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 SEPTEMBER 30, 2005

/ /  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 [ ]

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

As of November 11, 2005, there were 10,055,398 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 - September 30, 2005..........................3

         Unaudited Statements of Operations - For the Three and Nine Months
           Ended September 30, 2005 and September 30, 2004.....................4

         Unaudited Statements of Cash Flows - For the Nine Months
           Ended September 30, 2005 and September 30, 2004.....................5

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


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............14

ITEM 3.  CONTROLS AND PROCEDURES..............................................33


                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS.............................................................34

         SIGNATURES...........................................................35





                                        2
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<TABLE>
<CAPTION>

                                  PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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

                                                                                      SEPTEMBER 30,
                                                                                          2005
                                                                                        --------
                                     ASSETS
                                     ------
<S>                                                                                     <C>
CURRENT ASSETS:
    Cash and cash equivalents                                                           $  3,373
    Accounts receivable:
          Billed, net of allowance of $10                                                    964
          Unbilled                                                                           110
    Prepaid expenses and other current assets                                                569
                                                                                        --------
         Total current assets                                                              5,016
                                                                                        --------

PROPERTY AND EQUIPMENT, net                                                                  320

OTHER ASSETS AND DEFERRED CHARGES                                                            190
                                                                                        --------

TOTAL ASSETS                                                                            $  5,526
                                                                                        ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
    Accounts payable                                                                    $    501
    Payroll related liabilities                                                              497
    Other liabilities                                                                         41
    Short-term deferred revenues                                                           1,759
                                                                                        --------
         Total current liabilities                                                         2,798

    Long-term deferred revenues                                                               88
    Deferred rent                                                                             83

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 and outstanding         --
       Series B Convertible Participating Preferred Stock, 550,000 shares authorized,
         none issued and outstanding                                                        --
    Common stock, $.001 par value; 40,000,000 shares authorized; 10,055,398 issued
         and outstanding                                                                      10
    Additional paid-in capital                                                            40,146
    Accumulated deficit                                                                  (37,599)
                                                                                        --------
         Total stockholders' equity                                                        2,557
                                                                                        --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                              $  5,526
                                                                                        ========


                        See notes to the unaudited financial statements.

                                               3
<PAGE>

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



                                               Three Months Ended      Nine Months Ended
                                                  September 30,           September 30,
                                              --------------------    --------------------
                                                2005        2004        2005        2004
                                              --------    --------    --------    --------
REVENUES:
    Service and other fees                    $  1,969    $  2,462    $  5,446    $  7,197
    Implementation fees                            352         190       1,290       1,137
    Software license fees                            1          (3)         28         136
                                              --------    --------    --------    --------
        Total revenues                           2,322       2,649       6,764       8,470
                                              --------    --------    --------    --------

COST OF REVENUES                                 1,448       1,545       4,444       4,228
                                              --------    --------    --------    --------

GROSS MARGIN                                       874       1,104       2,320       4,242

OPERATING EXPENSES:

    Selling and marketing                          238         487         873       1,612
    Product development                            129         216         504         660
    General and administrative                     527         763       2,125       2,126
                                              --------    --------    --------    --------
        Total operating expenses                   894       1,466       3,502       4,398
                                              --------    --------    --------    --------

LOSS FROM OPERATIONS                               (20)       (362)     (1,182)       (156)

OTHER INCOME (EXPENSE):
    Interest income                                 21           9          54          20
    Interest expense                              --            (2)         (3)         (7)
                                              --------    --------    --------    --------
        Total other income                          21           7          51          13
                                              --------    --------    --------    --------

NET INCOME (LOSS)                             $      1    $   (355)   $ (1,131)   $   (143)
                                              ========    ========    ========    ========

NET INCOME (LOSS) PER COMMON SHARE:
    Basic                                     $   --      $   (.04)   $   (.11)   $   (.01)
    Fully diluted                             $   --      $   (.04)   $   (.11)   $   (.01)
                                              ========    ========    ========    ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
    Basic                                       10,055       9,961      10,054       9,898
    Fully diluted                               10,071       9,961      10,054       9,898
                                              ========    ========    ========    ========


                     See notes to the unaudited financial statements.

                                            4
<PAGE>

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

                                                            NINE MONTHS ENDED SEPTEMBER 30,
                                                                   2005        2004
                                                                  -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                      $(1,131)   $  (143)
    Adjustments to reconcile net income to net cash provided by
         operating activities:
         Depreciation and amortization                                239        314
         Loss on asset disposition                                      1         13
         Allowance for bad debt                                       (25)        28
         Changes in operating assets and liabilities:
             Accounts receivable                                      377         25
             Other current assets                                     (91)       150
             Other assets and deferred charges                        (35)         1
             Accounts payable                                         151        338
             Payroll related and other liabilities                    (53)       (54)
             Deferred revenue                                         457       (200)
                                                                  -------    -------
         Net cash provided by (used in) operating activities         (110)       472

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of property and equipment                               (106)      (232)
    Capitalized software costs                                       (129)      --
                                                                  -------    -------
         Net cash used in investing activities                       (235)      (232)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from exercise of stock options                            10        456
    Principal payments on debt obligations                            (56)       (51)
                                                                  -------    -------
         Net cash provided by (used in) financing activities          (46)       405

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (391)       645

CASH AND CASH EQUIVALENTS, beginning of period                      3,764      3,299
                                                                  -------    -------

CASH AND CASH EQUIVALENTS, end of period                          $ 3,373    $ 3,944
                                                                  =======    =======

SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest                                        $     2    $     7
                                                                  =======    =======


                  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", "we", "our", or the "Company"
     refer to InfoNow Corporation. The Company was incorporated under the laws
     of the State of Delaware on October 29, 1990. The Company provides channel
     visibility 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 client life,
     over which deferred revenue and implementation expenses are recognized; the
     percentage of completion on client contracts; the percentage of hours that
     technical staff devote to activities related to the cost of revenues versus
     product development activities, which drives the allocation of related
     costs; 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.

                                       6
<PAGE>

     Capitalized Software Product Development Costs - Capitalized software
     product development costs consist of technical personnel salaries, overhead
     related to technical personnel, and the cost of the facilities they occupy.
     The Company allocates these costs to the software product based on the
     amount of time an employee devotes directly to the product development
     effort in relation to that employee's total time worked during a given
     period. In accordance with SFAS No. 86, Accounting for the Costs of
     Computer Software to be Sold, Leased or Otherwise Marketed, software
     development costs are required to be expensed until the point that
     technological feasibility of the product is established which the Company
     has determined to be when a working model is complete. Once technological
     feasibility is established, such costs are required to be capitalized until
     the product is available for general release to customers. The
     establishment of technological feasibility and continuing evaluation of the
     recoverability of the capitalized software development costs requires
     management's judgment with respect to the impact of external factors such
     as future revenue, estimated economic life and changes in software and
     hardware technologies. Periodic amortization of capitalized software
     development costs will be based on either (a) the ratio that current period
     revenues for the product bear to the total estimated revenue for that
     product or (b) the straight-line method over the estimated economic life of
     the product, whichever results in a larger amortization expense. The
     Company capitalized $129,000 of software development costs during the three
     and nine months ended September 30, 2005. No software development costs
     were capitalized for product development efforts that took place prior to
     2005 because the period between technological feasibility and general
     availability was short and costs qualifying for capitalization were
     insignificant. The Company has not begun amortizing capitalized software
     development costs because the related product is not yet available for
     general release to customers.

