U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-QSB

                Quarterly Report Under Section 13 or 15(d) of the
                        Securities Exchange Act of 1934.

                 For the quarterly period ended: March 31, 2005
                          Commission File No 000-21235

                                   ----------

                               LOYALTYPOINT, INC.
                               ------------------
        (Exact name of small business issuer as specified in its charter)

            DELAWARE                                             11-2780723
            --------                                             ----------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

            3885 Crestwood Parkway, Suite 550, Duluth, Georgia 30096
            --------------------------------------------------------
                    (Address of principal executive offices)

                                 (770) 638-5101
                                 --------------
                           (Issuer's telephone number)

              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer (1) 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 No [X}

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

We had 102,498,832 shares of our common stock outstanding as of May 14, 2005.

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

<PAGE>

                                      INDEX

                         PART I - FINANCIAL INFORMATION

ITEM 1.    Financial Statements

           Condensed Consolidated Balance Sheet
             as of March 31, 2005 (unaudited)                                  1

           Condensed Consolidated Statements of Operations
             and Comprehensive Loss
             for the Three Months Ended March 31, 2005 and 2004 (unaudited)    3

           Condensed Consolidated Statement of Stockholders' Deficiency
             for the Three  Months Ended March 31, 2005 (unaudited)            4

           Condensed Consolidated Statements of Cash Flows
             for the Three Months Ended March 31, 2005 and 2004 (unaudited)    5

           Notes to Condensed Consolidated Financial Statements                7

ITEM 2.    Management's Discussion and Analysis of Interim Financial
           Condition and Results of Operations                                14

ITEM 3.    Controls and Procedures                                            17

                           PART II - OTHER INFORMATION

ITEM 1.    Legal Proceedings                                                  19

ITEM 2.    Changes in Securities                                              19

ITEM 3.    Defaults upon Senior Securities                                    19

ITEM 4.    Submission of Matters to a Vote of Security Holders                19

ITEM 5.    Other Information                                                  20

ITEM 6.    Exhibits and Reports on Form 8-K                                   20

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS

                       LOYALTYPOINT, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2005
                                   (UNAUDITED)

                                     ASSETS
CURRENT ASSETS
     Cash                                                   $  429,292
     Accounts receivable, net of allowance of $89,023          422,355
     Inventory, net of reserve of $36,152                      854,114
     Prepaid expenses and other current assets                 317,118
                                                            ----------

         TOTAL CURRENT ASSETS                                2,022,879
                                                            ----------

PROPERTY AND EQUIPMENT, NET                                    301,097
                                                            ----------

OTHER ASSETS
     Intangible assets, net of accumulated amortization
        of $524,949                                            573,939
     Goodwill                                                1,516,717
     Due from related party                                    157,787
     Deposits                                                   24,006
                                                            ----------

         TOTAL OTHER ASSETS                                  2,272,449
                                                            ----------



         TOTAL ASSETS                                       $4,596,425
                                                            ==========

            See notes to condensed consolidated financial statements.

                                       1
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2005
                                   (UNAUDITED)

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
     Accounts payable - trade                                    $  1,485,333
     Accounts payable - school rebates                              1,406,184
     Accrued expenses                                                 982,598
     Line of credit                                                   590,003
     Current potion of capital lease obligations                       23,431
     Current portion of note payable                                  151,529
     Current portion of notes payable - stockholders
       and related parties                                            342,205
     Other current liabilities                                         77,849
                                                                 ------------

         TOTAL CURRENT LIABILITIES                                  5,059,132
                                                                 ------------

LONG-TERM LIABILITIES
     Deferred revenue                                                  68,011
     Capital lease obligations less current portion                    38,910
     Note payable less current portion                                 93,714
     Notes payable - stockholders and related parties
       less current portion                                           764,566
     Other liabilities                                                949,911
                                                                 ------------
         TOTAL LONG-TERM LIABILITIES                                1,915,112
                                                                 ------------

         TOTAL LIABILITIES                                          6,974,244
                                                                 ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
     Preferred stock; 50,000,000 shares authorized:
       Series A preferred stock; $.001 par value;
         3 shares issued and outstanding                                   --
       Series B preferred stock; $.001 par value; 30,769,231
         shares issued and outstanding                                 30,769
     Common stock; $.001 par value; 200,000,000 shares
           authorized, 103,451,769 issued and outstanding             103,451
     Additional paid-in capital                                    17,839,484
     Deferred compensation                                            (81,878)
     Accumulated deficit                                          (20,269,645)
                                                                 ------------

         TOTAL STOCKHOLDERS' DEFICIENCY                            (2,377,819)
                                                                 ------------

         TOTAL LIABILITIES AND
           STOCKHOLDERS' DEFICIENCY                              $  4,596,425
                                                                 ============

            See notes to condensed consolidated financial statements.

