**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB/A**




Amendment
      No. 3






(Mark
      One)





**[X]**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      fiscal year ended December 31, 2004.





**[_]**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      transition period from ________ to _________.





Commission
      File Number: 0-29963









**FINDEX.COM,
      INC.**


(Name
      of
      Small Business Issuer in its Charter)





Nevada
              88-0379462(State
                  or other Jurisdiction of
              (I.R.S.
                  EmployerIncorporation
                  or Organization)
              Identification
                  No.)
  11204
                  Davenport Street, Suite 100, Omaha, Nebraska
              68154(Address
                  of Principal Executive Offices)
              (Zip
                  Code)





(402)
      333-1900


(Issuer’s
      Telephone Number, Including Area Code)





**Securities
      registered under Section 12(b) of the Exchange Act:**





None





**Securities
      registered under Section 12(g) of the Exchange Act:**





Common
      Stock, $.001 par value


(Title
      of
      Class)





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
      [X] No [_]**





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated
      by
      reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. **[_]**







Revenues
      for the fiscal year ended December 31, 2004 totaled
      $5,422,097.






As
      of October 20, 2005, the aggregate market value of the voting and
      non-voting common equity held by non-affiliates computed by reference to the
      average of the closing bid and asked prices on such date was approximately
$2,484,000.













At October
      20, 2005, the registrant had outstanding 48,619,855 shares of common stock,
      of
      which there is only a single class.







**DOCUMENTS
      INCORPORATED BY REFERENCE**





None.





Transitional
      Small Business Disclosure Format (check one):





Yes
      __ No X









































Table
          of Contents





**TABLE
      OF
      CONTENTS**




**Page
                Number****PART
                I**ITEM
                1. Description of Business.
            1ITEM
                2. Description of Property.
            14ITEM
                3. Legal Proceedings.
            14ITEM
                4. Submission of Matters to a Vote of Security
                Holders.
            14**PART
                II**ITEM
                5. Market for Common Equity and Related Stockholder
                Matters.
            15ITEM
                6. Management’s
                Discussion and Analysis or Plan of Operation.
            18ITEM
                7. Financial Statements.
            F-1ITEM
                8. Changes In and Disagreements With Accountants on
                Accounting and Financial Disclosure.
            37ITEM
                8A.Controls and Procedures.
            37ITEM
                8B. Other Information.
            38**PART
                III**ITEM
                9. Directors, Executive Officers, Promoters and Control
                Persons; Compliance With Section 16(a) of the Exchange
                Act.
            38ITEM
                10. Executive Compensation.
            41ITEM
                11. Security Ownership of Certain Beneficial Owners
                and Management and Related Stockholder Matters.
            43ITEM
                12. Certain Relationships and Related
                Transactions.
            44ITEM
                13. Exhibits.
            45ITEM
                14. Principal Accountant Fees and Services.
            46









-i-
 Table
          of Contents





**PART
      I**





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




This
      Form
      10-KSB/A, press releases and certain information provided periodically in
      writing or orally by our officers or our agents contain statements which
      constitute forward-looking statements. The words “may”, “would”, “could”,
“will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”,
      and similar expressions and variations thereof are intended to specifically
      identify forward-looking statements. These statements appear in a number of
      places in this Form 10-KSB/A and include all statements that are not statements
      of historical fact regarding the intent, belief or current expectations of
      us,
      our directors or our officers, with respect to, among other things: (i) our
      liquidity and capital resources, (ii) our financing opportunities and plans,
      (iii) our ability to attract customers to generate revenues, (iv) competition
      in
      our business segment, (v) market and other trends affecting our future financial
      condition or results of operations, (vi) our growth strategy and operating
      strategy, and (vii) the declaration and/or payment of dividends.




Investors
      and prospective investors are cautioned that any such forward-looking statements
      are not guarantees of future performance and involve risks and uncertainties,
      and that actual results may differ materially from those projected in the
      forward-looking statements as a result of various factors. The factors that
      might cause such differences include, among others, those set forth in Part
      II,
      Item 6 of this annual report on Form 10-KSB/A, entitled Management’s
      Discussion and Analysis or Plan of Operation, including without limitation
      the
      risk factors contained therein. Except as required by law, we undertake no
      obligation to update any of the forward-looking statements in this Form 10-KSB/A
      after the date of this report.




**ITEM
      1. DESCRIPTION OF BUSINESS.**




**OVERVIEW**




We
              develop, publish, market, and distribute and directly sell off-the-shelf
              consumer and organizational software products for PC and PDA platforms.
              We
              develop our software products through in-house initiatives supplemented
              by
              outside developers. We market and distribute our software products
              principally
              through direct marketing and Internet sales programs, but also through
              secular
              and non-secular wholesale retailers.
  ****CORPORATE
              FORMATION, LEGACY & SUBSIDIARIES****





We
        were
        incorporated in the State of Nevada on November 7, 1997 as EJH Entertainment,
        Inc. On December 4, 1997, a predecessor corporation with the same name as
        our
        own but domiciled in Idaho was merged with and into us. Although the predecessor
        Idaho corporation was without material assets or operations as of the time
        of
        the merger, since being organized in 1968, it had historically been involved
        in
        mining and entertainment businesses unrelated to our current business.
  Beginning
          in 1997, and although we were not then a reporting company under the Securities
          Exchange Act, our common stock was quoted on the OTC Bulletin Board (originally
          under the symbol “TIXX”, which was later changed to “TIXXD”). On May 13, 1999,
          we changed our name to FINdex.com, Inc. On March 7, 2000, in an effort
          to satisfy a newly imposed NASD Rule eligibility requirement that
          companies
          quoted on the OTC Bulletin Board be fully reporting under the Securities
          Exchange Act (thereby requiring recently audited financial statements)
          and
          current in their filing obligations, we acquired, as part of a share exchange
          in
          which we issued 150,000 shares of our common stock, all of the outstanding capital
          stock of Reagan Holdings, Inc., a Delaware corporation. At the time of
          this
          transaction, Reagan Holdings was subject to the requirements of having
          to file
          reports pursuant to Section 13 of the Securities Exchange Act, had recently
          audited financial statements and was current in its reporting obligations.
          Having no operations, employees, revenues or other business plan at the
          time,
          however, it was a public shell company. As a result of this transaction,
          Reagan
          Holdings, Inc. became our wholly-owned subsidiary and we became the successor
          issuer to Reagan Holdings for reporting purposes pursuant to Rule 12g-3
          of the
          Securities Exchange Act. Shortly thereafter, we changed our stock symbol
          to
“FIND”. Though it does not currently have any operations, employees, or
          revenues, Reagan Holdings remains our wholly-owned
          subsidiary.