     Revenue Recognition - The Company offers its software and services to
     clients in two forms. The first method utilizes an application service
     provider, or ASP, model. Under this business model, the 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 client life or contract term.
     Managed service fees and variable monthly fees are recognized as services
     are performed.

     The second method of delivering 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 clients' contractual fee rates relating to those services.

                                       7
<PAGE>

     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
     implementation costs exceed anticipated implementation 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.
     Fees owed to the Company's selling partners in conjunction with reseller
     channel sales are included in the cost of revenues.

     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
     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
     September 30, 2005.

     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

                                       8
<PAGE>

     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 September 30,
                                                       2005        2004
                                                      -------    -------
                                                        (In thousands,
                                                   except per share amounts)
       Net Income (Loss)
          As reported                                  $    1    $  (355)
          Add: Stock-based employee compensation
            expense included in reported net
            income, net of tax effect of $0              --         --
          Deduct: Total stock-based employee
            compensation expense determined under
            fair value based method for all
            awards, net of tax effect of $0              (152)      (417)
                                                      -------    -------
          Pro forma                                   $  (151)   $  (772)
                                                      =======    =======

       Earnings (loss) per share:
            Basic and diluted-as reported             $  --      $  (.04)
            Basic and diluted-pro forma               $  (.01)   $  (.08)


                                                Nine Months Ended September 30,
                                                       2005        2004
                                                      -------    -------
                                                         (In thousands,
                                                   except per share amounts)
       Net Loss
          As reported                                 $(1,131)   $  (143)
          Add: Stock-based employee compensation
            expense included in reported net
            income, net of tax effect of $0              --         --
          Deduct: Total stock-based employee
            compensation expense determined under
            fair value based method for all
            awards, net of tax effect of $0              (478)    (1,607)
                                                      -------    -------
          Pro forma                                   $(1,609)   $(1,750)
                                                      =======    =======

       Earnings (loss) per share:
            Basic and diluted-as reported             $  (.11)   $  (.01)
            Basic and diluted-pro forma               $  (.16)   $  (.18)


                                       9
<PAGE>

     In December 2004, the FASB issued SFAS No. 123(R), Share Based Payment,
     that requires companies filing as small business issuers to expense the
     value of employee stock options and similar awards for interim and annual
     periods beginning after December 15, 2005 and applies to all outstanding
     and unvested stock-based awards at a company's adoption date. Accordingly,
     beginning in 2006, the expense related to all stock compensation will be
     included in the Company's results of operations.

     During the nine months ended September 30, 2005, the Company received
     $10,000 of proceeds from the exercise of 10,667 options by employees and
     former employees pursuant to the terms of the original options. During the
     nine months ended September 30, 2004, the Company received $456,000 of
     proceeds from the exercise of 329,260 options by employees and former
     employees.

     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, or 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.

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



                                                Three Months Ended September 30,
                                                        2005       2004
                                                       -------   -------
                                                        (In thousands,
                                                   except per share amounts)
       Net income (loss) available for common
          shareholders (A)                             $     1   $  (355)
                                                       -------   -------
       Weighted average common shares
          outstanding (B)                               10,055     9,961
       Dilutive effect of employee stock based
          compensation                                      16      --
                                                       -------   -------
       Common stock and common stock
          equivalents (C)                               10,071     9,961
                                                       =======   =======

       Earnings (loss) per share:
       Basic (A/B)                                     $  --     $  (.04)
       Diluted (A/C)                                   $  --     $  (.04)


                                       10
<PAGE>

                                                Nine Months Ended September 30,
                                                      2005        2004
                                                    --------    --------
                                                        (In thousands,
                                                  except per share amounts)
       Net income (loss) available for common
          shareholders (A)                          $ (1,131)   $   (143)
                                                    --------    --------
       Weighted average common shares
          outstanding (B)                             10,054       9,898
       Dilutive effect of employee stock based
          compensation                                  --          --
                                                    --------    --------
       Common stock and common stock
          equivalents (C)                             10,054       9,898
                                                    ========    ========

       Earnings (loss) per share:
       Basic (A/B)                                  $   (.11)   $   (.01)
       Diluted (A/C)                                $   (.11)   $   (.01)


     For the three months ended September 30, 2005 options to purchase 5,457,528
     shares 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 nine months
     ended September 30, 2005, options to purchase 5,814,529 shares of common
     stock were outstanding, but were not included in the computation of diluted
     EPS for the nine months ended September 30, 2005 because their effect would
     have been antidilutive. As of September 30, 2004, options to purchase
     5,684,865 shares of common stock were outstanding, but were not included in
     the computation of diluted EPS for the three and nine months ended
     September 30, 2004 because their effect would have been antidilutive.

     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 majority of the Company's cash and
     cash equivalents balance at September 30, 2005 was in excess of federally
     insured limits. The Company's clients are primarily large multi-national
     entities located throughout the U.S. The Company grants credit, generally
     without collateral, to these clients under specific contractual terms. The
     Company has not experienced any material losses related to its accounts
     receivable to date, however, there can be no assurance that it will not
     experience material losses in the future.

     During the three and nine months ended September 30, 2005, the Company
     earned $800,000, or 34%, and $2,528,000, or 37%, respectively, of its
     revenue from its largest client. During the three and nine months ended
     September 30, 2005, this revenue consisted of $483,000 and $1,663,000,
     respectively, from channel visibility solutions and $317,000 and $865,000,
     respectively, from channel management solutions. One other organization
     accounted for more than 10% of the Company's revenue during the three and
     nine months ended September 30, 2005. This client represented $253,000, or
     11%, and $764,000, or 11%, respectively, of the Company's total revenue
     during the three and nine months ended September 30, 2005.

                                       11
<PAGE>

     As of September 30, 2005, the Company's largest client accounted for
     approximately 28%, or $269,000, of the Company's net accounts receivable
     balance. The loss of this client, further significant 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 individually accounted for more than 10% of
     the Company's net accounts receivable at September 30, 2005. These clients
     represented $193,000, or 20%, and $103,000, or 11%, respectively, of the
     Company's net accounts receivable balance at September 30, 2005. No other
     clients accounted for more than 10% of the Company's accounts receivable
     balance at September 30, 2005.

     During the three and nine months ended September 30, 2004, the Company
     earned $1,429,000, or 54%, and $4,417,000, or 52%, of its revenue from its
     largest client. During the three and nine months ended September 30, 2004,
     this revenue consisted of $1,134,000 and $3,367,000, respectively, from
     Channel Insight solutions and $295,000 and $1,050,000, respectively, from
     Channel Management solutions. No other organization accounted for more than
     10% of the Company's revenue during the three or nine months ended
     September 30, 2004.

     As of September 30, 2005, approximately $148,000, or 25%, of the Company's
     total monthly contracted managed service fees of $600,000 was attributable
     to Channel Insight contracts with its largest client. These managed service
     fees expired on October 31, 2005 and, in November 2005, the client agreed
     to a contract extension through April 30, 2006 at a reduced monthly fee of
     $120,000. The contract extension includes an early termination provision
     under which the client, if it requests termination prior to April 30, 2006,
     would be required to pay the Company a fee of $15,000 per month for each
     month remaining in the contract term. The Company expects to work with this
     client to negotiate a longer-term extension to the contract associated with
     this solution. In addition, the Company continues to work with this client
     for purposes of selling new solutions; however, there can be no assurance
     that it will be successful in renewing, extending or expanding solutions
     for this client.