                                       2
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
                               COMPREHENSIVE LOSS

                                                   FOR THE THREE MONTHS ENDED
                                               ---------------------------------
                                                 MARCH 31,           MARCH 31,
                                                   2005                2004
                                               -------------      -------------
                                                (unaudited)        (unaudited)

REVENUES                                       $   7,477,348      $  11,972,337
COST OF REVENUES                                   7,166,625         11,803,627
                                               -------------      -------------
       Gross Profit                                  310,723            168,710

OPERATING EXPENSES
     Salaries and wages                              847,705            609,905
     Stock based compensation                         11,513             23,200
     Selling, general, and
     administrative expenses                         721,673            704,574
     Depreciation and amortization                    91,943             97,110
                                               -------------      -------------
       Total Operating Expenses                    1,672,834          1,434,789
                                               -------------      -------------
       Net Operating Loss                         (1,362,111)        (1,266,079)

INTEREST EXPENSE, NET                                 44,517             71,683
                                               -------------      -------------
NET LOSS                                       $  (1,406,628)     $  (1,337,762)
                                               =============      =============

OTHER COMPREHENSIVE LOSS
     Unrealized loss on marketable securities             --            (82,998)
                                               -------------      -------------
TOTAL COMPREHENSIVE LOSS                       $  (1,406,628)     $  (1,420,760)
                                               =============      =============

Net loss per common share, basic and diluted   $       (0.01)     $       (0.02)
                                               =============      =============
Weighted average common shares
outstanding, basic and diluted                   103,451,769         65,762,623
                                               =============      =============

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

                    FOR THE THREE MONTHS ENDED MARCH 31, 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        SERIES A             SERIES B
                                    PREFERRED STOCK      PREFERRED STOCK            COMMON STOCK
                                    ---------------    --------------------    ----------------------
                                    SHARES   AMOUNT      SHARES      AMOUNT      SHARES       AMOUNT
                                    ------   ------    ----------   -------    -----------   --------
<S>                                 <C>      <C>       <C>          <C>        <C>           <C>
BALANCE AT DECEMBER 31, 2004             3   $   --    30,769,231   $30,769    103,451,769   $103,451

    Amortization of
     deferred compensation-             --       --            --        --             --         --

    Net loss                            --       --            --        --             --         --

                                    ------   ------    ----------   -------    -----------   --------
BALANCE AT MARCH 31, 2005                3   $   --    30,769,231   $30,769    103,451,769   $103,451
                                    ======   ======    ==========   =======    ===========   ========
</TABLE>

[RESTUBBED}
<TABLE>
<CAPTION>

                                      ADDITIONAL                                     TOTAL
                                        PAID-IN      DEFERRED      ACCUMULATED    STOCKHOLDERS'
                                        CAPITAL    COMPENSATION      DEFICIT       DEFICIENCY
                                      -----------  ------------    ------------   -------------
<S>                                   <C>            <C>           <C>            <C>
BALANCE AT DECEMBER 31, 2004          $17,839,484    $(93,391)     $(18,863,016)  $  (982,704)

    Amortization of
     deferred compensation-                    --      11,513                --        11,513

    Net loss                                   --          --        (1,406,628)   (1,406,628)

                                      -----------    --------      ------------   -----------
BALANCE AT MARCH 31, 2005             $17,839,484    $(81,878)     $(20,269,645)  $(2,377,819)
                                      ===========    ========      ============   ===========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                               -------------------------------
                                                                                MARCH 31,           MARCH 31,
                                                                                  2005                 2004
                                                                               -----------         -----------
                                                                                (unaudited)        (unaudited)
<S>                                                                            <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                                  $(1,406,628)        $(1,337,762)
     Adjustments to reconcile net loss to
       net cash used in operating activities:
           Depreciation                                                             43,003              21,628
           Amortization                                                             48,940              75,480

           Reserve for inventory                                                  (267,679)                 --
           Amortization of debt discount                                                --              31,535
           Stock based compensation                                                 11,513              23,200
           Changes in operating assets and liabilities
                Accounts receivable                                                264,214             298,137
                Inventory                                                          957,636             192,690
                Prepaid expenses and other current assets                         (127,801)            (74,063)
                Due from related party                                              22,673              33,531
                Accounts payable - trade                                          (376,125)            682,290
                Account payable - school rebates                                   (19,015)           (187,898)
                Accrued expenses and other current liabilities                     106,078            (145,336)
                Deferred revenue                                                   (16,052)                 --
                                                                               -----------         -----------

     NET CASH USED IN OPERATING ACTIVITIES                                        (759,243)           (386,568)
                                                                               -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of property and equipment                                             (4,668)            (30,222)
     Cash received from the Company merger                                              --             721,097
                                                                               -----------         -----------

     NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES                               (4,668)            690,875
                                                                               -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in line of credit                                                160,003                  --
     Proceeds from notes payable                                                        --             225,000
     Principal payments on notes payable and capital leases                        (47,529)           (172,886)
                                                                               -----------         -----------

     NET CASH PROVIDED BY FINANCING ACTIVITIES                                     112,474              52,114
                                                                               -----------         -----------


     NET (DECREASE) INCREASE IN CASH                                              (651,437)            356,421

CASH AT BEGINNING OF PERIOD                                                      1,080,729             238,796
                                                                               -----------         -----------

CASH AT END OF PERIOD                                                          $   429,292         $   595,217
                                                                               ===========         ===========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       5
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   CONTINUED

