the
     change in Deferred Rent. In the Company's quarterly report filed on Form
     10-QSB for the six months ended June 30, 2004, the change in Deferred Rent
     has been included in the change in Payroll Related and Other Liabilities.
     As a result, the change in Deferred Rent in the prior year financial
     statements presented in this Form 10-QSB for the six months ended June 30,
     2004 has been reclassified to the change in Payroll Related and Other
     Liabilities in order to conform to the current year classification.

     Concentrations of Credit Risk - Financial instruments which potentially
     subject the Company to concentrations of credit risk are cash equivalents
     and accounts receivable. The Company attempts to limit its credit risk
     associated with cash equivalents by placing the Company's financial
     instruments with a major institution. A portion of the Company's cash and
     cash equivalents balance at June 30, 2004 was in excess of federally
     insured limits. The Company's customers are primarily large multi-national
     entities located throughout the U.S. The Company grants credit, generally
     without collateral, to these customers under specific contractual terms.
     The Company has not experienced any material losses related to its accounts
     receivable to date.

     During the three and six months ended June 30, 2004, the Company earned
     $1,470,000, or 52%, and $2,989,000, or 51%, of its revenue from one global
     organization. During the three and six months ended June 30, 2004, this
     revenue consisted of $1,122,000 and $2,234,000, respectively, from Channel
     Insight solutions and $348,000 and $755,000, respectively, from Channel
     Management solutions. No other organization accounted for more than 10% of
     the Company's revenue during the three or six months ended June 30, 2004.
     As of June 30, 2004, that same organization accounted for approximately
     34%, or $418,000, of the Company's net accounts receivable balance. The
     loss of this client, reduction in revenues from this client, or its
     inability or failure to pay would have a material adverse impact on the
     Company's financial condition and results of operations. Two other clients
     accounted for more than 10% of the Company's net accounts receivable
     balance, one of which represented $318,000, or 26%, of net accounts
     receivable, and the other of which represented $189,000, or 16%, of net
     accounts receivable. No other customers accounted for more than 10% of the
     Company's accounts receivable balance at June 30, 2004.

     During the three and six months ended June 30, 2003, the Company earned
     $1,564,000, or 53%, and $3,122,000, or 48%, respectively, of its revenue
     from one global organization. No other organization accounted for more than
     10% of the Company's revenue during the three and six months ended June 30,
     2003.

     The $10,133,000 contract the Company entered into with its largest customer
     in 2001 and certain of the expanded managed services arrangements
     associated with that contract, which collectively represent $313,000 of the
     Company's monthly contracted managed service fees, expire on October 31,
     2004. One other managed services agreement related to that contract, which
     represents $58,000 of the Company's monthly contracted managed service
     fees, expires on October 31, 2005. Together these agreements comprise
     $371,000, or 82%, of the Company's $453,000 of total monthly service fees
     from this customer. These agreements represent a substantial portion of the
     Company's revenues, net income and cash flow. The Company believes that
     this customer is evaluating alternative solutions to the ones it provides
     under these agreements. While the Company is seeking to renew or modify and
     extend these agreements and enter into new agreements with this client,

                                       11

<PAGE>


     there can be no assurances that it will be able to do so. If the Company is
     unable to renew or extend these arrangements or enter into new arrangements
     under terms acceptable to it, or replace the revenue attributable to this
     business through increased sales to other new or existing customers, the
     Company's financial condition and results of operations would be materially
     adversely affected.

     Segment Information - The Company operates in a single reportable segment
     and all revenues from customers are primarily from the sale of the
     Company's Channel Insight and Channel Management software and services. The
     Company provides its solutions and services domestically to clients that,
     in some cases, have an international presence. All solutions and services
     are delivered from the Company's Denver, Colorado, office and two data
     centers located in Denver and Thornton, Colorado.

     Recent Accounting Pronouncements - In January 2003, the Financial
     Accounting Standards Board issued Interpretation No. 46 ("FIN 46"),
     Consolidation of Variable Interest Entities, an Interpretation of ARB No.
     51, and in December 2003 issued FIN 46R. FIN 46 requires certain variable
     interest entities to be consolidated by the primary beneficiary of the
     entity if the equity investors in the entity do not have the
     characteristics of a controlling financial interest or do not have
     sufficient equity at risk for the entity to finance its activities without
     additional subordinated financial support from other parties. FIN 46 is
     effective immediately for all new variable interest entities created or
     acquired after January 31, 2003. FIN 46R requires the adoption of either
     FIN 46 or FIN 46R in financial statements of public entities that have
     interests in structures that are commonly referred to as special purpose
     entities for periods ending after December 15, 2003. Application for all
     other types of variable interest entities is required in financial
     statements for periods ending after March 15, 2004. The adoption of FIN 46
     had no impact on the Company's financial position or results of operation.

     In August 2003, the EITF reached a consensus on Issue No. 03-05, Software
     Revenue Recognition, Applicability of AICPA Statement of Position 97-2,
     Software Revenue Recognition, to Non-Software Deliverables. This issue
     focuses solely on whether non-software deliverables included in
     arrangements that contain more-than-incidental software should be accounted
     for in accordance with SOP 97-2. The Task Force confirmed that in an
     arrangement that contains software that is more-than-incidental to the
     products or services as a whole, only the software and software-related
     elements are included within the scope of SOP 97-2. Software-related
     elements include software-related products and services such as those
     listed in paragraph 9 of SOP 97-2, as well as other deliverables for which
     the software is essential to their functionality. EITF Issue No. 03-05 is
     effective for revenue arrangements entered into in fiscal periods beginning
     after August 13, 2003. The adoption of EITF Issue No. 03-05 did not have an
     impact on the Company's financial position or results of operation.


2.   COMMITMENTS AND CONTINGENCIES
     -----------------------------
     From time to time the Company may be involved in litigation that arises in
     the normal course of business operations. As of the date of this report,
     the Company is not a party to any litigation that it believes could
     reasonably be expected to have a material adverse effect on its business or
     results of operations.

                                       12

<PAGE>


     In July 2004 the Company received correspondence from a terminated
     employee's legal counsel regarding the circumstances involved with the
     termination of employment. While the Company believes the assertions in the
     correspondence are without merit and no formal claim or litigation has been
     brought against the Company as of the date of this report, any litigation
     that might arise in connection with this matter could involve significant
     costs of defense, risks and uncertainties. Similarly, if the Company were
     to reach a settlement arrangement with this former employee the cost could
     be significant.