     Segment Information - The Company operates in a single reportable segment
     and all revenues from clients are primarily from the sale of the Company's
     channel visibility and channel management software and services. The
     Company sells 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 December 2004, the FASB issued SFAS
     No. 123(R), Share Based Payment, that requires companies filing as small
     business issuers to expense the value of employee stock options and similar
     awards for interim and annual periods beginning on or after December 15,
     2005 and applies to all outstanding and unvested stock-based awards at a
     company's adoption date. The Company believes that the adoption of this
     standard could have a material impact on its financial position and results
     of operations since the Company expects to continue to utilize stock-based
     compensation to motivate employees in the future, and, as a result, the
     Company expects that the implementation of SFAS No. 123(R) will result in
     increased compensation expense in future years.

                                       12
<PAGE>

     In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
     Assets, which eliminates the exception for nonmonetary exchanges of similar
     productive assets and replaces it with a general exception for exchanges of
     nonmonetary assets that do not have commercial substance. SFAS No. 153 will
     be effective for nonmonetary asset exchanges occurring in fiscal periods
     beginning after June 15, 2005. The Company does not believe the adoption of
     this standard will have a material impact on its financial position or
     results of operations.

     In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
     Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3.
     The Statement changes the requirements for the accounting for, and
     reporting of, a change in accounting principle. This Statement applies to
     all voluntary changes in accounting principle. It also applies to changes
     required by an accounting pronouncement in the unusual instance that the
     pronouncement does not include specific transition provisions. When a
     pronouncement includes specific transition provisions, those provisions
     should be followed. This Statement requires retrospective application to
     prior periods' financial statements for changes in accounting principle,
     unless it is impractical to determine either the period-specific effects or
     the cumulative effect of the change. When it is impractical to determine
     the period-specific effect of an accounting change on one or more
     individual prior periods presented, this Statement requires that the new
     accounting principle be applied to the balances of assets and liabilities
     as of the beginning of the earliest period for which retrospective
     application is practical and that a corresponding adjustment be made to the
     opening balance of retained earnings for that period rather than being
     reported as a component of income. When it is impractical to determine the
     cumulative effect of applying a change in accounting principle to all prior
     periods, this Statement requires that the new accounting principle be
     applied as if it were adopted prospectively from the earliest date
     practical. This Statement is effective for business enterprises and
     not-for-profit organizations for accounting changes and corrections of
     errors made in fiscal years beginning after December 15, 2005. The Company
     does not believe the adoption of this standard will have a material impact
     on its financial position or results of operations.


2.   COMMITMENTS AND CONTINGENCIES
     -----------------------------

     The Company leases approximately 27,000 square feet of office space at a
     rate of $17.00 per square foot through September 2005. The rate increased
     to $18.00 per square foot effective October 2005 through September 2007,
     when the lease expires. Rent expense 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.

     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.

                                       13
<PAGE>

     The Company has contracts with certain of its clients that contain
     indemnification clauses, which could require the Company to make payments
     to the client 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. The Company does not
     believe there are currently any outstanding obligations related to
     indemnification clauses and, accordingly, 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", "should" or similar
language. These forward-looking statements 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 visibility 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, Hewlett-Packard, Juniper
Networks, NEC Display Solutions of America, The Hartford, Visa, and Wachovia
Corporation. For a more comprehensive discussion of our channel visibility and
channel management solutions, please refer to the section entitled "InfoNow's
Software and Services" in our Annual Report filed with the Securities and
Exchange Commission on Form 10-KSB for the year ended December 31, 2004.

As of September 30, 2005, we had 47 managed services clients, compared to the 43
we reported as of September 30, 2004. The increase in our client base is
primarily attributable to sales of our Channel Insight solution. Despite the
increase in our client base, our contracted managed service fees, which includes
fees that are currently in a month-to-month contract status, decreased from
$804,000 per month as of September 30, 2004, to $600,000 per month as of
September 30, 2005. The decrease was primarily attributable to a $222,000 per
month reduction in service fees related to the Channel Insight contract with our
largest client, as well as reductions associated with other client contract
renegotiations and terminations, which were only partially offset by increases
in our contracted managed service fees related to new clients. Further
discussion related to the Channel Insight contract with our largest client can
be found in Results of Operations and Related Business Risks and Assumptions.

                                       14
<PAGE>

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 information technology, or 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 client, were inconsistent with this
trend; ii) the market for Channel Insight solutions is at an early stage of
adoption; iii) in many instances, our sales prospects have not budgeted for the
solutions we provide and, therefore, require a lengthy evaluation process prior
to purchasing; iv) we have not yet implemented our Channel Insight solution for
enough clients to enable us to gain significant sales leverage from client
references; and v) we are susceptible to competitive threats such as clients or
prospective clients outsourcing certain IT functions to other countries or
attempting to implement in-house solutions similar to those that we provide in
an effort to reduce costs.

As a result of these and other factors, it is difficult for us to accurately
predict the demand for our solutions, as well as the value we will receive upon
selling them. In addition, our implementation cycles have, in some cases,
extended substantially beyond our initial estimates, which has delayed our
ability to recognize license, implementation and service fee revenue in certain
periods. As a result of these challenges, among other things, our revenues can
fluctuate substantially from quarter to quarter.

In an effort to accelerate the sales cycle for Channel Insight we have developed
a modular delivery model for this solution, wherein a prospective client can
access distinct modules related to specific business needs at lower introductory
price points, and add other applications incrementally. Furthermore, during the
fourth quarter of 2004, we launched a limited Channel Insight offering.
Additionally, we are working on building leveraged access to clients through
strategic partner relationships. As a result of many of these initiatives, as
well as other ongoing sales efforts, we signed five Channel Insight agreements
with new customers in 2004 and seven Channel Insight agreements with new
customers thus far in 2005 through the date of this report. In addition, we
experienced an increase in sales (based on the first-year value of contracts
signed) during the first nine months of 2005 relative to the first nine months
of 2004.

Personnel-related costs, which include salaries, vacation, fringe benefits,
payroll taxes and personnel support costs such as office supplies for employees,
comprised approximately 73% and 76% of our total costs in the third quarter of
2005 and 2004, respectively. Because salaries and related costs are such 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 2005 we continued to develop a
software-as-a-service, or On-Demand, Channel Insight offering, which should be
available in early 2006. The new On-Demand service is expected to accelerate
market penetration of Channel Insight by making it easier to deploy and
available to a broader set of potential clients. In addition, we expect that
with the On-Demand Channel Insight offering we will realize implementation
efficiencies and related cost savings on a per-deal basis after deployment. We
added three employees and two contractors to our technical staff during the

                                       15
<PAGE>

third quarter of 2005 to support the development of this offering and we expect
to add further headcount during the fourth quarter of 2005. We anticipate that
our recent and planned hiring will increase our costs more quickly than our
revenues in the near-term. As a result, we expect to incur a loss and use cash
in the fourth quarter of 2005.

On February 25, 2005, we completed a workforce reduction. We eliminated four
full-time positions to more effectively align our cost structure with a
previously announced reduction in monthly service fees from our largest client,
among other factors. In addition, we temporarily reassigned the majority of our
product development employees to focus on client implementations and process
improvements. Employees whose employment was terminated received one-time
severance benefits, including salary, accrued vacation and health care benefits.
As a result, the Company paid out approximately $36,000 in cash and recognized a
related pre-tax charge of approximately $26,000 in the first quarter of 2005. In
addition, to further motivate our staff, we awarded a total of 352,100 stock
options to our employees, which vested immediately.