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                               -------------------------------
                                                                                MARCH 31,           MARCH 31,
                                                                                  2005                 2004
                                                                               -----------         -----------
                                                                                (unaudited)        (unaudited)
<S>                                                                            <C>                 <C>
Supplemental Disclosures of Cash Flow Information:

Cash paid for:

     Interest                                                                  $    41,589         $    49,186
                                                                               ===========         ===========

Non-cash investing and financing activities:

     Conversion of notes payable and accrued interest into common stock        $        --         $ 1,763,500
                                                                               ===========         ===========

     Decline in market value of marketable equity securities                   $        --         $    82,998
                                                                               ===========         ===========

     Liabilities assumed in connection with NSC acquisition of
       inventory and furniture, fixtures and equipment                         $        --         $ 1,246,217
                                                                               ===========         ===========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       6
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1--BUSINESS AND BASIS OF PRESENTATION

LoyaltyPoint, Inc. (the "Company") is a holding company for merchant, school,
and nonprofit loyalty marketing programs. The Company markets loyalty programs
that generate contributions to schools and nonprofits based upon supporter
purchases through hundreds of online, store, catalog and stored-value (gift)
card merchant participants. Our vision is to provide a one-stop shop for schools
and nonprofits to enroll in year-round nontraditional fundraising utilizing
everyday shopping purchases. Our corporate headquarters is based in the Atlanta,
Georgia area; we also maintain two offices in Northern California and a
fulfillment center in Norcross, Georgia.

The accompanying unaudited condensed consolidated interim financial statements
reflect all adjustments, which in the opinion of management, are necessary for a
fair presentation of the results of operations for the periods shown. The
results of operations for such periods are not necessarily indicative of the
results expected for the full fiscal year or for any future period. These
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 2004.

Certain prior year balances have been reclassified to conform to the current
year presentation.

NOTE 2--GOING CONCERN

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern. However, the Company has
incurred net losses in each of its previous two fiscal years and sustained a net
loss of $1,406,628 for the three months ended March 31, 2005, resulting in an
equity deficiency of approximately $2,378,000 and a working capital deficiency
of approximately $3,036,000 at March 31, 2005. The Company has used, rather than
provided, cash from its operating activities during the previous two fiscal
years and the three months ended March 31, 2005, and has deferred payment of
certain accounts payable and accrued expenses. Given these results, additional
capital or improved operations will be needed to sustain the Company's
operations. Other significant risks include the possibility that our line of
credit financing with Shelby Bank maturing at the end of May 2005 will not be
renewed or extended, therefore placing the Company in default of the debt, which
is secured by substantially all of our assets.

Management's plans in this regard include marketing and cross selling of its
product lines with special emphasis on its higher margin products, such as
school supplies to existing customers participating in the lower margin
programs. We believe that the fact that these programs benefit the schools by
providing larger contributions make it a compelling program that has potential
future value for our Company and our customers.

                                       7
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

In view of the matters described, there is substantial doubt about the Company's
ability to continue as a going concern. The recoverability of the recorded
assets and satisfaction of the liabilities reflected in the accompanying balance
sheet is dependent upon continued operation of the Company, which is in turn
dependent upon the Company's ability to meet its financing requirements on a
continuing basis and to succeed in its future operations. There can be no
assurance that management will be successful in implementing its plans. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

NOTE 3--CONCENTRATIONS

Major Customers: No single customer accounted for more than 10% of our revenues
during the quarters ended March 31, 2005 and 2004.

Major Suppliers: We purchased from two vendors approximately $1,512,800 and
$1,022,598, respectively, of gift cards during the three months ended March 31,
2005 which comprised approximately 25% and 17% of total gift card purchases for
the period then ended. The balance of accounts payable to these suppliers at
March 31, 2005 was $0 and $180,647, respectively.

Credit Risk: Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and accounts receivable.
Cash is held primarily with two financial institutions and consist primarily of
cash in bank accounts. The amount of deposits in any one institution that
exceeds federally insured limits is subject to credit risk. Such amounts were
approximately $401,902 at March 31, 2005.

NOTE 4--STOCK BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations in accounting
for its stock based compensation plans and outstanding options granted under
stock option agreements. In applying the intrinsic value method, as prescribed
by APB 25, we determine the value of the options granted by multiplying the
total number of shares the individual is entitled to receive by the difference
between (i) the closing share price of the stock on the date of grant and (ii)
the stated exercise price in the option agreement. If the stated exercise price
is equal to or greater than the closing share price, then the options would have
no intrinsic value at the date of grant. However, if the exercise price is less
than the closing share price, then the product of multiplying that amount times
the number shares would be considered compensation expense and would be
recognized as such over the vesting period of the options by recording the total
amount as deferred compensation expense in the equity section of the balance
sheet and recognizing such compensation expense in the statement of operations
as the options vest.