     The Company has contracts with certain of its customers that contain
     indemnification clauses, which could require the Company to make payments
     to the customer if it is determined that the solution provided under the
     contract infringes any proprietary right of a third party, and such
     infringement cannot be resolved by the Company. There is no liability
     reflected in the accompanying balance sheet for these contingencies.


Item 2.  Management's Discussion and Analysis or Plan of Operation.


The following discussion and analysis of the financial condition and results of
operations for InfoNow should be read in conjunction with our unaudited
financial statements and related notes appearing elsewhere in this report. This
discussion contains statements that are not historical fact. These
forward-looking statements are based on our current expectations, assumptions,
estimates and projections about our industry and business and include statements
about markets for our software and services, planned development of products and
anticipated expense and revenue levels. These forward-looking statements contain
words such as "anticipate", "believe", "plan", "expect," "intends," "predicts,"
or similar language. These forward-looking statements are made subject to the
Private Securities Litigation Reform Act of 1995 and are subject to business and
economic risks. Our actual results could differ materially from those
anticipated in such forward-looking statements as a result of many factors,
including those set forth in this discussion and in other documents we have
filed with the Securities and Exchange Commission.

General Information and Overview

InfoNow provides Channel Insight and Channel Management solutions, in the form
of software and services, to companies that sell their products through complex
networks of distributors, dealers, resellers, retailers, agents or branches
(i.e., "channel partners"). Companies use our software and services to
collaborate with their channel partners to create demand, increase revenues,
lower operating costs and maximize the return on investment of their channel
strategies. Our clients are generally companies with extensive channel partner
networks, and include companies such as Apple, Avaya, Bank of America,
Hewlett-Packard, Lexmark, Maytag, The Hartford, Visa, Vision Service Plan (VSP)
and Wachovia Corporation.

As of June 30, 2004, we had 42 managed services clients, which is consistent
with the number of clients we reported as of June 30, 2003. We have and may
continue to experience decreases in our client count for various reasons,
including client consolidation. However, the new clients we have added since
June 30, 2003, primarily through sales of our Channel Insight solution, have
offset any client losses. While our client count remained flat, our contracted
managed service fees, which include fees that are currently in a month-to-month
contract status, increased from $790,000 as of June 30, 2003, to $814,000 as of

                                       13

<PAGE>


June 30, 2004. This was primarily due to sales of our Channel Insight solution
through contracts that contained managed service fees in excess of those managed
service fees lost through client contract terminations and renewals at reduced
rates.

We have experienced extended sales cycles in recent years, which we believe were
caused primarily by the following factors: i) there has been a general decline
in IT spending in recent years and our past efforts to sell enterprise-level
solutions, which typically require a significant financial commitment on the
part of the customer, were inconsistent with this trend; ii) the market for
Channel Insight solutions is at an early stage of adoption; and iii) we are
susceptible to competitive threats such as clients or prospective clients
outsourcing certain IT functions to other countries in an effort to reduce
costs, as well as companies attempting to implement in-house solutions similar
to those that we provide.

In an effort to accelerate the sales cycle for Channel Insight we developed a
modular delivery model for this solution during the third quarter of 2003,
wherein a prospective customer can access distinct modules related to specific
business needs at lower introductory price points, and add other applications
incrementally. Additionally, we are working on building leveraged access to
customers through strategic partner relationships, and are jointly engaging in
early stage selling activities with one potential partner.

Our Channel Insight solution consists of a platform, a data collection solution
and six separate modules, as discussed on the Company's website at
www.infonow.com. As a result of implementing this tiered delivery model and
other ongoing sales efforts we signed a number of new Channel Insight agreements
in the first half of 2004 and experienced a significant increase in sales
relative to the first half of 2003. However, during the three months ended June
30, 2004, our sales levels declined relative to the three months ended June 30,
2003.

Personnel-related costs (1) comprised approximately 79% and 78% of our total
costs in the second quarter of 2004 and 2003, respectively. Because salaries and
related costs are a significant portion of our overall costs, variation in the
need for technical personnel based on the demand for our solutions, as well as
fluctuations in the cost of attracting and retaining qualified technical
personnel, can significantly impact our operating results.

During the third quarter of 2003, we took steps to reduce our costs, which
resulted in a 14-person reduction in regular full-time personnel. The reduction
in full-time personnel consisted of an 11-person reduction in staff related to
software implementation, system operations and client support, a 2-person
reduction in our marketing staff and a 1-person reduction in product development
personnel. The impact of these cost reductions on our operating results is
discussed more fully in "Results of Operations."

During the third and fourth quarters of this year we expect to add headcount in
the areas of services and development to more aggressively position for growth.
We want to ensure that we have the necessary resources to implement new and
expand existing clients, support strategic partnerships as they develop, as well
as position the company to become a leader in our industry.

--------------------
(1)  Personnel-related costs:  Includes salaries, vacation, fringe benefits,
     payroll taxes and personnel support costs such as office supplies for
     employees.


                                       14

<PAGE>


We expect that these actions will increase our costs more quickly than our
revenues in the near-term.

Critical Accounting Policies

We believe the following accounting policies, which are important to our
financial position and results of operations, require significant judgments and
estimates on the part of management. We believe that the following description
represents our critical accounting policies and estimates used in the
preparation of our financial statements.

Revenue Recognition

Our solutions are generally sold with annual or multi-year contracts. The
initial term of these agreements is typically one to three years and they are
generally renewable upon mutual agreement between InfoNow and the client.

A typical contract fee could include the following six separate
revenue-producing components:

Software license and implementation fees:

     -    The software license fee applies to all configured application
          software and related functionality used in the client's application.
     -    The implementation fee applies to the configuration of a tailored,
          client-specific software interface to the system and the design and
          configuration of client business rules and databases.

Monthly service fees and software maintenance fees:

     -    The managed service fee applies to hosting and provision of the
          service, any reconfiguration or maintenance on the software necessary
          during the contract term, as well as performance of routine
          maintenance to client databases and core systems.
     -    The variable monthly fee includes charges for system usage in excess
          of contracted thresholds. - A software maintenance fee (for customers
          utilizing a licensed model) includes updates to the client's software.
          Other fees:
     -    Variable fees included under this heading are pass-through charges for
          voice recordings, faxes, geocoding, and telecommunications charges,
          which are typically billed with an incremental administrative fee in
          addition to the direct charge we incur to provide these services.