On March 4, 2005, Michael W. Johnson resigned as our Chief Executive Officer,
President and Chairman of our Board of Directors. Mr. Johnson remains on our
Board of Directors. In connection with Mr. Johnson's resignation we recognized
approximately $330,000 in severance expense in the first quarter of 2005, of
which approximately $151,000 was paid during the first nine months of 2005. We
paid the remaining $179,000 in October 2005. An existing director, Jeffrey
Peotter, was elected Chairman of our Board of Directors. On March 7, 2005, we
amended Harold R. Herbst's employment agreement to provide for his employment as
our interim Chief Executive Officer for a six-month period commencing on March
4, 2005. Except to the extent necessary to reflect Mr. Herbst's appointment for
nine months as our interim Chief Executive Officer, we did not materially alter
the terms of Mr. Herbst's employment agreement, which terms are disclosed in our
proxy statement filed with the SEC in connection with the 2005 annual meeting of
stockholders under the caption "Employment Contracts, Termination of Employment
and Change-In-Control Arrangements" and are incorporated herein by reference. On
March 25, 2005, we also issued Mr. Herbst options to purchase 150,000 shares of
our common stock. In September 2005, we entered into a revised employment
agreement with Mr. Herbst extending his term as our interim Chief Executive
Officer until April 30, 2007. Mr. Herbst's annual salary was increased from
$225,000 to $250,000. Except to the extent necessary to reflect extension of Mr.
Herbst's term as our interim Chief Executive Officer and his salary increase, we
did not materially alter the terms of Mr. Herbst's previous employment
agreement.

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, although it is not all-inclusive.

Revenue Recognition
-------------------

Our solutions are typically sold with annual or multi-year contracts. The
initial term of these agreements range from one to three years and the
agreements are typically renewable upon mutual agreement of InfoNow and the
client. We also provide services to a number of clients under work-order or
purchase-order arrangements.

                                       16
<PAGE>

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.

Managed 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 contractual thresholds.
     -    A software maintenance fee (for clients 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 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
client 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 client
life is typically the longer deferral period and is estimated to be three years.
This estimate is based on a number of factors, including client turnover and the
rate of change for the technology underlying our solutions. We evaluate the
estimate of a client 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 client life were to
increase, deferred revenue balances would be recognized over a longer time
period. A reduction in the estimate of a client 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 client 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. Under this model, we grant our clients a perpetual license
for our software. They can install our software on their own in-house systems,
utilize third-party service providers for hosting, or, as is most often the
case, we will host the software and perform related services under a managed
services agreement.

                                       17
<PAGE>

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 clients' 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.
Because 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
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
material changes 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.

                                       18
<PAGE>

If, for any solution implementation, we determine that we are unable to estimate
the effort to implement a solution with a high degree of certainty we defer
recognition of the revenue and related cost until project completion in
accordance with SOP 81-1. Losses are recognized immediately if projected direct
implementation costs exceed anticipated implementation revenues. During the
three and nine months ended September 30, 2005, we recognized $35,000 and
$160,000, respectively, in estimated implementation losses related to projects
for which direct implementation costs are projected to exceed implementation fee
revenue. 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. Fees owed to our
selling partners in conjunction with reseller channel sales are included in the
cost of revenues.

Capitalized Software Product Development Costs
----------------------------------------------

Capitalized software product development costs consist of technical personnel
salaries, overhead related to technical personnel, and the cost of the
facilities they occupy. We allocate these costs to the software product based on
the amount of time an employee devotes directly to the product development
effort in relation to that employee's total time worked during a given period.
In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed, software development costs are required
to be expensed until the point that technological feasibility of the product is
established which we have determined to be when a working model is complete.
Once technological feasibility is established, such costs are required to be
capitalized until the product is available for general release to customers. The
establishment of technological feasibility and continuing evaluation of the
recoverability of the capitalized software development costs requires
management's judgment with respect to the impact of external factors such as
future revenue, estimated economic life and changes in software and hardware
technologies. Periodic amortization of capitalized software development costs
will be based on either (a) the ratio that current period revenues for the
product bear to the total estimated revenue for that product or (b) the
straight-line method over the estimated economic life of the product, whichever
results in a larger amortization expense. We capitalized $129,000 of software
development costs during the three and nine months ended September 30, 2005. No
software development costs were capitalized for product development efforts that
took place prior to 2005 because the period between technological feasibility
and general availability was short and costs qualifying for capitalization were
insignificant. We have not begun amortizing capitalized software development
costs because the related product is not yet available for general release to
customers.

Technical Personnel Cost Allocation
-----------------------------------

Certain members of our technical staff have the necessary skills to contribute
in solution implementation and maintenance roles, as well as in product
development roles. As such, we distribute our technical resources among these
efforts based on the needs of the organization at a given time. The costs
associated with these employees are allocated either to the cost of revenues or
product development based on the estimate of hours devoted to each such category
in a given period. The estimate of hours by category is derived from the data
maintained in our time tracking system, which reflects the time charged by each

                                       19
<PAGE>

employee to a particular project. For certain projects and ongoing system
maintenance efforts, we must use judgment in designating the effort as either a
cost of revenues or a product development expense. A misclassification in this
regard could result in a significant impact to our gross margin; however, we
believe we apply the necessary diligence in the process of designating projects
to provide a reasonable basis for our estimates.

The following table summarizes the distribution of our employees on a
full-time-equivalent basis as of September 30, 2005 and September 30, 2004:

                                                September 30,    September 30,
                                                    2005             2004
                                                    ----             ----
Staff related to the Cost of Revenues                59               66
Selling and Marketing                                 3               10
Product Development                                   6                7
General and Administrative                            9               11
                                                    ----             ----
   Total Employees                                   77               94

Included in the table above are 70 full-time employees and 7 full-time
equivalent part-time employees at September 30, 2005, and 83 full-time employees
and 11 full-time equivalent temporary and part-time employees at September 30,
2004. In addition to the employees in the table above, our staff included three
contractors as of September 30, 2005 and 2004.














                                       20
<PAGE>

Results of Operations

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

                                Three Months Ended September 30,
                                       2005        2004     Change     % Change
                                      -------    -------    -------    --------
REVENUES:

Software license fees                 $     1    $    (3)   $     4    $   133%
Implementation fees                       352        190        162         85%
Monthly service fees & software
   maintenance fees                     1,948      2,441       (493)       (20%)
Other fees                                 21         21       --            0%
                                      -------    -------    -------
       Total revenues                   2,322      2,649       (327)       (12%)

COST OF REVENUES                        1,448      1,545        (97)        (6%)
                                      -------    -------    -------

GROSS MARGIN                              874      1,104       (230)       (21%)

OPERATING EXPENSES:
Selling and marketing                     238        487       (249)       (51%)
Product development                       129        216        (87)       (40%)
General and administrative                527        763       (236)       (31%)
                                      -------    -------    -------
       Total operating expenses           894      1,466       (572)       (39%)
                                      -------    -------    -------

LOSS FROM OPERATIONS                      (20)      (362)       342         94%

OTHER INCOME (EXPENSE):
Interest income                            21          9         12        133%
Interest expense                         --           (2)         2        100%
                                      -------    -------    -------
       Total other income                  21          7         14        200%
                                      -------    -------    -------

NET INCOME (LOSS)                     $     1    $  (355)   $   356        100%
                                      =======    =======    =======



Comparison of the Three Months Ended September 30, 2005 with the Three Months
Ended September 30, 2004.