-1-
 Table
          of Contents





In
      addition to Reagan Holdings, we also have one other wholly-owned subsidiary,
      Findex.com, Inc. (*i.e.* the same name as our own), a Delaware
      corporation. Like Reagan Holdings, this entity, too, does not currently have
      any
      operations, employees, or revenues. This subsidiary resulted from an acquisition
      on April 30, 1999 pursuant to which we acquired all of the issued and
      outstanding capital stock of FINdex Acquisition Corp., a Delaware corporation,
      from its then stockholders in exchange for 4,700,000 shares of our common stock,
      which, immediately following the transaction, represented 55% of our total
      outstanding common stock. Our purpose for this acquisition was to broaden our
      then-existing stockholder base, an important factor in our effort to develop
      a
      strong market for our common stock. On May 12, 1999, in exchange for the
      issuance of 457,625 shares of FINdex Acquisition Corp. common stock, FINdex.com,
      Inc., another Delaware corporation (originally incorporated in December 1995
      as
      FinSource, Ltd.), was merged with and into FINdex Acquisition Corp., with FINdex
      Acquisition Corp. remaining as the surviving entity. Our purpose for this merger
      was to acquire a proprietary financial information search engine for the
      Internet which was to serve as the cornerstone for a Web-based development-stage
      business, but which has since been abandoned. As part of the certificate of
      merger relating to this transaction, FINdex Acquisition Corp. changed its name
      to FINdex.com, Inc. We currently own 4,700,000 shares of FINdex.com, Inc. (the
      Delaware corporation), representing 100% of its total outstanding common stock.




**STRATEGY**


The
        common thread among our current software products is their target constituency,
        consumers that share a devotion to or interest in Christianity and faith-based “ inspirational ” values.
        Our focus is to become the largest worldwide provider of Bible study
        and
        related faith-based software products through ongoing internal development
        of
        new products, expansion and upgrade of existing products and strategic product
        line and/or corporate acquisitions and licensing. Specifically, our development
        strategy includes:
  **Creating
        and
        Maintaining Diversity in Our Product Titles, Platforms and Market
        Demographic**
 
 We
        are
        committed to creating and maintaining a diversified mix of titles and title
        versions to mitigate our operating risks, and broaden market appeal within
        our
        demographic. Therefore, we strive to develop and publish titles and title
        versions spanning a wide range of categories, including bible study, financial
        and church management, pastoral products, children ’ s
        software and language tutorials. We may also design our software for use
        on
        multiple platforms in order to reach a greater potential audience. There
        are a
        number of factors that we take into consideration when determining the
        appropriate platform for each of our titles and title versions, including,
        amongst others, economic cost, the platform ’ s
        user
        demographics and the competitive landscape at the time of a title or title
        version’s release.
  **Creating,
        Acquiring
        and Maintaining Strong Brands**
 We
          attempt to focus our development and publishing activities principally
          around
          software products that are, or have the potential to become, titles and
          title
          versions possessing sustainable consumer appeal and brand recognition.
          To that
          end, we are continually in pursuit of intellectual property licensing
          opportunities with respect to software titles and title versions that are
          strategically aligned with our existing product line and focus. We have
          entered
          into a number of such strategic relationships with the owners of various
          forms
          of intellectual property which have allowed us to acquire the rights to
          publish
          content and develop titles and title versions based upon such intellectual
          properties. In addition, we may acquire intellectual property licenses
          in the
          future for products outside of our current area of focus.
 Our
          development strategy further includes the pursuit of acquisition and related
          strategic growth opportunities involving other companies that sell faith-based
          merchandise and services. As part of this strategy, we may acquire businesses
          that (i) only recently commenced operations, (ii) are development-stage
          enterprises in need of additional funds to expand into new products or
          markets,
          or (iii) are established businesses that may be experiencing financial
          or
          operating difficulties and need additional capital. We may also pursue
          opportunities to acquire assets of other companies and establish wholly-owned
          subsidiaries in various businesses or purchase existing businesses as
          subsidiaries. Furthermore, although we have no current intentions or plans
          to do
          so, we have not ruled out the pursuit of transactional opportunities in
          areas
          outside the faith-based market demographic.
 -2-
 Table
            of Contents
 ****
 Because
        acquisition and related opportunities may occur in relation to businesses
        at
        various stages of development, the task of comparative investigation and
        analysis of such business opportunities is likely to be extremely difficult
        and
        complex. We are also likely to incur significant legal and accounting costs
        in
        connection with our pursuit of such opportunities, including the legal fees
        for
        preparing acquisition documentation, due diligence investigation costs and
        the
        costs of preparing reports and filings with the SEC.
  **Disciplined
        Product
        Selection and Development Processes**
 
 The
        success of our business depends, in significant part, on our ability to develop
        titles and title versions that will generate appreciable unit volume sales
        while
        simultaneously meeting our high quality standards. We use a formal control
        process for the selection, development, production and quality assurance
        of our
        titles and title versions. We apply this process to products under development
        with external, as well as internal, resources. This control process includes
        upfront concept evaluation as well as in-depth reviews of each project on
        numerous levels and at various intervals during the development process by
        a
        team that includes our senior management and a number of our key technical,
        marketing and product development personnel.
  **Internal
        and External
        Development Groups**
 
 We
        develop our titles and title versions using a strategic combination of our
        internal development group and external, independently contracted developers,
        a
        team of which are located in the former Soviet Union and several others of
        which
        are located in the United States.
 
 We
        strive
        to provide our in-house team the independence and flexibility needed to foster
        creativity and teamwork. Employing an in-house development team provides
        us with
        the following advantages:
  •
                Our
                    developers work collaboratively, sharing development techniques,
                    software
                    tools, software engines and useful experience, to form a strong
                    collective
                    and creative environment;
 •
                The
                    ability to re-focus efforts quickly to meet the changing needs
                    of key
                    projects;
 •
                More
                    control over product quality, scheduling and costs; and
 •
                Our
                    developers are not subject to the competing needs of other software
                    publishers.
 
 In
          March
          2004, we opened an in-house development office in Naperville, Illinois.
 
 We
          select
          our external developers based on their track record and expertise in producing
          titles and title versions within certain categories. This selection process
          allows us to strengthen and leverage the particular expertise of our internal
          and external development resources, as well as to scale up and down as
          necessary, to maximize the productivity of our development
          budget.
  PRODUCT
        DEVELOPMENT
 We
          are
          committed to the ongoing development of our existing software as well as
          the
          development of new software titles and title versions. Our product development
          methodology is modeled around elements of the consumer packaged goods and
          software industry. Within this model, our management assesses the current
          market
          and establishes a direction for each of our products, while key personnel
          monitor quality, delivery schedules, development milestones and budget.
          Prior to
          final approval, whether developed internally or externally by our third-party
          developers, we test all new titles and title versions for bugs.
  The
          development time for a PC-based title or title version is between three and twelve months
          and the average development cost ranges from $8,000 to
          $450,000. The
          development time for a PDA-based title or version is
          between two and six months
          and the average development cost ranges from $30,000 to
          $250,000. Gross
          margin percentages for PDA-based software are significantly lower than
          the gross
          margin percentages for PC-based software and the manufacturing time is
          significantly longer than that associated with PC-based software, with
          lead time
          for PC-based software at approximately one to three weeks from the placement
          of
          an order, as opposed to four to six weeks for PDA-based software.
 -3-
 Table
            of Contents
  **OUR
        PRODUCTS**




Our
      focus
      is to become the largest worldwide provider of Bible study and related
      faith-based software products. To that end, we utilize a brand structure and
      market our largest selling titles and title versions under the distinct key
      brand: QuickVerse®and
      Membership Plus®.
      We
      support this strategy through the regularly scheduled introduction of new titles
      and title versions featuring this brand. In the twelve monthsended
      December 31, 2004,
      we
      released a total of twenty-onetitles
      and title versions for PC and PDA platforms. Through the remainder of
      fiscal 2005 we currently plan on releasing a total of approximately sixtitles
      and title version for PC and PDA platforms, including the introduction of titles
      and title versions for Macintosh® operating systems beginning in late
      spring/early summer 2005.