In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") was issued. SFAS 123 prescribes accounting and reporting standards for all
stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS 123


                                       8
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

requires compensation expense to be recorded (i) using the fair value method or
(ii) using the existing accounting rules prescribed by APB 25 with pro forma
disclosure of what net income and earnings per share would have been had the
Company adopted the fair value method. The following table illustrates what the
Company's net loss and loss per share would have been if the Company had used
the fair value based method of accounting for its employee stock option plans,
as prescribed by SFAS 123. During 2005 the fair value of each option was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions: dividend yield of 0.0%; expected
volatility of 181%; risk-free interest rates of 3.47%; and an expected life of 3
years. For the quarter ended March 31, 2004 the fair value of each option was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions: dividend yield of 0.0%; expected
volatility of 254%; risk-free interest rates of 1.19%; and an expected life of 3
years.
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                                             ----------------------------
                                                                 2005             2004
                                                             -----------      -----------
<S>                                                          <C>              <C>
Net loss available to common stockholders, as reported       $(1,406,628)     $(1,337,762)
Add:
Stock-based employee compensation expense included
in reported net loss                                              11,513               --
Deduct:
Total stock-based employee compensation expense
determined under fair value based method for all awards          (44,582)          (2,000)
                                                             -----------      -----------
Proforma net loss available to common stockholders           $(1,439,697)     $(1,339,762)
                                                             ===========      ===========
Net loss per common share basic and diluted, as reported     $     (0.01)     $     (0.02)
                                                             ===========      ===========
Proforma net loss per common share basic and diluted         $     (0.01)     $     (0.02)
                                                             ===========      ===========
</TABLE>

NOTE 5--NET LOSS PER SHARE

Basic EPS is computed by dividing income (loss) available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS is based on the weighted-average number of shares of common stock
and common stock equivalents outstanding at the end of the period. Common stock
equivalents have been excluded from the weighted-average shares for the three
months ended March 31, 2005 and 2004, as their inclusion would be anti-dilutive.
Stock options, common stock purchase warrants and convertible preferred stock
which could potentially dilute earnings per share in the future totaled
46,187,793 and 4,856,643 at March 31, 2005 and 2004, respectively.

NOTE 6--COMPREHENSIVE LOSS

The Company complies with the provisions of SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
comprehensive income and its components in the financial statements.


                                       9
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Comprehensive income, as defined, includes all changes in equity during a period
from non-owner sources. The only item of other comprehensive income (loss) that
the Company currently reports is unrealized gains and losses on investments in
marketable securities.

NOTE 7--LEGAL PROCEEDINGS

Albertson's Inc. ("Albertson's") filed an action against Schoolpop on October
31, 2003 related to certain alleged acts of Schoolpop prior to FUNDever
acquiring Schoolpop. Pursuant to the merger agreement between FUNDever and
Schoolpop, prior stockholders of Schoolpop agreed to indemnify FUNDever for any
damages incurred with regard to this action. Management has settled the
Albertson's litigation for $300,000, of which $20,000 was paid upon execution of
the final settlement agreement in August 2004, and $5,000 being paid monthly
over 56 months. FUNDever is offsetting contingent earn-out payments otherwise
payable to the former stockholders of Schoolpop that have agreed to indemnify
FUNDever for any damages with regard to this action. As of December 31, 2004,
$260,000 was due to Albertson's. Recovery through nonpayment of the earn-out
provision is recognized as the earn-out is expensed and as of December 31, 2004,
$119,540 in recovery had been recognized. As of March 31, 2005, $245,000 was due
to Albertson's. Recovery through nonpayment of the earn-out provision is
recognized as the earn-out is expensed and as of March 31, 2005, $142,213 in
recovery had been recognized.

Honey Baked Ham, Inc. and Gerard, Inc. filed an action in February 2004 against
Schoolpop in the Superior Court of California, County of Sonoma. The plaintiffs
were seeking to recover approximately $140,000 in damages as a result of
Schoolpop's January 2004 purchase of scrip assets from The National Scrip
Center, Inc. ("NSC"). On May 4, 2005 the parties entered into a Settlement
Agreement and Mutual General Release. The case was settled for an amount which
is not material to these financial statements.

On June 21, 2004, Mary Elizabeth Doherty, a spouse of a former employee of
Schoolpop, filed an action against Schoolpop in the United States District Court
for the Northern District of California alleging failure to pay ERISA benefits,
breach of contract, breach of fiduciary duty under ERISA and violation of
Section 502(a)(3) of ERISA. The plaintiff has alleged that she is entitled to
benefits under the Schoolpop's life insurance and accidental death policy and is
seeking to recover damages in the amount of $200,000 plus interest, resulting
from her husband's fatal automobile accident. The subject plan contains an
exclusion for benefits when the death is a result of participation in a felony
and Schoolpop understands that the felony exclusion should apply, since Mr.
Doherty's automobile accident was alcohol-related. However, the plaintiff
contends that the exclusion should not apply because the plaintiff's husband was
not provided with a summary plan description setting forth the felony acts
exclusion. Schoolpop was dismissed with prejudice as a party to the action in
October 2004.