We offer our solutions to clients in two forms. The first (and historical)
method utilizes an application service provider, or ASP, model. Under this
business model we sell the right to use our software for the term of a specific
agreement, and we implement and host that solution to meet specific client
requirements. Accordingly, we charge the client an implementation fee, a managed
service fee and, in many cases, variable monthly fees. The implementation fee
and related direct costs are deferred and recognized ratably over the longer of
the expected customer life or contract term in accordance with SAB 104. Because
most of our initial sales contracts range from one to three years in duration,
the customer life is typically the longer deferral period and is estimated to be
three years. This estimate is based on a number of factors, including customer

                                       15

<PAGE>


turnover, the rate of change for the technology underlying our solutions and the
expectation that our customers will continue to convert from the ASP model to
our license-hosted model, under which software, implementation fees and direct
costs are not deferred, but are recognized on a percentage of completion basis
in accordance with ARB No. 45 and SOP 81-1. We evaluate the estimate of a
customer life on an ongoing basis in consideration of these factors and the
estimate of three years has remained constant since the adoption of SAB 104. If,
based upon our evaluations, the estimate of a customer life were to increase,
deferred revenue balances would be recognized over a longer time period. A
reduction in the estimate of a customer life would, conversely, result in
accelerated recognition of deferred revenues relative to prior years. Because
our deferred revenues balances have declined as a result of our selling more
licensed solutions, this estimate has decreased in significance relative to
prior years. We expect to continue selling primarily licensed solutions,
therefore, we anticipate that the estimate of a customer life will continue to
decrease in significance in future periods. Revenue from managed service fees
and variable monthly fees is recognized as services are performed.

The second method of delivering our software and services is via a
license-hosted model. We began offering this model in 2001 and it has become our
predominant business model. Under this model, we sell our clients a perpetual
license for our software. They can install our software on their own in-house
systems, or, as is most often the case, we will host the software and perform
related services under a managed services agreement.

Sales of our solutions under the license-hosted model typically include a
software license fee, an implementation fee, a software maintenance fee, a
managed service fee and, in many cases, variable monthly fees. We establish
vendor specific objective evidence, or "VSOE," of fair value for the software
maintenance fee and managed service fee elements of a contract based on the
following two considerations: 1) they are sold independently of the other
elements in a contract, and independently of each other; and 2) these services
generally are, and have historically been, renewed in subsequent years
(independent of the other elements) at the same fees, or the current market
value of those fees, charged when all elements are sold together. Therefore, the
VSOE of fair value for each of such services can be properly determined by
reference to the applicable customers' contractual fee rates relating to those
services. We are not, however, currently able to establish VSOE of fair value
for the software license and implementation fee elements of our contracts.
Therefore, we use the residual value method to recognize revenue in accordance
with SOP 97-2. Using this method, revenue from the managed service and software
maintenance elements of a contract is recognized ratably over the term of the
managed service arrangement and the software maintenance arrangement,
respectively. Since we are currently unable to establish VSOE of fair value for
the software license fee and implementation fee components of a contract and our
installation services are essential to the functionality of the software, we
apply contract accounting to both the software and implementation elements of
the arrangement in accordance with ARB No. 45 and SOP 81-1. Accordingly, license
and implementation revenues are recognized on a percentage of completion basis.
In the future, if we are able to establish VSOE of fair value for the software
license and implementation elements of our solutions, license fees will
generally be recognized at the time of contract signing, assuming all revenue
recognition criteria are met, instead of on a percentage of completion basis. As
changes occur in our estimate of completion percentage, revenue recognition is
adjusted accordingly. Our estimate of completion percentage is based on the
ratio of the actual effort spent on a project as of the financial statement date
to the estimate of total effort to complete the implementation. Fluctuations in
the estimate of total effort to complete an implementation can significantly

                                       16

<PAGE>


impact revenue recognition on a project in a given period. The estimate of total
effort to complete an implementation involves significant judgment regarding the
time required to perform the tasks associated with a project, such as coding and
testing the solution. In many cases, our estimates are based on past experience;
however, because certain of our solutions are in an early stage of development
and in most cases involve client-specific configuration and/or customization, we
may not always have direct past experience to draw from, which could result in
increased volatility in the estimate of effort to complete an implementation. In
addition, implementing our solutions generally involves a high degree of
interaction with our clients; therefore, the level of client personnel's
technical understanding and changes in a client's requirements or expectations
can also affect the estimate of effort to implement a solution. However, we
believe our prior experience in developing and implementing complex solutions
provides an appropriate basis for developing our estimates. Revenue from
variable monthly fees is recognized as services are performed.

We have historically sold our solutions primarily through direct sales efforts
and reseller channels When we sell solutions through a reseller channel we
recognize revenue consistent with the methods described above.

The following table summarizes the distribution of our employees as of June 30,
2004 and June 30, 2003:

                                                June 30, 2004     June 30, 2003

Staff related to the Cost of Revenues                68                 86
Selling and Marketing                                10                 17
Product Development                                   6                 15
General and Administrative                           11                 12
                                                   ----               ----
   Total Employees                                   95                130

Included in the table above are 75 full-time employees, 18 temporary employees
and 2 part-time employees at June 30, 2004, and 106 full-time employees and 24
temporary employees at June 30, 2003.


The following table summarizes the Company's results of operations for the
periods indicated (amounts in thousands):
<TABLE>
<CAPTION>

                                        Three Months Ended June 30,
                                          2004               2003               Change               %Change
                                         -------            -------             ------               -------
REVENUES:

<S>                                      <C>                <C>                <C>                     <C>
Software license fees                    $    21            $     3            $    18                 600%
Implementation fees
                                             379                394                (15)                 (4%)
Monthly service fees & software
   maintenance fees                        2,403              2,509               (106)                 (4%)
Other fees                                    19                 19               --                  --
                                         -------            -------            -------
       Total revenues                      2,822              2,925               (103)                 (4%)

COST OF REVENUES                           1,368              1,469               (101)                 (7%)
                                         -------            -------            -------

GROSS MARGIN                               1,454              1,456                 (2)                 (0%)


                                                          17
<PAGE>



                                        Three Months Ended June 30,
                                          2004               2003               Change               %Change
                                         -------            -------             ------               -------

OPERATING EXPENSES:
Selling and marketing                        538                652               (114)                (17%)
Product development                          186                336               (150)                (45%)
General and administrative                   636                717                (81)                (11%)
                                         -------            -------            -------
       Total operating expenses            1,360              1,705               (345)                (20%)
                                         -------            -------            -------

INCOME (LOSS) FROM OPERATIONS                 94               (249)               343                 138%

OTHER INCOME (EXPENSE):
Interest income                                6                  6               --                  --
Interest expense                              (2)                (5)                 3                  60%
                                         -------            -------            -------
       Total other income (expense)            4                  1                  3                 300%
                                         -------            -------            -------

NET INCOME (LOSS)                        $    98            $  (248)           $   346                 140%
                                         =======            =======            =======
</TABLE>


Results of Operations

Comparison of the Three Months Ended June 30, 2004 with the Three Months Ended
June 30, 2003.