Our
        faith-based software titles and title versions are currently divided among
        the
        following six categories:
  •
                Bible
                      Study
 •
                Financial/Office
                      Management Products for Churches and other Faith-Based
                      Ministries
 •
                Print
                      & Graphic Products
 •
                Pastoral
                      Products•
                Children’s
                    Products•
                Language
                    Tutorial Products.
  
  **Bible
          Study**


For
          the
          fiscal year ended December 31, 2004, approximately 63% of our revenues
          were
          derived from sales of our flagship QuickVerse ® ,
          an
          industry-leading Bible-study software now in its 16 th year and
          9 th version,
          which is available in an array of content package variations ranging in
          retail
          price from $4.50 to $299.95. Originally introduced into the market in 1989,
          QuickVerse ® has sold
          over one million copies since its introduction and is currently believed
          by us
          to be the market leader in its category.
 QuickVerse®simplifies biblical research, allowing users to view multiple reference
        materials, including Bibles, dictionaries, commentaries and encyclopedias,
        side-by-side on the computer screen. A built-in QuickSearch feature enables
        the
        user to highlight a word or Bible verse and find all of its occurrences in
        a
        particular text. Advanced search options also enable users to search by word,
        phrase or verse across multiple books. QuickVerse®2005,
        our latest version, is currently available in four CD-Rom editions. Each
        edition
        of QuickVerse®contains
        several Bible translations (*e.g.*,
        the
        King James Version, the American Standard Version, etc.) along with numerous
        reference titles (*e.g.*,
        dictionaries, commentaries, encyclopedias, etc.). The QuickVerse®family
        of products includes: the QuickVerse®Essentials Edition (which includes 9 Bibles and 40 reference titles), the
        QuickVerse®Standard
        Edition (which includes 12 Bibles and 56 reference titles), the
        QuickVerse®Expanded
        Edition (which includes 14 Bibles and 95 reference titles), and the
        QuickVerse®Deluxe
        Edition (which includes 18 Bibles and 144 reference titles). Each
        QuickVerse®purchase
        includes access to additional books and content, which can be unlocked or
        downloaded and made accessible for an additional fee.
  -4-
 Table
            of Contents
 QuickVerse®
          PDA, an industry-leading PDA Bible-study software, is compatible on both
          Pocket
          PC® and Palm® OS operating systems, and is currently in
          its 3rd year and 2nd version. This program provides the
          same simplified access and many of the personal Bible study features found
          in
          the desktop QuickVerse® versions. QuickVerse® PDA is
          currently available in four editions as a download and in CD-Rom. Each
          edition
          of QuickVerse® PDA contains several Bible translations
          (*e.g.*, the King James Version, the American Standard Version, etc.)
          along with numerous reference titles (*e.g.*, dictionaries, commentaries,
          encyclopedias, etc.). The QuickVerse® PDA family of products
          includes: the Standard Edition (which includes 3 Bibles and 4 reference
          titles),
          the Deluxe Edition (which includes 5 Bibles and 6 reference titles), the
          Life
          Application Study Bible (which includes 1 Bible and 11 reference titles)
          and a
          secular version (which includes 2 Bibles and 4 reference titles). Each
          edition
          contains 25 scripture reading plans and provides the user with the ability
          to
          create their own.
  QuickVerse  Left
        Behind ® Series,
        a New York Times ® Best-Selling book series and the newest addition to the QuickVerse ® PDA
        Bible software family, is compatible on both Pocket PC ® and
        Palm ® OS
        operating systems and was released in 2004. This program provides a new way
        to
        read, reference, recall, retrieve, note, search, and study fiction and
        non-fiction. QuickVerse  Left
        Behind ® Series
        is currently available in four editions as a download and in CD-Rom. Each
        edition contains three volumes from the Left Behind ® Series,
        1 Bible translation, 4 reference titles and 36 scripture reading plans.
 We
          expect
          to introduce QuickVerse ® Macintosh beginning in late spring/early summer 2005. QuickVerse ® Macintosh is compatible with Macintosh ® OS X
          10.3 or higher operating systems. This program will be available in two
          editions
          and provide access to several Bible translations ( *e.g.* ,
          the
          King James Version, the American Standard Version, etc.) along with numerous
          reference titles ( *e.g.* ,
          dictionaries, commentaries, encyclopedias, etc.). The QuickVerse ® Macintosh family of products contains numerous Search Panel features, including
          user-defined book categorization, desktop books, download books, interactive
          workbooks and daily reading plans, as well as an exclusive Preview Drawer,
          allowing users to have an unlimited number of books open at any
          time.
 QuickVerse ® customers
          include (i) individuals devoted to or otherwise interested in studying
          Christianity and (ii) religious and other spiritual organizations including
          schools, churches and other faith-based ministries.
  In
          addition to QuickVerse ® ,
          we also
          develop and market certain other Bible study software packages. These include
          the Complete Bible Resource Library ® ,
          the
          Book ® ,
          The
          Life Application Bible ® ,
          A Walk
          in the Footsteps of Jesus ® ,
          Adam
          Clark’s
          Commentary on the Bible ® ,
          and
          Dictionaries of the New Testament ® .
          Although our prices are subject to change from time to time, these titles
          currently range in retail price from $9.95 to $99.95 per unit.
  **Financial/Office
            Management Products for Churches and other Christian Faith-Based
            Ministries**
 
 For
          the
          fiscal year ended December 31, 2004, approximately 28% of our revenues
          were
          derived from sales of Membership Plus ® ,
          an
          industry-leading church management software now in its 9 th version.
          Membership Plus ® is
          available in each of a standard and a deluxe package at retail prices of
          $149.95
          and $349.95 respectively. Each of these product packages provides church
          database, financial management and church productivity tools, including
          those
          designed to streamline church office accounting, tasks and scheduling,
          track
          membership and contributions, organize membership databases, and provide
          efficiency in producing targeted mailings, attendance reports and IRS-compliant
          contribution receipts. The deluxe package is equipped with a broader
          functionality and range of features, including, for example, a number of
          templates for legal agreements frequently used by these types of organizations
          and a fund based accounting function.
  Membership
          Plus ® is
          designed to serve the unique needs of the churches, “ para-church ” organizations and ministries, and non-profit entities. The term “ para-church ” has been
          developed by the religious community to refer to religious organizations
          which
          have some of the characteristics of a church, but which are not what most
          people
          would generally consider to constitute a church, including a defined
          congregation .
          Some “ para-church ” organizations are treated as churches for some reasons, and as religious
          organizations which are not churches for others. A few examples of a “ para-church ” organization are Campus Crusade for Christian Ministry Resources, Promise
          Keepers, and Josh McDowell Ministry.
  -5-
 Table
              of Contents
 Over
            80,000 churches and faith-based organizations have purchased Membership
            Plus ® since
            its introduction in 1990. Membership Plus ® 2005,
            our latest version, is currently available in two CD-Rom editions: Membership
            Plus ® Standard
            and Membership Plus ® Deluxe.
            We have approximately 50,000 registered users for this product.
 **Print
&
          Graphic
          Products**
  We
            currently sell/distribute ClickArt Christian Publishing ® Suite
            III, which is a full desktop publishing package containing over 13,000
            Christian
            images, icons, maps, Catholic and Jewish imagery and ethnically diverse,
            family-oriented illustrations to be used in the creation of a wide range
            of
            printed materials including newsletters, bulletins, posters, fliers,
            mailings,
            calendars, and reports. We also publish/distribute Religious ClipArt ® and
            Christian Images ® .
            Both of
            these products are CD-Rom Clipart products that contain faith-based and
            Christian graphical images that can be used in the production of other
            content
            related projects. In addition, we also distribute several titles produced
            and
            distributed by International Microcomputer Software, Inc. (“IMSI”)a leading developer of software for both professional and home
            users,
            including ClipArt
            & MoreTM2.5
            Million and QuickStartTMPrint
            Studio Pro Deluxe.
 Although
            our prices are subject to change from time to time, our print and graphic
            products range in price from $9.99 to $39.99 per unit. In the aggregate,
            and for
            the fiscal year ended December 31, 2004, 3% of our revenues were derived
            from
            sales of these products.
  **Pastoral
          Products**
 