Standard Insurance Company ("Standard") was Schoolpop's insurance carrier who is
also a defendant in the action by Ms. Doherty. Standard has not been dismissed.
On March 22, 2005, Standard filed a third-party complaint against Schoolpop for
violation of ERISA and breach of contract. Standard's complaint alleges that
Schoolpop failed to provide the plaintiff's husband with the summary plan
description setting forth the felony acts exclusion. Standard's claim is based


                                       10
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

on Schoolpop's status as designated ERISA plan administrator and on Standard's
interpretation of a purported indemnification clause in the plan policy.
Standard's complaint seeks indemnification by Schoolpop against damages arising
from Schoolpop's alleged failure to provide notice of the felony acts exclusion
to its chief executive officer. Litigation counsel for the Company has advised
the Company that it believes the underlying claims are without merit since (i)
the plaintiffs husband, as chief executive officer of Schoolpop, should
reasonably have been aware of the felony acts exclusion; and (ii) there is no
causation between any failure by Schoolpop to provide the plaintiffs husband
with a summary plan description setting forth the felony acts exclusion and the
damages suffered by the plaintiffs husband. Because litigation counsel for the
Company does not believe liability is probable, no accrual for this potential
liability has been recorded in our consolidated financial statements. However,
discovery on the indemnity claim has not begun. Based on a preliminary analysis,
it is possible that Schoolpop could be found liable on the indemnity claim if it
is found that Schoolpop did not distribute Standard's summary plan description.
If Schoolpop is liable for indemnity, it would be liable at least for Standard's
reasonable attorneys' fees.

At the time that Schoolpop purchased the scrip assets from NSC, it was
represented by NSC that the assets were free and clear of all liens and
encumbrances. Shortly after the closing, it was learned that the primary lender
of NSC had a lien on all of NSC's assets, including those purchased by
Schoolpop. Shortly after the closing, the lender verbally agreed to release the
security interest, but due to intervening events, including a bankruptcy
proceeding filed against NSC, has not yet fulfilled its agreement. Litigation
counsel to the Company has advised us that the lender should not prevail should
it attempt to enforce its security interest; nevertheless, if the lender should
attempt to enforce its security interest and is successful, the Company could be
required to compensate the lender to the extent of the value of the purchased
scrip assets which cost may be material. No accrual for this potential liability
has been recorded in our consolidated financial statements as the chances of the
lender seeking to enforce its security interest or any potential recovery in
seeking to enforce its security interest would be remote.

NOTE 8--NEW ACCOUNTING PRONOUNCEMENT

         In December 2004, the FASB issued Statement No. 123(R) which addresses
the accounting for stock-based payment transactions in which an employer
receives employee-services in exchange for equity securities of the company or
liabilities that are based on the fair value of the company's equity securities.
This standard eliminates use of APB 25 and requires such transactions to be
accounted for using a fair-value-based method and recording compensation expense
rather than optional pro forma disclosure. The new standard substantially amends
FASB Statement No. 123, Accounting for Stock-Based Compensation. FASB Statement
123(R) is effective for financial statements of small business issuers such as
the Company in the first interim or annual reporting period beginning after
December 15, 2005. Pro forma disclosures regarding the effect on the Company's
net loss and loss per common share for the three months ended March 31, 2005 and
2004, had the Company applied the fair value method of accounting or share-based
compensation as prescribed by SFAS123, are contained in Note 4. The Company has
not determined which method it will use in complying with Statement 123 (R), nor
has it determined what the impact will be on its earnings per share, although
such impact may have a material adverse effect on our results of operations.

                                       11
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 9--ACQUISITION

On January 9, 2004, Schoolpop purchased certain assets and assumed certain
liabilities from NSC, a Santa Rosa, California-based nonprofit company that is
in the scrip industry (gift certificates and store value purchase cards). Under
the terms of the agreement, the Company agreed to: (i) pay $200,000 in cash
three days after closing; (ii) pay a five-year contingent earn-out consisting of
2% of net revenue generated from specified customers; (iii) satisfy up to
$1,266,000 owed to certain schools and other nonprofit customers of NSC; and
(iv) assume approximately $244,166 in leases and deferred payments on computer
software and hardware. The cash portion of the purchase price has been deferred
and has been included in the accrued expenses on the accompanying consolidated
balance sheet as of March 31, 2005 Earnout payments are recorded as an
additional cost of the acquisition in the period the earnout is earned. There
was no earnout earned in the quarter ended March 31, 2005 and 2004 under this
agreement.

The preceding consideration is subject to further adjustment based upon the
ascertainment of revised figures and facts regarding the on-going business.
Subject to these adjustments and subsequent to the acquisition, the total amount
owed to certain schools and other nonprofit customers has been revised downward
to $525,249 and the amount of deferred payments on computer software has been
revised downward to $27,106. NSC had substantial debts owed to trade vendors and
other creditors, and Schoolpop did not agree to assume those liabilities.
Pursuant to the terms of the asset purchase agreement, the Company had the
obligation to honor credit balances to certain customers who continued doing
business with the Company for a one-year period expiring January 9, 2005. An
adjustment to the purchase price allocation has been made to account for the
expiration of this obligation in 2005 resulting in negative goodwill. This
negative goodwill, which is reflected on the Company's balance sheet at March
31, 2005 in other liabilities, will be reduced in subsequent periods by the
amount of the contingent earnout accrued, with any negative goodwill remaining
at the end of the earnout period to be recognized as extraordinary gain.