Revenues: Our revenues consist primarily of implementation fees, software
license fees and monthly service fees from new and existing customers. Total
revenues decreased by $103,000 or 4%, to $2,822,000 for the three months ended
June 30, 2004, from $2,925,000 for the three months ended June 30, 2003.

Monthly Service Fees and Software Maintenance Fees - Monthly service fees and
software maintenance fees were $2,403,000 during the second quarter of 2004, a
decrease of $106,000, or 4%, from $2,509,000 in the second quarter of 2003. The
decrease is primarily due to a $124,000 reduction in service fees as a result of
client contract terminations. In addition, we experienced a $106,000 reduction
in variable monthly fees related to one client whose system usage was lower in
the second quarter of 2004 than in the second quarter of 2003. These reductions
were partially offset by $124,000 of monthly service fee increases primarily
associated with new Channel Insight solutions that were sold in the fourth
quarter of 2003 and the first quarter of 2004. Monthly service fees and software
maintenance fees comprised 85% of total revenue during the three months ended
June 30, 2004, compared to 86% during the three months ended June 30, 2003.

Implementation Fees - Revenues generated from implementation fees during the
three months ended June 30, 2004 decreased by $15,000, or 4%, to $379,000 from
$394,000 during the three months ended June 30, 2003. The decrease in
implementation fees is primarily attributable to attaining lower levels of
completion percentage on existing Channel Insight projects in the second quarter
of 2004 compared to the second quarter of 2003. The reduction in completion
levels was driven mainly by client needs and requirements.

Software License Fees - Software license fees were $21,000 in the second quarter
of 2004, an increase of $18,000 from the $3,000 of license fees during the
second quarter of 2003. This increase in license fees is primarily attributable
to an increase in the sales of our Channel Insight solutions to new clients
during the first quarter of 2004. Since the implementation associated with these
solutions continued into the second quarter of 2004, a portion of the revenue

                                       18

<PAGE>


was recognized during that period in accordance with our revenue recognition
policy described above. Software license fees represented approximately 1% of
total revenue during the three months ended June 30, 2004, and less than 1% of
revenue during the three months ended June 30, 2003. We anticipate that more
contracts will be executed under license-hosted arrangements going forward.
Therefore, we expect that our software license fees will increase in the future.

Other Fees - Other fees were $19,000 during the second quarter of 2004, as well
as during the second quarter of 2003. The revenue we recognize from these fees
is driven primarily by the number of contracts with charges for voice
recordings, faxes, geocoding and telecommunications charges, as well as
interactive voice response transaction volume.

Through June 30, 2004, we have recognized total revenue of $9,232,000 on the
$10,133,000 Channel Insight contract we entered into with our largest customer
in the second quarter of 2001, consisting of $7,889,000 in managed service fees,
$1,072,000 in implementation fees and $271,000 in software license fees. The
unrecognized balance of $901,000 under this contract consists of managed service
fees that we expect to recognize over the period from July 1, 2004 through
October 31, 2004 as we perform services. In addition, as a result of expanding
the services we provide in conjunction with this client's Channel Insight
solution we expect to recognize in approximately equal monthly installments an
aggregate of an additional $581,000 of managed service fees during the period
from July 1, 2004 through October 31, 2004, and $696,000 during the period from
November 1, 2004 through October 31, 2005 as we perform services through the
respective terminations of these agreements. For a further discussion of
potential risk associated with this contract see "Related Business Risks and
Assumptions."

Cost of Revenues: Our cost of revenues includes technical personnel salaries and
related personnel costs, data royalties, depreciation for server equipment,
reimbursable expenses such as telecommunications and contract labor related to
specific projects, co-location facility fees and other direct costs related to
operating our data centers, as well as the recognition of previously deferred
implementation expenses. Cost of revenues was 48% of revenues in the second
quarter of 2004 and 50% during the second quarter of 2003. Total cost of
revenues decreased $101,000 to $1,368,000 during the three months ended June 30,
2004 from $1,469,000 during the three months ended June 30, 2003. This was
primarily due to an $89,000 reduction in personnel and personnel support costs
primarily as a result of the cost reduction measures taken during the third
quarter of 2003 and attrition in our technical staff. The decrease in personnel
costs is net of $93,000 of severance and benefit continuation expense associated
with the termination of our Executive Vice President, Development and Services
in the second quarter of 2004. Our data center costs have also decreased $52,000
mainly due to lower data royalty costs associated with the transition to a new
provider for certain of the data used in delivering our solutions. The
reductions in cost of sales associated with personnel costs and data center
expenses were partially offset by a $15,000 increase in bad debt expense due to
an increase in the estimate of our accounts receivable that we believe have a
high likelihood of being uncollectible. The remaining $25,000 increase in our
cost of sales was mainly because of an increase in contract labor costs largely
due to the attrition in our technical staff.

Operating Expenses:

Selling and Marketing Expenses - Selling and marketing expenses consist of
sales, pre-sales, marketing and business development personnel costs and related
expenses, travel and entertainment, sales commissions, and advertising and
promotion costs. These costs decreased to 19% of revenues during the three
months ended June 30, 2004 from 22% of revenues during the three months ended

                                       19

<PAGE>


June 30, 2003. The total amount of selling and marketing expenses decreased by
$114,000, or 17%, to $538,000 during the three months ended June 30, 2004 from
$652,000 during the three months ended June 30, 2003. The change is primarily
attributable to a $141,000 decrease in personnel and personnel support costs
partly as a result of attrition related to our sales and marketing staff and
partly due to the cost savings measures taken during the third quarter of 2003.
We also experienced an $11,000 decrease in trade show expenses. The decreases in
sales and marketing expenses associated with personnel costs and trade show
expenses were partially offset by a $31,000 increase in commissions, which was
partly due to incremental commissions for our Executive Vice President of Sales,
Marketing and Business Development and partly due to significant commission
expense recognition in the second quarter of 2004 associated with sales of our
Channel Insight solutions in the first quarter of 2004. Since commission expense
for our sales executives is generally recognized when revenue for the related
solution is recognized, a portion of the commission expense associated with
first quarter sales was recognized in the second quarter as implementation of
the solutions took place. In addition, contract labor costs increased $7,000
primarily as a result of costs associated with redesigning our website.