 We
          currently produce and distribute/sell a line of pastoral products designed
          to
          assist faith-based ministries in streamlining sermon development and research
          tasks and in organizing responsibilities. These titles include the following:
  •
                  Sermon
                          Builder®4.0 Deluxe, which is a database compilation of illustrations,
                          anecdotes,
                          quotations, proverbs and bits of humor from general topics
                          like children
                          and angels to specific Bible passages, which users can
                          use to bring
                          messages to a congregation or classroom.
 •
                  Ministry
                          Notebook®2.0, which is an organizational tool for users to keep
                          better track of
                          ministry-related paperwork including sermons, prayer requests,
                          personal
                          libraries, telephone contacts, and expense reports.
 •
                  Daily
                          Journal®,
                          which is a tool for entry and recordation of personal thoughts,
                          important
                          family and business events.
 Although
          our prices are subject to change from time to time, our pastoral products
          range
          in price from $9.95 to $49.95 per unit. In the aggregate, and for the fiscal
          year ended December 31, 2004, 2% of our revenues were derived from sales
          of
          these products.
  **Children’s
          Products**
 
 We
          currently produce and distribute/sell a line of children’s
          CD-Rom products designed to appeal to faith-conscious families interested
          in
          spiritually-enriched entertainment and play-along educational content.
          Collectively, these titles include Jonah and the Whale ® ,
          Noah
          and the Ark ® ,
          Daniel
          in the Lion’s
          Den ® ,
          and The
          Story of Creation ® .
          In
          addition, we also distribute the Veggie Tales ® ,
          a
          popular line of children’s
          software programs involving interactive adventures with biblical
          themes.
  Although
            our prices are subject to change from time to time, our children’s
            CD-Rom products range in price from $5.95 to $22.98 per unit. In the
            aggregate,
            and for the fiscal year ended December 31, 2004, less than 1% of our
            revenues
            were derived from sales of these products.
 
 -6-
 Table
              of Contents
  **Language
          Tutorial
          Products**
 
 We
          currently produce tutorial software programs for learning Greek and Hebrew,
          languages frequently studied in conjunction with a Bible-study curriculum
          or by
          biblical scholars. Each of these two programs covers all of the essential
          language development skills, including letters, vocabulary and grammar.
          Although
          our prices are subject to change from time to time, our language tutorial
          products range in price from approximately $10.00 to approximately $69.95
          per
          unit. In the aggregate, and for the fiscal year ended December 31, 2004,
          3% of
          our revenues were derived from sales of these products.
  **Other
          Products**
 In
            addition to our own software products, we resell certain titles and title
            versions that we purchase at a discount and that are published by others,
            including IMSI®, Veggie Tales, and Webroot®. These are
            non-exclusive, purchase-order only type arrangements in connection with
            which we
            carry only limited inventory. Sales from these titles are derived exclusively
            online through our Website and, apart from on our Website, we do not
            promote
            these products. Although prices are subject to change from time to time,
            these
            software products range in price from approximately $5.99 to approximately
            $39.99 per unit. In
            the
            aggregate, and for the fiscal year ended December 31, 2004, 2% of our
            revenues
            were derived from sales of these products.
 **OUR
          MARKET**
  According
          to a Gallup poll released in March 2004, 49.4% of Americans identified
          themselves as Protestant, while 23.7% identified themselves as Catholic,
          and
          9.1% identified themselves as“Other
          Christian”.
          According to the same survey, more than 60% of Americans say that religion
          is
          very important to them in their own lives, and another 24% say that religion
          is
          fairly important in their lives.
 A
            survey
            released in July 2003 by the Christian Bookseller ’ s
            Association (“CBA”)indicated that Christian-product sales for the year 2002 were
            $4.2
            billion. The survey also revealed that $2.4 billion of the $4.2 billion
            total
            was sold through Christian retail, with $1.1 billion sold through general
            retail, and $725 million sold direct-to-consumer, and through ministry
            sales
            channels. The 3,500-store CBA segment includes several different chains,
            Family
            Christian Stores being the largest with 325 stores. As faith-based retailing
            increases, secular stores are offering more faith-based products as evidenced
            by
            the $1.1 billion sales figure in 2002 as reported by the CBA. It is this
            faith-based demographic that we seek to target.
 **MARKETING
              AND
              ADVERTISING**
  In
              developing a marketing strategy for our consumer software products,
              we seek
              brands or titles and title versions that we believe will appeal to
              the interests
              of our target consumers. We strive to create marketing campaigns which
              are
              consistent with this strategy and generally market our software
              through:
  •
                    Our
                        Website (www.quickverse.com) and the Internet sites of
                        others;
 •
                    Print
                        advertising;
 •
                    Opt-in
                        e-mail campaigns;
 •
                    Product
                        sampling through demonstration software;
 •
                    In-store
                        promotions, displays and retailer assisted co-operative advertising;
 •
                    Publicity
                        activities; and
 •
                    Trade
                        shows.
 -7-
 Table
              of Contents
  **SALES**
  
  **Direct
          Marketing /
          Online Sales**
  Direct
            sales accounted for approximately 65% of our 2004 fiscal year revenue.
            Over the
            past two years, we have devoted significant and increasing resources
            to the
            development of our direct-marketing program. Through this program, we
            market our
            products directly to consumers and Church and “para-church” organizations
            through a combination of direct-mailings and opt-in e-mailings of our
            product
            title catalogs and brochures. An important aspect of this initiative
            is our
            online sales. In May of 2004, we launched a full-service online store
            with many
            of the kinds of features and capabilities that online shoppers have come
            to
            expect from cutting-edge Internet retailers. We are currently marketing
            our
            products online through multiple sources including our own www.quickverse.com
            Internet Website, other Internet Websites such as www.amazon.com, as
            well as
            several widely used search engines such as Google® and
            Yahoo®. While we market our products through these other Internet
            Websites and search engines, we are not substantially dependent upon
            these
            marketing relationships and have no written agreements with any one or
            more of
            them. The revenue generated from these Internet Websites and search engines,
            excluding our own www.quickverse.com Internet Website, accounted for
            less than
            approximately 1% of our 2004 fiscal year revenue.
 