The following summarizes the allocation of the purchase price:


          Purchase Price:                        AMOUNT
                                              -----------
            Due to NSC                        $   200,000
            Due to customers                      525,249
            Capital lease obligation               27,106
                                              -----------
                  Total Purchase Price        $   752,355
                                              ===========

         Allocation of Purchase Price:
            Inventory, net                    $ 1,172,111
            Accounts receivable                   220,000
            Negative goodwill                    (713,862)
            Furniture, fixtures & equipment        74,106
                                              -----------
                  Total Assets                $   752,355
                                              ===========

                                       12
<PAGE>

                       LOYALTYPOINT, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 10--SUBSEQUENT EVENTS

On April 5, 2005, we entered into the Second Amendment to the Reseller Agreement
Between Schoolpop, Inc. and American Express Incentive Services, L.L.C. (the
"Agreement"). The Agreement reduces the fee we are required to pay to maintain
our exclusive rights in the non-profit marketplace from $1,250,000 to $125,000
and limits our exclusive product offering to the Persona Select Card. In
addition, we are permitted to sell our remaining inventory of other American
Express scrip cards.

On April 11, 2005 we sold four of our search-oriented patents to NeoMedia
Technologies, Inc. for $1,500,000 in cash and a 10-year royalty.

Effective April 15, 2005, we entered into a Reseller Agreement Between
Schoolpop, Inc. and a major distributor whose products are to be included in
Schoolpop's school supply kits (the "Agreement"). The Agreement expires on
December 31, 2009 and provides for price rebates based upon the volume of
products sold during a given year. The Agreement provides for 90 day termination
without cause by either party. Mr. Paul Robinson, our chief executive officer,
has guaranteed payment of any credit extended to us pursuant to the Agreement.

                                       13
<PAGE>

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

The following discussion of our financial condition and results of operations
should be read together with the financial statements and related notes included
in this Report. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in those forward-looking statements as a result of certain factors,
including, but not limited to, those contained in the discussion on
forward-looking statements that follows this section.

OVERVIEW

Effective on February 18, 2004, the Company merged with FUNDever in a reverse
merger transaction. We now operate as a holding company for merchant, school,
and nonprofit loyalty marketing programs. We market online, store, and
catalog-based loyalty programs that generate contributions to schools,
nonprofits and other organizations, based upon parent and supporter purchases.
The mission of Schoolpop, our principal subsidiary, is to help eliminate the
negative impact of budget shortfalls by providing a one-stop shop for schools
and other nonprofits to enroll in a suite of nontraditional fundraising programs
that are hassle-free for schools, convenient for parents, and safe for students.

Highlights for the first quarter of 2005 include:

     o   Our gross margins improved substantially to approximately 4.2% as
         compared to approximately 1.4% for the same quarter in 2004;
     o   Our revenue was lower in the quarter ended March 31, 2005;
     o   Our net operating loss for the quarter increased by approximately
         $96,000;
     o   Our working capital deficit increased by approximately $1.1 million to
         $3,036,253 as of March 31, 2005. However, we sold our patents in the
         beginning of the second quarter of 2005 and received $1.5 million in
         cash proceeds. See Note 10 "Subsequent Events".

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of long-lived assets, and contingencies and litigation. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.

Impairment of long-lived assets. The Company evaluates its property and
equipment and intangible assets subject to amortization for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be


                                       14
<PAGE>

impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.

Goodwill and Nonamortizable Intangible Assets: Goodwill and nonamortizable
intangible assets are tested for impairment at least on an annual basis or more
frequently if events or changes in circumstances indicate that the asset might
be impaired.

Contingencies and litigation. We are party to various claims and legal
proceedings. We record a reserve for these matters when an adverse outcome is
probable and the amount of the potential liability is reasonably estimable.
Although the ultimate outcome of these matters is currently not determinable, we
do not believe that the resolution of these matters will have a material effect
upon our financial condition, results of operations or cash flows. See "Legal
Proceedings" footnote.

RESULTS OF OPERATIONS

The following table summarizes our results of operations as a percentage of net
revenue for the three months ended March 31, 2005 and 2004:

    (Amounts in thousands,
    except per share data)          THREE MONTHS ENDED MARCH 31,
                              ---------------------------------------
                                      2005                  2004
                              -----------------     -----------------
         Net revenue          $  7,477      100%    $ 11,972      100%
         Gross profit              311      4.1%         169      1.4%
         Operating expenses      1,673     22.3%       1,435     11.9%
                              --------    -----     --------    -----

         Net loss             $ (1,407)   (18.8)%   $ (1,338)   (11.1)%
                              ========    =====     ========    =====
         Loss per share,
         basic and diluted    $  (0.01)             $  (0.02)
                              ========               =======

Net Revenue
-----------

Our revenue for the three months ended March 31, 2005 was $7,477,348, compared
to revenues of $11,972,337 for the same period in 2004, a decrease of $4,494,989
or 38%. This decrease is primarily attributable to the discontinuation of our
selling certain AEIS product offerings in our gift card business, which
accounted for approximately $8,900,000 of our revenues in the three months ended
March 31, 2004. This loss of revenue was partially offset by an increase in
sales of other gift cards, including other AEIS gift cards, revenues from our
auction business which was not active in 2004, and a 30% year-over-year increase
in our shopping rebate revenue.