Revenues: Our revenues consist primarily of implementation fees, software
license fees and monthly service fees from new and existing clients. Total
revenues decreased by $327,000 or 12%, to $2,322,000 for the three months ended
September 30, 2005, from $2,649,000 for the three months ended September 30,
2004.

Monthly Service Fees and Software Maintenance Fees - Monthly service fees and
software maintenance fees were $1,948,000 during the third quarter of 2005, a
decrease of $493,000, or 20%, from $2,441,000 in the third quarter of 2004. The
decrease is primarily due to a $666,000 reduction in service fees related to the
Channel Insight contract with our largest client. In the second quarter of 2005
we reached an agreement with this client to extend many of the services
associated with this contract through October 31, 2005, which included a
reduction in managed service fees of $222,000 per month. Please refer to the

                                       21
<PAGE>

section entitled "Related Business Risks and Assumptions" below in this Item 2
for a discussion of the risk associated with the Channel Insight contract with
our largest client. We also experienced an additional $176,000 reduction in
monthly service fees as a result of other client contract and service
terminations. The decrease in our monthly service fees related to the reduction
in fees associated with the Channel Insight contract with our largest client and
client contract and service terminations was partially offset by a $120,000
increase in service fee revenue due to a settlement associated with a client
contract termination. We also experienced other increases in service fees
totaling $229,000 primarily associated with new clients and new service
activations, as well as increases in variable monthly fees as a result of
increased system usage by certain of our clients. Monthly service fees and
software maintenance fees comprised 84% of total revenue during the three months
ended September 30, 2005, compared to 92% during the three months ended
September 30, 2004.

Implementation Fees - Revenues generated from implementation fees during the
three months ended September 30, 2005 increased by $162,000, or 85%, to $352,000
from $190,000 during the three months ended September 30, 2004. The increase in
implementation fees is primarily attributable to $200,000 higher revenue as a
result of attaining higher levels of completion percentage on projects that
expand existing client solutions, as well as the implementation of new client
solutions in the third quarter of 2005 compared to the third quarter of 2004.
This increase in implementation fee revenue was partially offset by a $37,000
increase in revenue deferrals associated with an increase in ASP contracts sold
during 2005, which we are required to account for in accordance with SAB 104, as
discussed above. Implementation fees represented approximately 15% of our total
revenue during the third quarter of 2005, compared to 7% during the third
quarter of 2004.

Software License Fees - Software license fees were $1,000 in the third quarter
of 2005, an increase of $4,000 from the ($3,000) of license fees during the
third quarter of 2004. This increase is primarily the result of a reduction in
the estimated completion percentage for one of our Channel Insight solution
implementations during the third quarter of 2004. Software license fees
represented less than 1% of total revenue during the three months ended
September 30, 2005 and 2004. Our software license fees have historically
represented a small portion of our total revenue and we expect that this will
generally be the case in the future.

Other Fees - Other fees remained flat at $21,000 during the three months ended
September 30, 2005 and 2004.

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 and partner commission costs. Cost of revenues was 62%
of revenues in the third quarter of 2005, compared to 58% of revenues in the
third quarter of 2004. Total cost of revenues decreased $97,000 to $1,448,000
during the three months ended September 30, 2005 from $1,545,000 during the
three months ended September 30, 2004. This was primarily due to an $89,000
reduction in personnel costs, as a result of a reduction in headcount in the
third quarter of 2005 compared to the third quarter of 2004, as well as
allocating more of our technical staff to support product development efforts.
Also contributing to the decrease in cost of sales was a $51,000 increase in
implementation expenses associated with ASP contracts that were deferred in

                                       22
<PAGE>

accordance with SAB 104. We also experienced a $43,000 reduction in bad debt
expense primarily as a result of reversing bad debt expense in the third quarter
of 2005 that had been recorded in prior periods. This reversal was necessary
because we collected cash for a trade receivable that we originally believed had
a high likelihood of being uncollectible. In addition, contract labor costs
decreased by $24,000 due to a reduction in the use of external resources to
assist with the implementation and maintenance of our Channel Insight and
Channel Management solutions. The decreases in our cost of sales associated with
personnel costs, deferred implementation expense, bad debt expense and contract
labor costs were partially offset by a $56,000 increase in our data center and
telecommunications costs primarily due to the transition to a new mapping data
vendor and increased system usage. In addition, partner commission costs
increased by $54,000 as a result of leveraging one of our strategic partner
relationships for a Channel Insight agreement we signed during the third quarter
of 2005.

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 10% of revenues during the three
months ended September 30, 2005 from 18% of revenues during the three months
ended September 30, 2004. The total amount of selling and marketing expenses
decreased by $249,000, or 51%, to $238,000 during the three months ended
September 30, 2005 from $487,000 during the three months ended September 30,
2004. The change is primarily attributable to a $163,000 decrease in personnel
and personnel support costs mainly due to planned staff reductions and attrition
related to our sales and marketing staff. In addition, commissions decreased
$33,000 primarily due to the reduction in our revenue. We also experienced a
$22,000 reduction in recruiting costs because we incurred fees related to the
hiring of a sales representative in the third quarter of 2004, whereas we did
not hire any new sales personnel during the third quarter of 2005. Travel costs
also decreased by $22,000 primarily as a result of the reduction in our sales
and marketing staff. The remaining $9,000 reduction in our selling and marketing
expenses was primarily due to lower public relations and advertising and
promotion consulting costs.

Product Development Expenses - Product development expenses consist of time
spent on development of our channel visibility and channel management products
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 September 30, 2005, product development expenses decreased $87,000,
or 40%, to $129,000 from $216,000 for the three months ended September 30, 2004.
This change was primarily due to the capitalization of $129,000 in software
product development costs during the third quarter of 2005, which was partially
offset by a $42,000 increase in costs primarily associated with allocating more
of our existing resources to support product development efforts. Product
development expenses represented 6% of revenues during the three months ended
September 30, 2005, compared to 8% of revenues during the three months ended
September 30, 2004.

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 September 30, 2005, from
29% of revenues for the three months ended September 30, 2004. The total amount
of general and administrative costs over the same period decreased $236,000, or
31%, to $527,000 during the third quarter of 2005 from $763,000 during the third

                                       23
<PAGE>

quarter of 2004. This decrease was primarily attributable to a $183,000
reduction in personnel and personnel support costs associated with the
termination of our former Chief Executive Officer in the first quarter of 2005,
as well as other reductions in our full-time equivalent staffing levels and
$85,000 of one-time severance expense incurred in the third quarter of 2004. In
addition, our facilities costs decreased by $31,000, which was primarily due to
one-time sales and use tax expenses incurred during the third quarter of 2004,
as well as $7,000 lower rent expense as a result of capitalizing the portion of
this cost that is related to product development efforts. We also experienced a
$12,000 reduction in professional fees mainly due to external legal and
accounting costs, and insurance costs declined by $7,000 primarily due to
negotiated rate reductions in our insurance policies. The remaining $3,000
reduction in our general and administrative expenses was primarily due to a
reduction in travel and entertainment costs.

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.

Other Income/Expense: We had net other income of $21,000 during the three months
ended September 30, 2005, compared to net other income of $7,000 for the three
months ended September 30, 2004. The increase of $14,000 is primarily
attributable to higher interest income on cash and cash equivalents resulting
primarily from higher interest rates during the third quarter of 2005 relative
to the third quarter of 2004. In addition, we experienced lower interest expense
due to a reduction in our capital lease obligations.