 We
            anticipate online orders will continue to increase as we expand our software
            product base and enhance our marketing efforts in this area.
   ****
 **Retail
            Sales**
  Retail
          sales accounted for approximately
          35% of our 2004 fiscal year revenue. Our domestic retail sales involve
          thousands
          of retail stores across the United States through which our products are
          sold,
          many of which are members of the CBA. These stores vary from small, family-owned
          Christian bookstores to large chain bookstores such as LifeWay Christian
          Stores,
          Family Christian Stores®and Berean Christian Stores. We face the
          continuing challenge of reaching these stores on a consistent basis to
          keep them
          informed of new releases, promotional offers, etc. In addition to advertising
          in
          trade publications and maintaining visibility at CBA trade shows and events,
          we
          believe that it is critical to be in direct personal contact with each
          customer
          routinely in order to maintain or increase our market position. Towards
          that
          end, our sales representatives are expected to contact each of our customers
          as
          well as each of the independent stores that are not yet our customers regularly
          and present them with the latest in our products and promotions. We believe
          our
          personalized approach to marketing provides us with an edge over our
          competition, which we believe rely predominantly on advertising to maintain
          and
          develop their relations with CBA customers.
  In
            the
            secular retail market, which includes chains such as Best
            BuyTM, CompUSA®, and OfficeMaxTM, we
            believe that we continue to be a top seller of Bible study software and
            we are
            developing additional product offerings and promotions to grow our market
            share.
 -8-
 Table
              of Contents
  **International
          Sales**
 
 International
          sales accounted for approximately 2% of our 2004 fiscal year revenue.
          We
          currently sell to distributors and retailers in Canada, New Zealand, Australia,
          Philippines, Hong Kong, the United Kingdom, and Singapore. These distributors
          and retailers, in turn, sell our products into both Christian and large,
          secular
          retail outlets that sell off-the-shelf consumer software packages.
  **Returns
          and Price
          Concessions**
 At
            the
            time we ship our products we establish reserves, including reserves that
            estimate the potential for future product returns and price concessions.
            Management makes these estimates and assumptions based on actual historical
            experience regarding allowances for estimated price concessions and product
            returns. In determining the percentage of sales for product return
            reserves, management considers a number of different statistical
            factors.
            First, it reviews the rate of actual product returns (in total) for the
            period.
            Second, it reviews return rates for the same period(s) of prior years.
            Third, it
            reviews its sales by individual retail customers to assess any unusual
            return
            exposure. Fourth, it reviews actual return rates of specific title and
            title
            versions to determine if there are any unusual trends taking place. Fifth,
            the
            potential for an increase in actual returns resulting from upcoming new
            title or
            title version releases is reassessed. Sixth, and finally, management
            reviews the
            actual returns from the balance sheet date to the date of calculation
            to
            determine if anything unexpected has taken place.
  We
            give
            all of our distributors and retail customers a written product return
            policy
            providing for returns, upon written request, within nine months of the
            invoice
            date for credit only. If a new title or title version release falls within
            that
            nine month time span, a distributor has 60 days from the announced release
            date
            to return the old title or title version in exchange for the new title
            or title
            version only. We provide our end-user consumers with a 45 day satisfaction
            guarantee, allowing them to return a title or title version within that
            time
            frame if for any reason unsatisfied. Our warranty policy for defective
            software
            is to provide replacement or repair for a period of 45 days from the
            invoice
            date. We believe that these measurement dates provide a consistent period
            for
            assessment and the opportunity to adequately estimate channel inventory
            levels
            for appropriately estimating our return reserves.
   We
              generally grant price concessions to our wholesale retail customers
              when we
              deem those concessions necessary to maintain our relationships with
              those
              retailers and maintain continued access to their retail channel customers.
              Further, if consumer demand for a specific title falls below expectations
              or
              significantly declines below previous rates of wholesale retail sell-through,
              then a price concession or credit may be requested by our retail customers
              to
              spur further retail channel sell-through.
 Trends
            that our returns typically follow include (i) the seasonality of sales,
            and (ii)
            the fact that, generally, relatively higher return rates occur during
            periods of
            new title or title version releases. Historically, actual returns have
            been
            within management’s prior estimates, however, we cannot be certain that any
            future write-offs exceeding reserves will not occur or that amounts written
            off
            will not have a material adverse effect on our business, our financial
            condition, including liquidity and profitability, and our results of
            operations.
            Management continually monitors and adjusts these allowances to take
            into
            account actual developments and sales results in the marketplace. In
            the past,
            particularly during title and title version transitions, we have had
            to increase
            price concessions to our retail customers.
  MANUFACTURING
              AND
              FULFILLMENT
  We
              prepare a set of master program copies, documentation and packaging
              materials
              for each platform on which a title or title version is available. All
              of our
              software products are manufactured through third-party subcontractors,
              with
              orders for PC-based titles and title versions generally taking seven
              to ten
              days, and reorders taking three to five days. Packaging, printing and
              assembly
              are also performed by third-party subcontractors. To date, we have
              not
              experienced any material returns due to product defects.
  We
              currently fulfill all of our direct-to-consumer sales out of our own
              warehouse
              located in Omaha, Nebraska and a third-party fulfillment company, also
              located
              in Omaha, Nebraska, fulfills our bulk retail sales.
 -9-
 Table
                of Contents
  SIGNIFICANT
          CUSTOMERS
          AND SUPPLIERS
  During
          the years ended December 31, 2004 and 2003, we had no major customers that
          individually accounted for 10% or more of annual sales. As we introduce
          new
          and enhanced software titles into the market, we anticipate our sales to
          a
          single customer, as a percentage of gross consolidated revenue, will continue
          to
          remain below 10%.
  Also
            for
            the years ended December 31, 2004 and 2003, product and material purchases
            from
            IsoDisc accounted for 29% and 3%, respectively, Midlands Packaging Corporation
            accounted for 18% and 14%, respectively, Frogs Copy and Graphics accounted
            for
            17% and 10%, respectively, MicroBytes, Inc. accounted for 12% and 39%,
            respectively, and Cedar Graphics accounted for 7% and 17%, respectively,
            of the
            total product and material purchases made by us. We currently have no
            long-term
            written agreements with any of these suppliers. The payment terms are
            generally
            net 30 days, and we are not substantially dependent upon any one or more
            of
            them; all are easily replaceable with any locally available supplier.
   **REGULATION**
 
 We
          are
          not currently subject to direct regulation by any government agency, other
          than
          regulations applicable to businesses generally.
 
 **COMPETITION**
 The
            market for our products is rapidly evolving and intensely competitive
            as new
            software products and platforms are regularly introduced. Competition
            in the
            software industry is based primarily upon:
 
 •
                  brand
                      name recognition;
 •
                  availability
                      of financial resources;
 •
                  the
                      quality of titles;
 •
                  reviews
                      received for a title from independent reviewers who publish
                      reviews in
                      magazines, Websites, newspapers and other industry publications;
 •
                  publisher’s
                      access to retail shelf space;
 •
                  the
                      price of each title; and
 •
                  the
                      number of titles then available.
 