Cost of Revenue
---------------

Our cost of revenue for the three months ended March 31, 2005 was $7,166,625,
compared to $11,803,627 for the same period in 2004, a decrease of $4,637,002 or
39%. This decrease is primarily attributable to the discontinuation of the AEIS
gift cards, as previously discussed. As a percentage of revenue, our cost of
sales decreased 2.7%, from 98.6% of revenues to 95.9% of revenues. This
improvement is a result of an increase in sales of our higher margin product
offerings, shopping and auctions, as well as better margins in our gift card
business without the AEIS products.

                                       15
<PAGE>

Operating Expenses
------------------

Our operating expenses for the three months ended March 31, 2005 were
$1,672,834, compared to $1,434,789 for the same period in 2004, an increase of
$238,045 or 17%. The increase is primarily attributable to greater headcount
resulting in an increase in salaries of $237,800 from $609,905 to $847,705.

Interest Expense
----------------

Interest expense for the three months ended March 31, 2005 was $44,517, compared
to $71,683 for the same period in 2004, a decrease of $27,166 or 38%. This
decrease is primarily attributable to the conversion of certain debt into equity
securities during 2004 and the related deferred debt discount associated with
such debt being recognized in 2004, prior to conversion.

Net Loss
--------

Our net loss for the three months ended March 31, 2005 was $1,406,628, compared
to $1,337,762 for the same period in 2004, an increase of $68,866 or 5%. The
increase in the net loss was primarily attributable to the higher operating
expenses increasing $238,045, being partially offset by the improvement in gross
profit of $142,013 and a reduction of interest expense of $27,166.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended March 31, 2005, we used $759,243 in cash for
operations compared to $386,567 for the same period in 2004, an increase of
$372,676 or 96%. The primary components were a net loss of $1,406,628 and
decrease in accounts payable and inventory reserves, partially offset by a
decrease in inventory.

For the three months ended March 31, 2005, net cash used in investing activities
was $4,668 compared to net cash provided by investing activities of $690,875 for
the corresponding period in 2004. The purchase of fixed assets in 2005 used
$4,668. In 2004, purchases of fixed assets used $30,222, while we received
$721,097 in cash from the Barpoint.com merger.

For the three months ended March 31, 2005, net cash provided by financing
activities was $112,474 compared to net cash provided by financing activities of
$52,114 in the same period for 2004, an increase of 116%. In the most recent
quarter, proceeds from our line of credit provided $160,003, partially offset by
$47,529 in principal payments on loans and capital leases. In the quarter ended
March 31, 2004, we received proceeds of $225,000 from the issuance of notes
payable. No proceeds from notes were received thus far in 2005.

At March 31, 2005, we had approximately $429,292 in cash. As of May 10, 2005, we
had approximately $1.5 million in cash which represents the proceeds from the
sale of our patents, offset by continued use of cash to fund operations. At
March 31, 2005, our current liabilities exceeded our current assets by
approximately $3,036,253.

We have historically generated insufficient cash flow from operations to cover
our operating expenses. We have had to raise additional capital through
commercial bank loans and private investors in order to meet our operating
capital needs. We have also been able to obtain capital through the acquisition
of companies and assuming the cash and cash equivalent balances of those


                                       16
<PAGE>

companies. We are currently seeking to extend our line of credit for another
year. if we are unsuccessful and are required to pay the $590,003 balance due on
the line of credit, it will require us to raise additional capital. We have not
formulated any plans to obtain any additional equity or debt financing, and the
Company gives no assurances that it will be able to obtain adequate capital
resources in the future on acceptable terms and conditions. any equity
financing, if obtainable would be very dilutive.

CAPITAL EXPENDITURES AND COMMITMENTS

Except for the purchase and implementation of new accounting software estimated
to cost approximately $150,000 and upgrading our website at an estimated cost of
$50,000, we do not currently have any plans to acquire a material amount of
fixed assets during 2005.

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, we enter into contractual commitments to
purchase materials and services from suppliers in exchange for favorable pricing
arrangements or more beneficial terms. We also have entered into acquisition
agreements which require us to pay the sellers contingent earn-outs based upon
the future revenue or profit of the businesses or assets we acquired. For the
three month period ended March 31, 2005, earn-out expense was $22,673.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to our liquidity, the
impact of UCC-1 liens on the NSC assets, renewal of our line of credit,
resolution of litigation, and anticipated capital expenditures. Additionally,
words such as "seek," "intend," "believe," "plan," "estimate," "expect,"
"anticipate" and other similar expressions are forward-looking statements within
the meaning of the Act. Some or all of the results anticipated by these
forward-looking statements may not occur. Forward-looking statements involve
known and unknown risks and uncertainties, both general and specific to the
matters discussed in this press release. Factors that could cause or contribute
to such differences include, but are not limited to, the future price of our
stock, the Company's ability to manage its anticipated growth, and resolving
contractual issues. Further information on the Company's risk factors is
contained in the Company's other filings with the Securities and Exchange
Commission ("SEC") including its Form 10-KSB for the year ended December 31,
2004. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as the result of new information, future
events or otherwise.