Net Income/Loss: Net income for the three months ended September 30, 2005 was
$1,000 compared to net loss of $355,000 for the three months ended September 30,
2004, a $356,000 increase. This increase is primarily attributable to a
$669,000, or 22%, decrease in total expenses, and a $14,000 increase in other
income, which were partially offset by a $327,000, or 12%, decrease in total
revenues for the three months ended September 30, 2005, compared to the three
months ended September 30, 2004, as discussed above in this Item 2.




















                                       24
<PAGE>

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

                                Nine months Ended September 30,
                                       2005        2004     Change     % Change
                                      -------    -------    -------    --------
REVENUES:

Software license fees                 $    28    $   136    $  (108)       (79%)
Implementation fees                     1,290      1,137        153        (13%)
Monthly service fees & software
   maintenance fees                     5,383      7,140     (1,757)       (25%)
Other fees                                 63         57          6         11%
                                      -------    -------    -------
       Total revenues                   6,764      8,470     (1,706)       (20%)

COST OF REVENUES                        4,444      4,228        216          5%
                                      -------    -------    -------

GROSS MARGIN                            2,320      4,242     (1,922)       (45%)

OPERATING EXPENSES:
Selling and marketing                     873      1,612       (739)       (46%)
Product development                       504        660       (156)       (24%)
General and administrative              2,125      2,126         (1)         0%
                                      -------    -------    -------
       Total operating expenses         3,502      4,398       (896)       (20%)
                                      -------    -------    -------

LOSS FROM OPERATIONS                   (1,182)      (156)    (1,026)      (658%)

OTHER INCOME (EXPENSE):
Interest income                            54         20         34        170%
Interest expense                           (3)        (7)         4         57%
                                      -------    -------    -------
       Total other income (expense)        51         13         38        292%
                                      -------    -------    -------

NET LOSS                              $(1,131)   $  (143)   $  (988)      (691%)
                                      =======    =======    =======



Comparison of the Nine months Ended September 30, 2005 with the Nine months
Ended September 30, 2004.

Revenues: Total revenues decreased by $1,706,000 or 20%, to $6,764,000 for the
nine months ended September 30, 2005, from $8,470,000 for the nine months ended
September 30, 2004.

Monthly Service Fees and Software Maintenance Fees - Monthly service fees and
software maintenance fees were $5,383,000 during the nine months ended September
30, 2005, a decrease of $1,757,000, or 25%, from $7,140,000 during the nine
months ended September 30, 2004. The decrease is primarily due to a $1,998,000
reduction in service fees related to the Channel Insight contract with our
largest client. We also experienced an additional $501,000 reduction in monthly
service fees as a result of other client contract and service terminations. The
decreases in our monthly service fees related to the Channel Insight contract
with our largest client and other client contract and service terminations were
partially offset by increases in service fees totaling $622,000 primarily
associated with new clients and new service activations, as well as increases in
variable monthly fees as a result of increased system usage by certain of our
clients. In addition, we experienced a $120,000 increase in service fee revenue
due to a settlement associated with a client contract termination. Monthly
service fees and software maintenance fees comprised 80% of total revenue during
the nine months ended September 30, 2005, compared to 84% during the nine months
ended September 30, 2004.

                                       25
<PAGE>

Implementation Fees - Revenues generated from implementation fees during the
nine months ended September 30, 2005, increased by $153,000, or 13%, to
$1,290,000 from $1,137,000 during the nine months ended September 30, 2004. The
increase in implementation fees is primarily attributable to a $287,000 increase
in revenue associated with attaining higher levels of completion percentage on
projects that expand existing client solutions, as well as the implementation of
new client solutions in the first nine months of 2005 compared to the first nine
months of 2004. This increase in revenue was partially offset by a $134,000
increase in revenue deferrals associated with an increase in ASP contracts sold
during the first nine months of 2005, which we are required to account for under
SAB 104, as discussed above. Implementation fees represented approximately 19%
of our total revenue during the nine months ended September 30, 2005, compared
to 13% during the nine months ended September 30, 2004.

Software License Fees - Software license fees were $28,000 during the nine
months ended September 30, 2005, a decrease of $108,000, or 79%, from the
$136,000 of license fees during the nine months ended September 30, 2004. This
decrease in license fees is primarily attributable to a reduction in the value
of licenses sold during the nine months ended September 30, 2005, compared to
the nine months ended September 30, 2004. Software license fees represented less
than 1% of total revenue during the nine months ended September 30, 2005,
compared to 2% of revenue during the nine months ended September 30, 2004.

Other Fees - Other fees increased by $6,000, or 11%, to $63,000 during the nine
months ended September 30, 2005, from $57,000 during the nine months ended
September 30, 2004. The increase in other fees is primarily attributable to an
increase in travel costs that we incurred on behalf of certain of our clients,
which we were contractually permitted to pass through to those clients.

Cost of Revenues: Cost of revenues was 66% of revenues during the nine months
ended September 30, 2005 compared to 50% during the nine months ended September
30, 2004. Total cost of revenues increased $216,000 to $4,444,000 during the
nine months ended September 30, 2005 from $4,228,000 during the nine months
ended September 30, 2004. This was primarily due to a $206,000 increase in data
center and telecommunications costs due to a refund received from a former data
vendor in 2004, as well as the transition to a new mapping data vendor and
increased system usage. In addition, personnel and personnel support costs
increased by $136,000 as our head count levels were higher on average during the
nine months ended September 30, 2005 compared to the nine months ended September
30, 2004. Partner commission costs also increased by $66,000 as a result of
leveraging one of our strategic partner relationships for a Channel Insight
agreement we signed during the third quarter of 2005. We also experienced a
$6,000 increase in travel costs that we incurred on behalf of certain of our
clients. As discussed above, the travel costs incurred for our clients were
passed through to those clients and are included in other revenue. The increases
in our cost of sales related to data center and telecommunications expenses,
personnel costs, and travel costs were partially offset by an $86,000 increase
in implementation expenses associated with ASP contracts that were deferred in
accordance with SAB 104. We also experienced a $72,000 decrease in bad debt
expense primarily due to the reversal in the second quarter of 2005 of bad debt
that had been recorded in prior periods. The bad debt expense recorded in prior
periods related primarily to variable monthly fees that we believed could be

                                       26
<PAGE>

uncollectible as a result of client contract renegotiations. We worked with
these clients during the second quarter of 2005 to resolve the collectibility
issues and, in the third quarter of 2005, we collected a portion of the
previously recorded bad debt amounts. Accordingly, we reversed the previously
recorded bad debt expense associated with these fees. The remaining $40,000
decrease in our cost of sales was primarily attributable to lower contract labor
costs as a result of a reduction in the use of external resources to assist with
the implementation and maintenance of our Channel Insight and Channel Management
solutions.