 We
            face
            competition from other software publishers, all of which generally sell
            through
            the same combination of channels that we do, including chain store, secular,
            CBA, direct and online sales.
  Specifically,
            and in relation to our QuickVerse ® products, we believe are the market leader in our category. We currently
            compete
            with the following companies and products, among others:
 •
                      Logos
                            Research Systems, Inc.-Logos Series X®
 •
                      Biblesoft,
                            Inc.-BibleSoft PC Bible Study®Version 4
 •
                      Thomas
                            Nelson, Inc.-Nelson eBible®
 •
                      WordSearch
                            Bible Publishers-WordSearch®7
 •
                      Zondervan-Zondervan Bible Study Library®
 Although
              each of these companies publishes software packages in several different
              variations, generally in a range that includes a standard package,
              an expanded
              package, and a deluxe package (the same way that we do), in each of
              these
              respective categories we believe that we tend to be the least expensive
              but the
              most comprehensive in terms of the number of Bibles and reference titles
              included. We believe QuickVerse ’ s ® reputation to be among the most well-respected in its category.
 -10-
 Table
                  of Contents
  In
            relation to our Membership Plus ® products, we currently compete with the following companies and comparable
            products, among others:
  •
                    ACS
                          Technologies®
 •
                    CCIS
                          Church Software®
 •
                    Church
                          Data Master Plus®
 •
                    Church
                          Windows/Computer Helper®
 •
                    Church
                          Office®
 •
                    Logos
                          Management Software®
 •
                    Power
                          Church Software®•
                    Servant
                        PC®•
                    Shelby
                        Systems®•
                    Shepherd’s
                        Staff®(Concordia Publishing House)•
                    Specialty
                        Software®
 We
              believe that Membership Plus ® is the
              market leader by a margin of over 100% in the church management software
              publishing category in terms of registered users. Our Membership
              Plus ® packages
              are also among the least expensive products in the category.
 We
            rely
            upon our product quality, marketing and sales abilities, proprietary
            technology
            and product development capability, the depth of our retail distribution
            channels and management experience to compete in the software industry.
            Although
            we believe that we are among the market leaders in each of our two primary
            product categories, some of our competitors have longer operating histories,
            larger customer bases and greater financial, marketing, service, support,
            technical and other resources than we do. Due to these greater resources,
            certain of our competitors have the ability to undertake more extensive
            marketing campaigns, adopt more aggressive pricing policies, pay higher
            fees to
            licensors and pay more to third-party software developers than we can.
            Moreover,
            we believe that competition from new entrants will increase as the market
            for
            faith-based products and services expands.
 **INTELLECTUAL
          PROPERTY**
  **Overview**
 We
            rely
            for our business on a combination of copyrights, trademarks, and trade
            secrets
            to protect our intellectual property. Our copyrighted software content
            and the
            brand recognition associated with our related product trademarks are
            among the
            most important assets that we possess in our present ability to generate
            revenues and profits, and we rely very significantly on these intellectual
            property assets in being able to effectively compete in our market. Our
            intellectual property rights derive from a combination of licenses from
            third
            parties, internal development and confidentiality and non-disclosure
            agreements.
  We
              cannot
              be certain that the precautions we have taken will provide meaningful
              protection
              from unauthorized use by others. If we must pursue litigation in the
              future to
              enforce or otherwise protect our intellectual property rights, or to
              determine
              the validity and scope of the proprietary rights of others, we may
              not prevail
              and will likely have to make substantial expenditures and divert valuable
              resources in the process. Finally, we may not have adequate remedies
              if our
              proprietary content is appropriated, our proprietary rights are violated
              or our
              trade secrets are disclosed.
  **Copyrights**
  Our
              copyrights, some of which have been registered and others of which
              remain
              unregistered, derive from a combination of program and source code
              embodied in
              software titles that we license from third parties, as well as program
              and
              source code embodied in software titles that we have internally developed
              on our
              own.
 