Product Development Expenses - Product development expenses consist of time
spent on development of our Channel Insight and Channel Management software that
is not specifically associated with a client contract. Product Development
expenses are primarily made up of salaries and related costs. For the three
months ended June 30, 2004, product development expenses decreased $150,000, or
45%, to $186,000 from $336,000 during the three months ended June 30, 2003. This
change was primarily due to a reduction in personnel and personnel support costs
partly as a result of allocating more of our existing resources to support
implementation efforts, as well as the cost reduction measures taken during the
third quarter of 2003.

General and Administrative Expenses - General and administrative expenses relate
to the personnel costs of our executive management, finance, investor relations,
human resources and other corporate functions, general expenses such as legal
and accounting fees, insurance and costs related to our facilities. These costs
decreased to 23% of revenues for the three months ended June 30, 2004, from 25%
of revenues for the three months ended June 30, 2003. The total amount of
general and administrative costs over the same period decreased $81,000, or 11%,
to $636,000 during the second quarter of 2004 from $717,000 during the second
quarter of 2003. The decrease was primarily attributable to a $62,000 reduction
in professional fees primarily due to recruiting fees incurred during the second
quarter of 2003 related to the hiring of our Executive Vice President of Sales,
Marketing and Business Development, as well as lower legal and accounting fees.
We also experienced a $38,000 reduction in our facilities costs, which was
mainly due to lower depreciation expense since many of our older assets are now
fully depreciated. We also wrote off certain office lease deposits in the second
quarter of 2003, which caused rent expense to be higher during that period than
in the second quarter of 2004. The decreases in general and administrative
expenses associated with professional fees and facilities costs were partially
offset by a $12,000 increase in personnel related costs mainly due to salary
increases for corporate personnel. In addition, Board of Directors expenses
increased $10,000 as a result of a new Board of Directors compensation plan that
was implemented beginning in 2004.

In the future, we expect that our head count levels, and related costs, in all
functional areas will change commensurate with our needs as we execute against
our business strategy.

                                       20

<PAGE>


Other Income/Expense: We had net other income of $4,000 during the three months
ended June 30, 2004, compared to net other income of $1,000 for the three months
ended June 30, 2003. The increase of $3,000 is primarily attributable to lower
interest expense due to a reduction in our capital lease obligations.

Net Income/Loss: Net income for the three months ended June 30, 2004 was $98,000
compared to net loss of $248,000 for the three months ended June 30, 2003, a
$346,000 improvement. This increase is primarily attributable to a $446,000, or
14%, reduction in total costs and a $3,000 increase in other income, which were
partially offset by a $103,000, or 4%, decrease in total revenues for the three
months ended June 30, 2004, compared to the three months ended June 30, 2003, as
discussed above in this Item 2.








The following table summarizes the Company's results of operations for the
periods indicated (amounts in thousands):
<TABLE>
<CAPTION>

                                           Six Months Ended June 30,

                                           2004                2003             Change                %Change
                                          -------            -------            ------                -------
REVENUES:
<S>                                       <C>                <C>                <C>                     <C>
Software license fees                     $   139            $    78            $    61                 78%
Implementation fees                           947              1,585               (638)               (40%)
Monthly service fees & software
   maintenance fees                         4,698              4,846               (148)                (3%)
Other fees                                     37                 51                (14)               (27%)
                                          -------            -------            -------
       Total revenues                       5,821              6,560               (739)               (11%)

COST OF REVENUES                            2,683              3,054               (371)               (12%)
                                          -------            -------            -------

GROSS MARGIN                                3,138              3,506               (368)               (10%)

OPERATING EXPENSES:
Selling and marketing                       1,125              1,292               (167)               (13%)
Product development                           444                695               (251)               (36%)
General and administrative                  1,363              1,485               (122)                (8%)
                                          -------            -------            -------
       Total operating expenses             2,932              3,472               (540)               (16%)
                                          -------            -------            -------

INCOME FROM OPERATIONS                        206                 34                172                506%

OTHER INCOME (EXPENSE):
Interest income                                11                 12                 (1)                (8%)
Interest expense                               (5)               (10)                 5                 50%
                                          -------            -------            -------             -------
       Total other income (expense)             6                  2                  4                200%
                                          -------            -------            -------             -------

NET INCOME                                $   212            $    36            $   176                489%
                                          =======            =======            =======             =======
</TABLE>



                                       21

<PAGE>


Results of Operations

Comparison of the Six Months Ended June 30, 2004 with the Six Months Ended June
30, 2003.

Revenues: Total revenues decreased by $739,000 or 11%, to $5,821,000 for the six
months ended June 30, 2004, from $6,560,000 for the six months ended June 30,
2003.

Monthly Service Fees and Software Maintenance Fees - Monthly service fees and
software maintenance fees were $4,698,000 during the six months ended June 30,
2004, a decrease of $148,000, or 3%, from $4,846,000 during the six months ended
June 30, 2003. The decrease is primarily due to a $282,000 reduction in service
fees as a result of client contract terminations. This reduction was partially
offset by a $93,000 increase in monthly service fees associated with new Channel
Insight solutions that were sold in the fourth quarter of 2003 and the first
quarter of 2004. The remaining $41,000 increase in service fees was generated
primarily by an increase in variable monthly fees for a Channel Management
client whose system usage increased in 2004. Monthly service fees and software
maintenance fees comprised 81% of total revenue during the six months ended June
30, 2004, compared to 74% during the six months ended June 30, 2003.

Implementation Fees - Revenues generated from implementation fees during the six
months ended June 30, 2004 decreased by $638,000, or 40%, to $947,000 from
$1,585,000 during the six months ended June 30, 2003. The decrease in
implementation fees is primarily attributable to a $753,000 decrease in the
recognition of previously deferred implementation fees from $783,000 during the
six months ended June 30, 2003 to $30,000 during the six months ended June 30,
2004. This change is mainly due to the recognition of $587,000 of implementation
fees for our largest client in the first quarter of 2003 that were deferred in
previous years under the ASP model. During the first quarter of 2003, this
client converted the term licenses related to its Referral/Locator and Lead
Generation and Management solutions to perpetual licenses, which required the
recognition of previously deferred implementation fees. In addition,
implementation fees in the first half of 2003 contained recognition of
previously deferred revenue associated with the adoption of SAB 104. Revenue
recognition associated with the adoption of SAB 104 was completed at the end of
2003, therefore, we experienced a reduction in the first half of 2004. The
decrease in implementation fee revenue associated with the recognition of
previously deferred revenue was partially offset by a $115,000 increase in
revenue recognition caused primarily by an increase in the sales of our Channel
Insight solution to new clients during the fourth quarter of 2003 and the first
quarter of 2004.