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

Selling and Marketing Expenses - Selling and marketing expenses decreased to 13%
of revenues during the nine months ended September 30, 2005 from 19% of revenues
during the nine months ended September 30, 2004. The total amount of selling and
marketing expenses decreased by $739,000, or 46%, to $873,000 during the nine
months ended September 30, 2005 from $1,612,000 during the nine months ended
September 30, 2004. The change is primarily attributable to a $403,000 decrease
in personnel and personnel support costs mainly as a result of planned staff
reductions and attrition related to our sales and marketing staff. We also
experienced a $199,000 decrease in commission expense as a result of the
reduction in our revenue. In addition, travel costs decreased by $59,000 due to
the reduction in our sales and marketing staff. We also experienced a $47,000
reduction in public relations and advertising and promotion consulting costs.
Recruiting fees also declined by $23,000 because we incurred fees related to the
hiring of a sales representative during the nine months ended September 30,
2004, whereas we did not hire any new sales personnel during the nine months
ended September 30, 2005. The remaining $8,000 decrease in our sales and
marketing costs was primarily due to lower trade show expenses.

Product Development Expenses - For the nine months ended September 30, 2005,
product development expenses decreased $156,000, or 24%, to $504,000 from
$660,000 for the nine months ended September 30, 2004. This change was primarily
due to the capitalization of $129,000 in software product development costs
during the third quarter of 2005, as well as lower bonus expenses. Product
development expenses represented 7% of revenues during the nine months ended
September 30, 2005, compared to 8% of revenues during the nine months ended
September 30, 2004.

General and Administrative Expenses - General and administrative expenses were
31% of revenues for the nine months ended September 30, 2005, compared to 25% of
revenues for the nine months ended September 30, 2004. The total amount of
general and administrative costs decreased $1,000, or less than 1%, to
$2,125,000 during the nine months ended September 30, 2005 from $2,126,000
during the nine months ended September 30, 2004. The decrease was primarily
attributable to a $48,000 decrease in our facilities costs, which was mainly due
to lower depreciation expense since many of our older assets are now fully
depreciated, as well as lower rent expense as a result of capitalizing the
portion of this cost that is related to product development efforts. Travel and
entertainment costs and investor relations expenses also decreased by $17,000
and $15,000, respectively. The decreases in our general and administrative
expenses associated with facilities costs, travel costs, and investor relations
expenses were partially offset by a $61,000 increase in personnel and personnel
support costs mainly as a result of severance expenses incurred in conjunction
with the separation agreement we entered into with our former Chief Executive
Officer during the first quarter of 2005. The increase associated with these
severance expenses was partially offset by an $85,000 reduction in severance
expense associated with an employee that was terminated in 2004. We also
experienced an $18,000 increase in professional fees mainly due to higher audit
and legal fees during the nine months ended September 30, 2005, compared to the
nine months ended September 30, 2004.

                                       27
<PAGE>

Other Income/Expense: We had net other income of $51,000 during the nine months
ended September 30, 2005, compared to net other income of $13,000 for the nine
months ended September 30, 2004. The increase of $38,000 is primarily
attributable to an increase in interest income on cash and cash equivalents, as
well as lower interest expense due to a reduction in our capital lease
obligations.

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 loss for the nine months ended September 30, 2005, was
$1,131,000 compared to net loss of $143,000 for the nine months ended September
30, 2004, a $988,000 increase. This increase is primarily attributable to a
$1,706,000, or 20%, decrease in total revenue, which was partially offset by a
$680,000, or 8%, decrease in total costs and a $38,000 increase in other income
during the nine months ended September 30, 2005, compared to the nine months
ended September 30, 2004, as discussed above in this Item 2.



Liquidity and Capital Resources

Since our initial public offering, we have financed our 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 $3,653,000 from the exercise of stock options and warrants since we
began offering our 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 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 $3,373,000 at September 30, 2005, compared
to $3,944,000 at September 30, 2004. Our total cash use for the nine months
ended September 30, 2005, was $391,000 compared to $645,000 in cash generated
during the nine months ended September 30, 2004. The decrease of $1,036,000 was
primarily due to a $582,000 decrease in cash flows from our operating
activities, which was caused primarily by the increase in our net loss during
the nine months ended September 30, 2005 compared to the nine months ended
September 30, 2004. In addition, cash flows from our financing activities
decreased $451,000 primarily as a result of a decrease in proceeds from stock
option exercises in the first nine months of 2005 relative to the first nine
months of 2004. We also experienced a $3,000 increase in cash used in our
investing activities, which was primarily due to a $129,000 increase in
capitalized software costs, partially offset by a $126,000 reduction in the
purchase of property and equipment for our data centers and corporate office.
The changes in our total cash flow for the first nine months of 2005 compared to
the first nine months of 2004 are discussed below in more detail.

                                       28
<PAGE>

Net cash used by operating activities during the nine months ended September 30,
2005 was $110,000, compared to $472,000 of cash generated by operating
activities during the nine months ended September 30, 2004. The decrease of
$582,000 was primarily due to the $988,000 increase in our net loss. Changes in
the adjustments to reconcile net income to net cash provided by operating
activities are as follows:

     o    $277,000 increase in other assets and deferred charges mainly due to
          prepaid rent and insurance payments;
     o    $186,000 decrease in accounts payable and payroll related and other
          liabilities primarily due to paying down our accruals and trade
          accounts payable;
     o    $75,000 reduction in depreciation and amortization since many of our
          data center and corporate office assets have become fully depreciated
          without corresponding asset purchases;
     o    $53,000 decrease in the allowance for bad debt primarily due to
          reversing bad debt during 2005 that had been recorded in prior
          periods;
     o    $12,000 decrease in loss on asset dispositions;
     o    $657,000 increase in deferred revenue primarily due to cash received
          from clients who prepaid their annual service fees in accordance with
          their contract terms, as well as unearned revenue related to solutions
          sold during 2005 for which implementation has not yet been completed;
          and
     o    $352,000 decrease in accounts receivable mainly due to significant
          collections of trade accounts receivable during 2005.


Cash used in investing activities increased to $235,000 for the nine months
ended September 30, 2005 compared to $232,000 for the nine months ended
September 30, 2004. The change of $3,000 is primarily due to a $129,000 increase
in capitalized software costs, partially offset by a $126,000 decrease 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 2005 primarily to support the development of an enhanced version of
our Channel Insight solution, to upgrade or replace some of our existing data
center hardware and software, and to add new equipment to support anticipated
growth in our client base.

Net cash used in financing activities during the nine months ended September 30,
2005, was $46,000, compared to cash generated by financing activities of
$405,000 during the nine months ended September 30, 2004. The decrease of
$451,000 was caused by a $446,000 decrease in cash received from stock option
exercises and a $5,000 increase in capital lease payments.

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.

                                       29
<PAGE>

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

Contractual Obligations                          Payment Due by Period
                                      Total   Less Than   1-3    4 - 5   After 5
                                               1 year    years   years    years
                                       ----    ------    -----   -----    -----
Operating Leases                       $867     $372      $495    $--     $--
Minimum Royalties                       132       12        24      24      72
                                       ----     ----      ----    ----    ----
Total Contractual Cash Obligation      $999     $384      $519    $ 24    $ 72


We lease approximately 27,000 square feet of office space at a rate of $17.00
per square foot through September 2005. The rate increased to $18.00 per square
foot effective October 2005 through September 2007, when the lease expires.

Recent Accounting Pronouncements
--------------------------------

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which
will be effective for our fiscal year beginning January 1, 2006. We believe the
adoption of this standard could have a material impact on our financial position
and results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
which will be effective for fiscal periods beginning after June 15, 2005. We do
not believe the adoption of this standard will have a material impact on our
financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, Accounting for Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3,
which will be effective for fiscal periods beginning after December 31, 2005. We
do not believe the adoption of this standard will have a material impact on our
financial position or results of operations.