ITEM 3.  CONTROLS AND PROCEDURES

We carried out an evaluation required by Rule 13a-15(b) of the Securities
Exchange Act of 1934 under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer,
of the effectiveness of the design and operation of our "disclosure controls and
procedures" as of the end of the period covered by this Report.

Disclosure controls and procedures are designed with the objective of ensuring
that (i) information required to be disclosed in an issuer's reports filed under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms and (ii)
information is accumulated and communicated to management, including our chief
executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosures.

                                       17
<PAGE>

The evaluation of our disclosure controls and procedures included a review of
our objectives and processes and effect on the information generated for use in
this Report. This type of evaluation will be done quarterly so that the
conclusions concerning the effectiveness of these controls can be reported in
our periodic reports filed with the SEC. We intend to maintain these controls as
processes that may be appropriately modified as circumstances warrant.

Based on their evaluation, our chief executive officer and chief financial
officer have concluded that our disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company required
to be included in our periodic reports filed with the SEC as of the end of the
period covered by this Report. There were no changes in our internal control
over financial reporting that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. However, a control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Management necessarily
applied its judgment in assessing the benefits of controls relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected. The design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote. Because of the inherent limitations in a control
system, misstatements due to error or fraud may occur and may not be detected.

                                       18
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On June 21, 2004, Mary Elizabeth Doherty, a spouse of a former employee of
Schoolpop, filed an action against Schoolpop in the United States District Court
for the Northern District of California alleging failure to pay ERISA benefits,
breach of contract, breach of fiduciary duty under ERISA and violation of
Section 502(a)(3) of ERISA. The plaintiff has alleged that she is entitled to
benefits under the Schoolpop's life insurance and accidental death policy and is
seeking to recover damages in the amount of $200,000 plus interest, resulting
from her husband's fatal automobile accident. The subject plan contains an
exclusion for benefits when the death is a result of participation in a felony
and Schoolpop understands that the felony exclusion should apply, since Mr.
Doherty's automobile accident was alcohol-related. However, the plaintiff
contends that the exclusion should not apply because the plaintiff's husband was
not provided with a summary plan description setting forth the felony acts
exclusion. Schoolpop was dismissed with prejudice as a party to the action in
October 2004.

Standard Insurance Company ("Standard") was Schoolpop's insurance carrier who is
also a defendant in the action by Ms. Doherty. Standard has not been dismissed.
On March 22, 2005, Standard filed a third-party complaint against Schoolpop for
violation of ERISA and breach of contract. Standard's complaint alleges that
Schoolpop failed to provide the plaintiff's husband with the summary plan
description setting forth the felony acts exclusion. Standard's claim is based
on Schoolpop's status as designated ERISA plan administrator and on Standard's
interpretation of a purported indemnification clause in the plan policy.
Standard's complaint seeks indemnification by Schoolpop against damages arising
from Schoolpop's alleged failure to provide notice of the felony acts exclusion
to its chief executive officer. Litigation counsel for the Company has advised
the Company that it believes the underlying claims are without merit since (i)
the plaintiffs husband, as chief executive officer of Schoolpop, should
reasonably have been aware of the felony acts exclusion; and (ii) there is no
causation between any failure by Schoolpop to provide the plaintiffs husband
with a summary plan description setting forth the felony acts exclusion and the
damages suffered by the plaintiffs husband. Because litigation counsel for the
Company does not believe liability is probable, no accrual for this potential
liability has been recorded in our consolidated financial statements. However,
discovery on the indemnity claim has not begun. Based on a preliminary analysis,
it is possible that Schoolpop could be found liable on the indemnity claim if it
is found that Schoolpop did not distribute Standard's summary plan description.
If Schoolpop is liable for indemnity, it would be liable at least for Standard's
reasonable attorneys' fees.

ITEM 2.  CHANGES IN SECURITIES

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         Not applicable.



                                       19
<PAGE>

ITEM 5.  OTHER INFORMATION

         Not applicable.


ITEM 6.  EXHIBITS AND REPORTS  ON FORM 8-K

         (a)      Exhibits

                  EXHIBIT
                  NUMBER     DESCRIPTION
                  -------    ---------------------------------
                   31.1      Certification of CEO
                   31.2      Certification of CFO
                   32.1      Section 1350 certification of CEO
                   32.2      Section 1350 certification of CFO

         (b)      Reports on Form 8-K

                  None.

                                       20
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf on May 16, 2005 by the
undersigned, thereunto duly authorized.


                                    LOYALTYPOINT, INC.


                                    /s/ Paul Robinson
                                    --------------------------------------
                                    Paul Robinson, Chief Executive Officer



                                    /s/ Jeffrey S. Benjamin
                                    --------------------------------------------
                                    Jeffrey S. Benjamin, Chief Financial Officer


                                       21