                                       22

<PAGE>


Software License Fees - Software license fees were $139,000 in the first half of
2004, an increase of $61,000 from the $78,000 of license fees during the first
half of 2003. This increase in license fees is primarily attributable to an
increase in the sales of our Channel Insight solutions to new clients during the
fourth quarter of 2003 and the first quarter of 2004. Software license fees
represented approximately 2% of total revenue during the six months ended June
30, 2004, compared to 1% of revenue during the six months ended June 30, 2003.

Other Fees - Other fees decreased by $14,000, or 27%, to $37,000 during the six
months ended June 30, 2004, from $51,000 during the six months ended June 30,
2003. The decrease in other revenues is attributable to a decrease in the number
of contracts with charges for voice recordings, faxes, geocoding and
telecommunications charges, as well as a reduction in interactive voice response
transaction volume and negotiated rate reductions in our telecommunications
charges.

Cost of Revenues: Cost of revenues was 46% of revenues in the first half of 2004
compared to 47% for the first half of 2003. Total cost of revenues decreased
$371,000 to $2,683,000 during the six months ended June 30, 2004 from $3,054,000
during the six months ended June 30, 2003. This was primarily due to a $243,000
reduction in personnel and personnel support costs primarily as a result of the
cost reduction measures taken during the third quarter of 2003, as well as
attrition in our technical staff. The decrease in personnel costs is net of
$93,000 of severance and benefit continuation expense associated with the
termination of our Executive Vice President, Development and Services in the
second quarter of 2004. Recognition of implementation expense on contracts that
were deferred in previous periods under ASP arrangements also decreased by
$78,000 mainly due to the recognition of implementation expense in the first
quarter of 2003 as a result of the conversion of our largest customer from the
ASP model to the license-hosted model. We also experienced a $62,000 reduction
in our data center costs mainly due to a decline in depreciation expense as many
of our older assets are now fully depreciated. In addition, data royalties
expense decreased primarily as a result of the transition to a new provider for
certain of the data used in delivering our solutions. The reductions in cost of
sales associated with personnel costs, deferred implementation expense
recognition and data center costs were partially offset by a $5,000 increase in
bad debt expense due to an increase in the estimate of our accounts receivable
that we believe have a high likelihood of being uncollectible. The remaining
$7,000 increase in cost of sales was primarily due to an increase in contract
labor costs largely as a result of the attrition in our technical staff.

Operating Expenses:
-------------------

Selling and Marketing Expenses - Selling and marketing expenses decreased to 19%
of revenues during the six months ended June 30, 2004 from 20% of revenues
during the six months ended June 30, 2003. The total amount of selling and
marketing expenses decreased by $167,000, or 13%, to $1,125,000 during the six
months ended June 30, 2004 from $1,292,000 during the six months ended June 30,
2003. The change is primarily attributable to a $268,000 decrease in personnel
and personnel support costs partly as a result of attrition related to our sales
and marketing staff and partly due to the cost savings measures taken during the
third quarter of 2003. We also experienced an $11,000 decrease in trade show
expenses and a $10,000 reduction in public relations and advertising and

                                       23

<PAGE>


promotion consulting costs. The decreases in our selling and marketing expenses
associated with personnel costs, consulting expenses and trade show expenses was
partially offset by a $119,000 increase in commission expense as a result of an
increase in the sales of our solutions, as well as incremental commissions for
our Executive Vice President of Sales, Marketing and Business Development. The
remaining $3,000 increase in our selling and marketing expenses was due to an
increase in travel and entertainment costs.

Product Development Expenses - For the six months ended June 30, 2004, product
development expenses decreased $251,000, or 36%, to $444,000 from $695,000 for
the six months ended June 30, 2003. This change was primarily due to a reduction
in personnel and personnel support costs as a result of allocating more of our
existing resources to support implementation efforts, as well as the cost
reduction measures taken during the third quarter of 2003.

General and Administrative Expenses - General and administrative expenses were
23% of revenues for the six months ended June 30, 2004 and 2003. The total
amount of general and administrative costs decreased $122,000, or 8%, to
$1,363,000 during the first half of 2004 from $1,485,000 during the first half
of 2003. The decrease was primarily attributable to a $70,000 reduction in our
facilities costs, which was mainly due to lower depreciation expense and
property taxes since many of our older assets are now fully depreciated. We also
wrote off certain office lease deposits in the second quarter of 2003, which
caused rent expense to be higher during the first half of 2003 than in the first
half of 2004. In addition, we experienced a $66,000 reduction in professional
fees primarily due to recruiting fees incurred during the first half of 2003
related to the hiring of our Executive Vice President of Sales, Marketing and
Business Development. Our insurance costs also decreased $5,000 due to a
reduction in the cost of our commercial insurance policy. The decreases in
general and administrative expenses associated with facilities costs,
professional fees and insurance costs were partially offset by a $19,000
increase in Board of Directors expenses as a result of a new Board of Directors
compensation plan that was implemented beginning in 2004.

Other Income/Expense: We had net other income of $6,000 during the six months
ended June 30, 2004, compared to net other income of $2,000 for the six months
ended June 30, 2003. The increase of $4,000 is primarily attributable to lower
interest expense due to a reduction in our capital lease obligations. The
reduction in interest expense was partially offset by lower interest income on
cash and cash equivalents resulting from lower interest rates during the first
half of 2004 relative to the first half of 2003.

Income Taxes: InfoNow has paid no income taxes since its inception and has not
recorded a benefit for income taxes due to valuation allowances provided against
net deferred tax assets, which consist primarily of operating loss
carryforwards.

Net Income/Loss: Net income for the six months ended June 30, 2004 was $212,000
compared to net income of $36,000 for the six months ended June 30, 2003, a
$176,000 increase. This increase is primarily attributable to a $911,000, or
14%, decrease in total costs and a $4,000 increase in other income, which were
partially offset by a $739,000, or 11%, decrease in total revenue for the six
months ended June 30, 2004, compared to the six months ended June 30, 2003, as
discussed above in this Item 2.