 We
              entered into a license agreement in June 1999 with Parsons Technology,
              Inc.
              which forms the basis of our copyright protection for products that
              accounted
              for approximately 97% of our revenues in 2004, including those generated
              from
              sales of QuickVerse ® and
              Membership Plus ® ,
              by far
              our two largest selling software titles. A copy of the license that
              we obtained
              from Parsons Technology, which has since been assigned to Riverdeep,
              Inc., the
              latest licensor-assignee in a succession of assignments by Parsons
              Technology
              that have occurred since June 1999, is incorporated by reference into
              this
              annual report on Form 10-KSB/A as Exhibit 10.3 .
              At the
              time, it was acquired as part of a combination of related transactions
              involving
              ourselves, Parsons Technology, then a wholly-owned subsidiary of Mattel,
              Inc.,
              and TLC Multimedia Inc., then also a wholly-owned subsidiary of Mattel,
              Inc.
              Aside from the license, the transactions involved an asset sale, a
              product
              distribution agreement, and a related services agreement. Taken as
              a whole, and
              essentially, we had acquired from TLC Multimedia a software publishing
              and sales
              division (known and referred to by many then as the “Parsons Church Group”). In
              accordance with its terms, we agreed to pay a one-time non-recurring
              fee of $5
              million to obtain the license, which fee was payable over a subsequent
              approximate one year period. The related asset sale involved separate
              consideration.
 -11-
 Table
                of Contents
   The
            license that we acquired in 1999 provided us with the right, originally
            for a
            term of ten years, to publish, use, distribute, sublicense and sell,
            exclusively
            worldwide in non-secular channels and non-exclusively (with continuing
            right retained by Riverdeep, Inc., successor to Parsons Technology)
            on an
            unrestricted basis in secular channels, a collection of 65 individual
            top-selling Christian-related software titles owned by Parsons Technology,
            including QuickVerse ® and
            Membership Plus ® ,
            among
            others. The license covered a variety of other add-on content titles
            ( *e.g.* ,
            various
            Bible translations, study guides and sermon preparation tools). The license
            also
            included the right for us to modify the programs (including the source
            code) in
            order to prepare derivative works and future versions of the programs,
            and
            stated that we would exclusively own all rights associated with any such
            modifications.
   Beginning
            in 2000, we became involved in a series of mediations arising out of
            or
            otherwise in connection with the 1999 license. The first of these involved
            the
            payment terms of the $5 million licensing fee. Rather than making payments
            in
            accordance with the fee schedule as originally set forth in the agreement,
            we
            entered into an arrangement with Parsons Technology's direct sales group
            whereby
            we provided resale products and in turn received an offset credit against
            the
            balance due under the fee provision in the license. The dispute centered on
            the amount of product actually resold, and, therefore, the amount of
            offset
            credit to which we were entitled. Prior to the resolution of this contest,
            a
            second dispute arose, naming Parsons Technology and ourselves, among
            others, as
            parties thereto. The first mediation was set aside, and ultimately resolved
            in
            conjunction with the latter proceeding as described in the following
            paragraph.
  In
                October 2001, due to being in arrears with respect
                to certain royalty
                payments owed to The Zondervan Corporation then, a content provider
                to
                QuickVerse ® ,
                we
                became party to a second mediation ultimately resulting in a multi-party
                settlement agreement, on October 20, 2003, the terms of which provided
                for our
                payment to Zondervan of $500,000 plus 5% simple interest in installments,
                as
                well as for our destruction of all inventory containing Zondervan-owned
                content,
                all of which we satisfied within months thereafter. As part of the
                settlement
                agreement, we received a covenant in perpetuity with respect to our
                rights under
                the 1999 license, effectively extending it indefinitely with no continuing
                financial obligations owed by us. A copy of the settlement agreement
                which
                resulted in the effective extension is incorporated by reference
                as Exhibit
                10.14 to this Form 10-KSB/A for the year ended December 31, 2004.
 Since
              1999, the developments, including modifications and improvements, that
              we have
              made to the originally acquired copyrighted programs covered by the
              license have
              been extensive. We have used both in-house developers and third-party
              contractors in these modifications and improvements over which
              we retain
              the exclusive ownership. Given these developments, which have been
              made through
              four subsequent versions and seven new editions of QuickVerse ® , four
              subsequent versions and one new edition of Membership Plus ® ,
              and various subsequent versions of some of the other
              titles to which
              we acquired rights under the license (including those in each of the
              print and
              graphics, pastoral, children’s, and language tutorial product categories), we
              believe that the real value of the copyrights associated with these
              titles lay
              almost exclusively at this point in the improvements that we own rather
              than the
              base copyrights that we were originally granted and that continue to
              be owned by
              Riverdeep, Inc. Moreover, it is our belief that the original source
              code covered
              by the license has been effectively rendered valueless by virtue of
              these
              subsequent modifications and improvements. Although
              we do not believe that any third parties have been granted any rights
              to date in
              addition to our own to publish or sell these titles into secular channels,
              and
              do believe that, even if this has occurred or should occur in the future,
              the
              barriers to entry created by the extensive developments that we have
              made and
              now own to these otherwise licensed titles would make it practically
              infeasible
              for any third party to effectively compete with us in relation to these
              products
              in any market, there can be no assurance that one or more competitors
              will not
              emerge at some point or that they will not impact on our sales and
              revenues.
   As
              noted
              above, our largest-selling title, QuickVerse ® ,
              is one
              from which we originally derived our rights under the 1999 license.
              One of the
              features that make QuickVerse ® such a
              popular title is its breadth of content. A very significant percentage
              of this
              content is licensed by us from various third-party content providers
              for
              inclusion in QuickVerse ® .
              We are
              therefore responsible for paying royalties on a regular basis to these
              providers
              in connection with our sales of QuickVerse ® .
              In
              total, we currently have content licensing agreements with 45 different
              publishers for approximately 765 individual Bible translations and
              other
              Biblical or related scholarly works which are incorporated in various
              editions
              of our QuickVerse ® products, or in some cases sold as stand-alone or add-on content. These
              licensing agreements are typically non-exclusive and for a fixed duration
              ( *e.g.* ,
              a term
              of 3 or 5 years). Royalties are generally paid within 30 days following
              the end
              of a quarter and are calculated as a percentage of net sales from a
              work
              ( *e.g.* ,
              ranging
              from 3% to 10% according to the licensing agreements), based upon factors
              such
              as value as a stand-alone product as compared to, for example, value
              when
              bundled with other titles within a collective work. These license agreements
              typically cover content in the context of both stand-alone products
              and as
              bundled works. For
              example, consumers who purchase QuickVerse®pay the
              suggested retail price and are in part paying for the technology within
              the
              program along with the content. QuickVerse®titles
              sold to new consumers or new users are subject to royalties on all
              content
              within each specific QuickVerse®title.
              However, upgrade sales to existing users are only subject to royalties
              on new
              content additions of the upgraded version.
 -12-
 Table
                of Contents
  In
            addition to the copyrights associated with the 1999 license described
            above,
            copyright protection exists in relation to the software titles that we
            resell
            published by others. These copyrights, however, are held by the publishers
            and/or their respective third-party content providers.
  **Trademarks**
  As
            part
            of the 1999 license, we acquired the unlimited right to use the registered
            trademarks associated with the various titles licensed thereunder exclusively
            worldwide in non-secular channels and non-exclusively in secular channels.
            Because of the fact that each of QuickVerse ® and
            Membership Plus ® had been
            on the market for approximately ten years by the time we acquired the
            license,
            and each had a substantial existing user base, the trademarks for these
            products
            alone were deemed at the time to be of great importance and value. We
            believe
            that our initiatives in introducing subsequent versions and editions
            of these
            titles since then, as well as our having maintained extremely high publishing
            standards throughout the period that we have been publishing these titles,
            have
            served to sustain and enhance the importance and value of these
            trademarks.
  **Trade
            Secrets**
  Whenever
            we deem it important for purposes of maintaining competitive advantages,
            our
            policy requires parties with whom we share, or who otherwise are likely
            to
            become privy to, our trade secrets or other confidential information,
            including
            source code, to execute and deliver to us confidentiality and/or non-disclosure
            agreements prior to their exposure to any such information. Among others,
            this
            includes employees, consultants and other advisors, including our in-house
            and
            outsourced software developers and collaborators, each of whom we require
            to
            execute such an agreement upon commencement of their employment, consulting
            or
            advisory relationships. These agreements generally provide that all confidential
            information developed or made known to the individual by us during the
            course of
            the individual’s
            relationship with us is to be kept confidential and not to be disclosed
            to third
            parties except in specific circumstances. In the case of employees and
            consultants, the agreements provide that all inventions conceived by
            the
            individual in the course of their employment or consulting relationship
            shall be
            our exclusive property.
  **EMPLOYEES**
 As
            of June 7, 2005, we had twenty-eight full-time
            employees. Of
            those twenty-eight, four were part of the senior-level executive and
            financial
            management team, five were in the product development team, nine
            were on
            the sales team, and ten were in fulfillment, administration, and
            related
            support positions. For the fiscal year ended December 31, 2004, our annual
            payroll was $1,523,332, equivalent to 26% of gross revenues. In addition,
            we
            have engaged the services of several consulting firms who are working
            full or
            part-time for us in the area of product development and marketing.
  We
            rely
            heavily on our current officers and directors in operating the business.
            We are
            not subject to any collective bargaining agreements and believe that
            our
            relationships with our employees are good.
  **SEASONALITY**
  Our
            business is highly seasonal. More than 50% of our annual sales are expected
            to
            occur in the five months of September through January; the five months
            of April
            through August are generally our weakest, generating only about 33% of
            our
            annual sales.
 -13-
 Table
              of Contents
  **ITEM
          2. DESCRIPTION OF PROPERTY.**
 Our
              principal executive offices are located at 11204 Davenport Street,
              Suite 100,
              Omaha, Nebraska. We lease this 6,500 square foot premises under a five
              year
              lease agreement with 11204, LLC. Our monthly rent is $7,094.79 and,
              as
              of June 7, 2005, there were approximately twenty-three
              months
              remaining under the lease.
  We
              maintain additional leased office space in Naperville, Illinois for
              certain
              product development activity. We lease this 880 square foot premises
              under an
              eighteen month lease agreement with Transwestern Commercial Services.
              Our
              monthly rent is $1,320.00 and there are three months remaining
              under the
              lease.
 Three
            of our full-time employees work in home offices located in Cedar
            Rapids,
            Iowa. We do not pay for any space associated with these
            operations.
  **ITEM
          3. LEGAL PROCEEDINGS.**
  In
            March
            2004, a joint settlement was finalized with The Zondervan Corporation
            and TLC
            Multimedia, Inc. in connection with then pending litigation surrounding
            royalties owed by us. Pursuant to the settlement, we were required to
            make
            certain payments to The Zondervan Corporation, which obligations, as
            of July
            2004, were satisfied in full. A stipulation of such settlement has since
            been
            duly entered and the matter has been discontinued.
 