For a more complete description of these accounting pronouncements, please refer
to Note 1 to the accompanying financial statements.

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 clients, none of whom are obligated to renew, modify
          or extend their contractual relationships with the Company, and
          attract new clients;
     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    Maintain and improve our network assets as necessary;
     o    Continue to serve new and existing clients;

                                       30
<PAGE>

     o    Improve our operational and financial systems in order to address
          planned growth in our operations;
     o    Develop cost-effective delivery processes for our new solutions;
     o    Maintain or develop adequate pricing and profit margins on our
          products and services;
     o    Retain and attract qualified personnel;
     o    Develop future enhancements to our services timely 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
          clients migrating to lower cost solutions, such as offshore IT
          development and service functions;
     o    Develop and maintain relationships with strategic selling partners;
     o    Maintain the listing of our common stock on the Nasdaq Stock Market;
          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, 2004, 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.

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.

Our common stock is currently listed on the Nasdaq Stock Market. This listing is
dependent on our maintaining certain minimum listing standards, including, among
others, minimum bid price and minimum stockholders' equity standards. As
previously disclosed by us on Form 8-K, on November 2, 2005 we received a notice
from the Nasdaq Stock Market indicating that we are not in compliance with
Nasdaq Marketplace Rule 4310(c)(4) (the "Minimum Bid Price Rule"), and as a
result our common stock will be delisted at the opening of business on November
11, 2005, unless we request a hearing in accordance with the Nasdaq Marketplace
Rules. The Minimum Bid Price Rule requires that the bid price of our common
stock remain above $1.00 for continued inclusion in the Nasdaq SmallCap Market.
We were initially notified on May 5, 2005, that our stock had closed below the
minimum bid price for 30 consecutive business days. In accordance with the
Nasdaq Marketplace Rules, we were granted 180 calendar days, or until November
1, 2005, to regain compliance with the Minimum Bid Price Rule. We were unable to
regain compliance with the Minimum Bid Price Rule prior to November 1, 2005 and
we are not eligible for an additional compliance period because we do not meet
the Nasdaq SmallCap Market initial inclusion requirements. We have requested a
hearing of a Listing Qualifications Panel to review the Nasdaq staff's delisting
determination, and the hearing date has been scheduled for December 1, 2005. The
request for a hearing is expected to stay the delisting of our common stock

                                       31
<PAGE>

pending the Panel's decision. If our appeal is denied by the Panel, our common
stock will be delisted. Notwithstanding the outcome of our appeal of the Nasdaq
staff's delisting determination related to the Minimum Bid Price Rule, our
current estimated financial projections indicate that we may not satisfy the
$2,500,000 minimum stockholders' equity balance requirement as of the end of the
fourth quarter of 2005. While we are evaluating alternatives to remain in
compliance with this requirement, there can be no assurances that we will be
able to do so. If our stockholders' equity balance were to fall below the
minimum requirement, we would expect to receive a separate deficiency letter
from Nasdaq's Listings Qualifications Department indicating we are out of
compliance. If our stock is delisted, we expect that our common stock will trade
in the "Pink Sheets" and/or on the OTC Bulletin Board; however, our stock may
not be eligible to trade in the "Pink Sheets" and/or on the OTC Bulletin Board
immediately. Our stock may become eligible if one or more market makers makes
application to register in and quote our common stock in accordance with SEC
Rule 15c2-11 and such application is cleared. Only a market maker, not the
Company, may file the required application. There can be no assurance that such
an application will be made and cleared or that our common stock will be
eligible for trading or quotation on any alternative exchange or market.
Furthermore, delisting of our common stock from trading on the Nasdaq National
Market would likely adversely affect the price and liquidity of our common stock
and could adversely affect our ability to issue additional securities or to
secure additional financing. In addition, if our shares were not listed and the
trading price of our shares was less than $5.00 per share, our shares could be
subject to Rule 15g-9 under the Securities Exchange Act of 1934, as amended,
which, among other things, requires that broker/dealers satisfy special sales
practice requirements, including making individualized written suitability
determinations and receiving a purchaser's written consent prior to any
transaction. In such case, our securities could also be deemed to be a "penny
stock" under the Securities Enforcement and Penny Stock Reform Act of 1990,
which would require additional disclosure in connection with trades in those
shares, including the delivery of a disclosure schedule explaining the nature
and risks of the penny stock market. Such requirements could severely limit the
liquidity of our securities.

As of September 30, 2005, approximately $148,000, or 25%, of our total monthly
contracted managed service fees of $600,000 was attributable to Channel Insight
contracts with our largest client. These managed service fees expired on October
31, 2005 and, in November 2005, the client agreed to a contract extension
through April 30, 2006 at a reduced monthly fee of $120,000. The contract
extension includes an early termination provision under which the client, if it
requests termination prior to April 30, 2006, would be required to pay us a fee
of $15,000 per month for each month remaining in the contract term. We expect to
work with this client to negotiate a longer-term extension to their Channel
Insight contract. In addition, we continue to work with this client for purposes
of selling new solutions; however, there can be no assurance that we will be
successful in renewing, extending or expanding solutions for this client.

For a more comprehensive discussion of the risk factors associated with our
business, please refer to the section entitled "Related Business Risks and
Assumptions" in our Annual Report filed with the Securities and Exchange
Commission on Form 10-KSB for the fiscal year ended December 31, 2004.


                                       32
<PAGE>

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
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 September 30, 2005, pursuant to Rule 13a-15(b) under the
Exchange Act. Based upon that evaluation, our Certifying Officers concluded
that, as of September 30, 2005, 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 September 30, 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.















                                       33
<PAGE>

                           PART II. OTHER INFORMATION


Item 6. Exhibits

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

     10.1               Employment Agreement by and between InfoNow Corporation
                        and Harry Herbst, dated September 27, 2005.

     10.2               Employment Agreement by and between InfoNow Corporation
                        and James Medina, dated September 27, 2005.

     10.3               Employment Agreement by and between InfoNow Corporation
                        and Don Kark, dated September 27, 2005.

     10.4               Employment Agreement by and between InfoNow Corporation
                        and Mark W. Geene, dated September 27, 2005.

     31.1               Rule 13a-14(a)/15d-14(a) certification of Principal
                        Executive Officer.

     31.2               Rule 13a-14(a)/15d-14(a) certification of Principal
                        Financial Officer.

     32                 Section 1350 certifications.

















                                       34
<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:  November 14, 2005                    By: /s/ Harry R. Herbst
                                            -----------------------
                                            Harry R. Herbst, Interim Chief
                                            Executive Officer



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



November 14, 2005    Interim Chief Financial Officer         /s/ James L. Medina
                     (Principal Financial and Accounting)    -------------------
                     Officer)                                James L. Medina









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<PAGE>

                                  EXHIBIT INDEX



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

     10.1               Employment Agreement by and between InfoNow Corporation
                        and Harry Herbst, dated September 27, 2005.

     10.2               Employment Agreement by and between InfoNow Corporation
                        and James Medina, dated September 27, 2005.

     10.3               Employment Agreement by and between InfoNow Corporation
                        and Don Kark, dated September 27, 2005.

     10.4               Employment Agreement by and between InfoNow Corporation
                        and Mark W. Geene, dated September 27, 2005.

     31.1               Rule 13a-14(a)/15d-14(a) certification of Principal
                        Executive Officer.

     31.2               Rule 13a-14(a)/15d-14(a) certification of Principal
                        Financial Officer.

     32                 Section 1350 certifications.















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