                                       24
<PAGE>


Liquidity and Capital Resources

InfoNow has financed its operations primarily through the placements of private
equity securities and, to a lesser extent, through borrowing and equipment
leasing arrangements. We have received a total of approximately $13,800,000 from
private offerings and have received an additional $3,556,000 from the exercise
of stock options and warrants since we began offering our Enterprise Channel
Management solutions in 1995. We also have a bank credit facility with both a
$1,000,000 revolving line of credit to support our future operating needs and a
$1,000,000 equipment facility to support our future investing needs. The bank
credit facility requires that we meet various covenants. We have failed to meet
certain of the financial covenants in the past; however, we have obtained
waivers for all instances of non-compliance. We are not permitted to draw on the
bank credit facility if we are out of compliance with any of the covenants. As
of the date of this report we are in compliance with all covenants and we have
no outstanding debt under this facility. The interest rate on the revolving line
of credit is the prime rate plus 1 percent, and the interest rate on the
equipment facility is the U.S. Treasury note yield to maturity for a term equal
to 36 months as quoted in the Wall Street Journal plus 587 basis points.

We had cash and cash equivalents of $4,216,000 at June 30, 2004, compared to
$2,679,000 at June 30, 2003. Our total cash flow for the six months ended June
30, 2004 was $917,000 compared to $189,000 for the six months ended June 30,
2003. The increase of $728,000 was due in part to a $459,000 increase in cash
provided by our financing activities primarily as a result of an increase in
stock option exercises in 2004. In addition, cash provided by operating
activities increased $276,000 mainly due to reductions to our cost structure in
the first half of 2004 compared to the first half of 2003. The increases in cash
flow associated with our financing and operating activities was partially offset
by a $7,000 increase in cash used in investing activities due to an increase in
purchases of property and equipment for our data centers and corporate office.
The changes in our total cash flow for the first half of 2004 compared to the
first half of 2003 are discussed below in more detail.

Net cash generated by operating activities during the six months ended June 30,
2004, was $661,000, compared to $385,000 during the six months ended June 30,
2003. The increase of $276,000 is generally due to lower overall costs. More
specifically, the increase in cash generated by operating activities is
attributable primarily to a $970,000 change in deferred revenue. This change was
driven primarily by the recognition of previously deferred implementation fees
in the first quarter of 2003 because our largest client obtained perpetual
licenses for its Referral/Locator and Lead Generation and Management solutions
during 2003, which required the recognition of the deferred implementation fees
associated with those solutions. In addition, recognition of previously deferred
revenue associated with the adoption of SAB 104 decreased in 2004. We also
experienced a $176,000 increase in net income mainly as a result of reductions
in our cost structure. Accounts payable also increased $172,000 primarily as a
result of increases in accruals for severance expense and data royalties in
2004. In addition, our bad debt expense increased $23,000 due to an increase in
the estimate of our accounts receivable that we believe have a high likelihood
of being uncollectible. The changes in operating cash flow associated with
deferred revenue, net income, accounts payable and bad debt expense were
partially offset by a $723,000 change in accounts receivable, which was driven
primarily by an increase in sales in the first half of 2004 compared to the
first half of 2003. Payroll related and other liabilities also decreased by
$203,000 mainly because of the reductions in our cost structure, and
depreciation and amortization declined by $125,000 since many of our data center

                                       25

<PAGE>


and corporate office assets have become fully depreciated without proportionate
asset purchases. We also experienced a $12,000 decrease associated with a stock
option compensation charge that occurred in the first half of 2003. The
remaining $2,000 decrease in cash flows was due to changes in other assets and
deferred charges.

Cash used in investing activities increased to $157,000 for the six months ended
June 30, 2004 compared to $150,000 for the six months ended June 30, 2003. The
change of $7,000 is due to an increase in purchases of computer hardware and
software for our data centers and corporate office. We have plans to increase
our capital expenditures throughout the remainder of 2004 primarily to upgrade
or replace existing data center hardware and software, as well as to add new
equipment to support anticipated growth in our customer base.

Net cash provided by financing activities during the first half of 2004 was
$413,000 compared to cash used in financing activities of $46,000 during the
first half of 2003. The increase of $459,000 was caused primarily by a $447,000
increase in cash received from stock option exercises, as well as a $12,000
decrease in principal payments on debt obligations due to the reduction in our
capital lease liabilities.

In order to meet our fiscal management needs we may, from time to time,
accelerate or defer payments on our trade payables and accrued liabilities, and,
in some cases, we may prepay certain of our future operating expenses. Variation
in the timing of our cash receipts and disbursements can significantly impact
our overall cash flow for a given period and there can be no assurance that our
current cash balance will be sufficient to fund operations.

If we believe it is advisable, we may seek additional funding to continue our
operations. Our ability to successfully complete an offering to obtain
additional funding is dependent on a number of factors. There can be no
assurances that we can successfully complete an equity or debt placement, or
that a placement can be concluded on the terms and conditions that would be
acceptable to us.





The following table summarizes the Company's contractual payments and
obligations by period (amounts in thousands):
<TABLE>
<CAPTION>

Contractual Obligations                                        Payment Due by Period
                                          Total         Less Than 1        1-3            4 - 5           After 5
                                                           year           years           years            years
<S>                                       <C>             <C>             <C>             <C>             <C>
Capital Lease Obligations                 $   97          $   78          $   19          $ --            $ --
Operating Leases                           1,461             353             986             122            --
Minimum Royalties                            147              12              24              24              87
Total Contractual Cash Obligation         $1,705          $  443          $1,029          $  146          $   87
</TABLE>


We lease approximately 27,000 square feet of office space at a rate of $17.00
per square foot through September 2005. The rate increases to $18.00 per square
foot from October 2005 through September 2007, when the lease expires. The lease
contains a refurbishment allowance of $326,000, of which the Company utilized
approximately $35,000 to improve the premises and $291,000 to offset a portion
of its rent obligations from September 2002 through May 2003. Rent expense, net
of the refurbishment allowance, is recognized on a straight-line basis over the
term of the lease. The difference between cash payments for rent and the
straight-line rent expense is recorded as deferred rent on the Company's balance
sheet.

                                       26

<PAGE>


Recent Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN 46"), and in
December 2003 issued FIN 46R. The adoption of this standard did not have an
impact on our financial position or results of operations.

In August 2003, the EITF reached a consensus on Issue No. 03-05, Software
Revenue Recognition, Applicability of AICPA Statement of Position 97-2, Software
Revenue Recognition, to Non-Software Deliverables. The adoption of EITF Issue
No. 03-05 did not have an impact on our financial position or results of
operation.

Related Business Risks and Assumptions

Our actual results may vary materially from the forward-looking statements made
above, which have been made pursuant to the Private Securities Litigation Reform
Act of 1995. We intend that such statements be subject to the safe harbor
provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934. Our forward-looking statements include the plans and objectives of
management for future operations and relate to a variety of factors, including
management's assumptions about our ability to:

     o    Gain market acceptance of our services;
     o    Retain existing customers, none of whom are obligated to renew, modify
          or extend their contractual relationships with the Company, and
          attract new customers;
     o    Accurately forecast and meet demands for our services, including our
          ability to maintain technical performance of the system as new clients
          are added;
     o    Continue to serve new and existing customers;
     o    Improve our operational and financial systems in order to address
          planned growth in our operations;
     o    Maintain pricing and adequate profit margins on our products and
          services;
     o    Retain and attract qualified technical personnel;
     o    Develop future enhancements to our services and control development
          costs of those enhancements;
     o    Operate our business in accordance with our operating budget;
     o    Obtain patent protection for our intellectual property;
     o    Respond to competitive threats, including the possibility of our
          customers migrating to lower cost solutions, such as offshore IT
          development and service functions; and
     o    Raise additional capital, if needed.

If we are unable to manage the risks enumerated above, or those discussed in our
Annual Report filed with the Securities and Exchange Commission on Form 10-KSB
for the year ended December 31, 2003, our financial condition and results of
operations could be materially adversely affected.

Our assumptions are based on judgments with respect to, among other things,
future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our ability to control.

                                       27

<PAGE>


We believe that the assumptions underlying our forward-looking statements are
reasonable. However, our assumptions may prove to be inaccurate and therefore
there can be no assurance that the results contemplated in forward-looking
statements will be realized. You should not regard any statements made in this
report on Form 10-QSB as a representation by InfoNow or any other person that we
will achieve our objectives.

In March 2004 the Financial Accounting Standards Board ("FASB") issued an
Exposure Draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and
95, which proposes a change in accounting for stock-based compensation to
replace existing guidance under SFAS No. 123 and APB No. 25 and require
companies to treat share-based compensation the same as other forms of
compensation by recognizing the related cost in the company's income statement.
We do not currently recognize an expense in our income statement for stock-based
compensation issued to our employees and directors. If we are required to do so
in the future, we believe it would have a material adverse impact on our results
of operations.

The $10,133,000 Channel Insight contract we entered into with our largest
customer in 2001 and certain of the expanded managed services arrangements
associated with that contract, which collectively represent $313,000 of our
monthly contracted managed service fees, expire on October 31, 2004. One other
managed services agreement related to that contract, which represents $58,000 of
our monthly contracted managed service fees, expires on October 31, 2005.
Together these agreements comprise $371,000, or 82%, of the Company's $453,000
of total monthly service fees from this customer. These agreements represent a
substantial portion of our revenues, net income and cash flow. We believe this
customer is evaluating alternative solutions to the ones we provide under these
agreements. While we are seeking to renew or modify and extend these agreements
and enter into new agreements with this client, there can be no assurances that
we will be able to do so. If we are unable to renew or extend these arrangements
or enter into new arrangements under terms acceptable to us, or replace the
revenue attributable to this business through increased sales to other new or
existing customers, our financial condition and results of operations would be
materially adversely affected.

In July 2004 we received correspondence from a terminated employee's legal
counsel regarding the circumstances involved with the termination of employment.
While we believe the assertions in the correspondence are without merit and no
formal claim or litigation has been brought against us as of the date of this
report, any litigation that might arise in connection with this matter could
involve significant costs of defense, risks and uncertainties. Similarly, if we
were to reach a settlement arrangement with this former employee the cost could
be significant.

For a more comprehensive discussion of the risk factors associated with our
business, please refer to the section entitled "Related Business Risks and
Assumptions:" beginning on page 29 of our Annual Report filed with the
Securities and Exchange Commission on Form 10-KSB for the fiscal year ended
December 31, 2003.


Item 3.    Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
to the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the

                                       28

<PAGE>


time periods specified by the SEC's rules and forms, and that information is
accumulated and communicated to our management, including our principal
executive and principal financial officers (whom we refer to in this periodic
report as our Certifying Officers), as appropriate to allow timely decisions
regarding required disclosure. Our management evaluated, with the participation
of our Certifying Officers, the effectiveness of our disclosure controls and
procedures as of June 30, 2004, pursuant to Rule 13a-15(b) under the Exchange
Act. Based upon that evaluation, our Certifying Officers concluded that, as of
June 30, 2004, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that
occurred during our fiscal quarter ended June 30, 2004 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


                           PART II. OTHER INFORMATION


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

     The Company held its annual meeting of stockholders on May 14, 2004. In
     connection with the annual meeting, pursuant to Regulation 14A under the
     Securities Act of 1934, we furnished our stockholders with a definitive
     proxy statement with respect to the matters acted upon. At the meeting,
     four directors were re-elected to their positions to serve until the next
     annual meeting of our stockholders or until their successors are
     elected and have qualified. The following votes were cast with respect to
     the election of directors:

                                                For                  Withheld

         Michael W. Johnson                  9,176,884                42,832
         Duane Wentworth                     9,177,601                42,115
         Jeffrey Peotter                     9,179,161                40,555
         Allan Spies                         9,178,701                41,015

     The Company also submitted one additional proposal for shareholder
     consideration, which was approved:

     Proposal #2:

     Ratification of the appointment of Deloitte & Touche, LLP as the
     independent auditors of the Company for the fiscal year ended December 31,
     2004.

            For           Against         Abstain            Broker Non-Votes

         9,199,716         17,451          2,549                  0

                                       29

<PAGE>


Item 5. Other Information

     On May 19, 2004, the Company entered into a an eighteen month, with renewal
     features, reseller agreement. Under terms of this agreement, InfoNow has
     exclusive North American distribution rights for a data collection
     solution. This solution is currently being sold under the InfoNow brand as
     Channel Insight POS Connect.



Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits

         Exhibit Number    Exhibit Description
         --------------    -------------------

               31          Rule 13a-14(a)/15d-14(a) certifications

               32          Section 1350 certifications



     (b) Reports on Form 8-K.

          On April 28, 2004, the Company furnished a Form 8-K to the SEC under
          item 12 (Results of Operations and Financial Condition).

                                       30
<PAGE>


                                   SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                   INFONOW CORPORATION



Date:  August 13, 2004              By: /s/ Michael W. Johnson
                                      -----------------------------------------
                                    Michael W. Johnson, Chief Executive Officer



Date                  Title                               Signature
----                  -----                               ---------



August 13, 2004       Chief Financial Officer and         /s/ Harold R. Herbst
                      Executive Vice President            ----------------------
                      (Principal Financial Officer)       Harold R. Herbst


August 13, 2004       Vice President, Controller and      /s/ James L. Medina
                      Treasurer                           ----------------------
                      (Principal Accounting Officer)      James L. Medina


                                       31