 As
            of the
            date of this report, there were no pending material legal proceedings
            to which
            we were a party and we are not aware that any were contemplated. There
            can be no
            assurance, however, that we will not be made a party to litigation in
            the
            future. Moreover, there can be no assurance that our insurance coverage
            will
            prove adequate to cover all liabilities arising out of any claims that
            may be
            initiated against us in the future. Any finding of liability imposed
            against us
            coupled with a lack of corresponding insurance coverage is likely to
            have an
            adverse effect on our business, our financial condition, including liquidity
            and
            profitability, and our results of operations.
 **ITEM
          4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**
  On
            October 15, 2004, we filed a definitive information statement on Schedule
            14C
            with the SEC. The information statement was mailed to our stockholders
            on or
            about October 18, 2004 solely for the purpose of informing our stockholders
            of
            the approval and unanimous consent by our board of directors, and the
            affirmative vote on September 9, 2004 of the holders of a majority of
            the voting
            power to take the following action:
 
 (i)
                  amendour
                      articles of incorporation to increase our authorized shares
                      of common
                      stock from 50,000,000 to 120,000,000 shares; and
 
 (ii)
                  ratify
                      the designation ofour
                      incumbent directors among the three classes of directors.
 
 Of our
            46,153,189 common shares issued and outstanding at the time, the affirmative
            vote of the holders of a majority of our voting power was required to
            approve
            the amendment and to ratify the designation. Both the amendment and the
            ratification of designation received the approval of holders owning 32,307,090
            shares of our common stock, representing 70% of our then total issued
            and
            outstanding common stock (51.97% after adjustment for certain voting
            restrictions set forth in our articles of incorporation), each by written
            consent as permitted by the Nevada Revised Statutes and our bylaws. The
            action
            approved by the consenting stockholders became effective on November
            8, 2004,
            which was 20 days after we mailed the information statement to our stockholders.
            The amendment to our articles of incorporation was filed and effective
            with the
            Secretary of State of Nevada on November 10, 2004. We did not solicit
            proxies to
            vote at a stockholders’ meeting in connection with either the amendment or the
            ratification.
 
 No
            other
            matters were submitted to a vote of our stockholders during the fourth
            quarter
            of the fiscal year ended December 31, 2004.
  -14-
 Table
                of Contents
  **PART
          II**
 
 **ITEM
          5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS.**
  **RECENT
          SALES
          OF UNREGISTERED SECURITIES**
  **Date
                      Securities Issued**
                  
                  
                  **Securities
                      Title**
                  
                  
                  **Issued
                      To**
                  
                  
                  **Number
                      of Securities Issued**
                  
                  
                  **Consideration
                      ***
                  
                  
                  **Footnotes****Common
                      Stock Issuances**12/31/04
                  
                  
                  Common
                      Stock
                  
                  
                  Business
                      Investor Services, Inc.
                  
                  
                  466,666
                  
                  $
                  ---
                  
                  
                  2B11/16/04
                  
                  
                  Common
                      Stock
                  
                  
                  2030
                      Investors, LLC
                  
                  
                  1,000,000
                  
                  $
                  ---
                  
                  
                  2B11/16/04
                  
                  
                  Common
                      Stock
                  
                  
                  C.
                      James Jensen
                  
                  
                  1,000,000
                  
                  $
                  ---
                  
                  
                  2B**Common
                      Stock Warrant Issuances**11/10/04
                  
                  
                  Common
                      Stock
                  
                  
                  Barron
                      Partners, LP
                  
                  
                  10,937,500
                  
                  $
                  576,042
                  
                  
                  1A11/10/04
                  
                  
                  Common
                      Stock
                  
                  
                  Barron
                      Partners, LP
                  
                  
                  10,937,500
                  
                  $
                  576,042
                  
                  
                  1A**Convertible
                      Promissory Note Issuances**09/30/04
                  
                  
                  Common
                      Stock
                  
                  
                  2030
                      Investors, LLC
                  
                  
                  1,000,000
                  
                  $
                  120,000
                  
                  
                  1A09/30/04
                  
                  
                  Common
                      Stock
                  
                  
                  C.
                      James Jensen
                  
                  
                  1,000,000
                  
                  $
                  120,000
                  
                  
                  1A*
                      Consideration is calculated to be the value of the security
                      at the date of
                      issuance.1.
                      Stock issued in connection with issuances of stock, warrants,
                      and/or
                      convertible debt.2.
                      Stock issued in connection with conversion of a promissory
                      note.A.
                      We relied in each case for these unregistered sales on the
                      private
                      offering exemption of Section 4(2) of the Securities Act and/or
                      the
                      private offering safe harbor provision of Rule 506 of Regulation
                      D
                      promulgated thereunder based on the following factors: (i)
                      the number of
                      offerees or purchasers, as applicable, (ii) the absence of
                      general
                      solicitation, (iii) representations obtained from the acquirors
                      relative
                      to their accreditation and/or sophistication (or from offeree
                      or purchaser
                      representatives, as applicable), (iv) the provision of appropriate
                      disclosure, and (v) the placement of restrictive legends on
                      the
                      certificates reflecting the securities coupled with investment
                      representations obtained from the acquirors.B.
                      We relied on Section 3(a)(9) of the Securities Act as the basis
                      for our
                      exemption from registration of these offerings.There
                      were no underwriters or placement agents involved in any of
                      the issuances
                      set forth above and no commissions were paid.
 **MARKET
          INFORMATION**
 
 Our
          common stock is traded on the OTC Bulletin Board, a service provided by
          the
          Nasdaq Stock Market Inc., under the symbol, “FIND”.
 
 The
          following table sets forth for the periods indicated the high and low bid
          prices
          for our common stock as reported each quarterly period within the last
          two
          fiscal years on the OTC Bulletin Board, and as obtained from BigCharts.com.
          The
          prices are inter-dealer prices, do not include retail mark-up, markdown
          or
          commission and may not necessarily represent actual transactions.
  **Common
                      Stock****2003**
                  
                  **High**
                  
                  **Low**First
                      Quarter
                  
                  $0.024
                  
                  $0.022Second
                      Quarter
                  
                  $0.080
                  
                  $0.022Third
                      Quarter
                  
                  $0.070
                  
                  $0.010Fourth
                      Quarter
                  
                  $0.040
                  
                  $0.025**2004**
                  
                  **High**
                  
                  **Low**First
                      Quarter
                  
                  $0.055
                  
                  $0.020Second
                      Quarter
                  
                  $0.400
                  
                  $0.018Third
                      Quarter
                  
                  $0.250
                  
                  $0.090Fourth
                      Quarter
                  
                  $0.190
                  
                  $0.060
 -15-
 Table
              of Contents
  **STOCKHOLDERS**
  As
          of June 6, 2005, there were approximately 800 holders of record
          of our
          common stock, with any shares held by persons or companies in street or
          nominee
          name counted only under such street or nominee name.
  **DIVIDENDS**
 
 During
          the last two years, no dividends have been paid on our common stock and
          we do
          not anticipate paying any dividends in the foreseeable future. Although
          it is
          our intention to utilize all available funds for the development of our
          business, no restrictions are in place that would limit or restrict our
          ability
          to pay dividends.
  **SECURITIES
          AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**
 
 **EQUITY
          COMPENSATION PLAN INFORMATION**
 
 **Number
                    of securities to be issued upon exercise of outstanding options,
                    warrants
                    and rights**
                  **(a)**
                **Weighted-average
                    exercise price of outstanding options, warrants and
                    rights**
                  **(b)**
                **Number
                    of Securities remaining available for future issuance under equity
                    compensation plans (excluding securities reflected in column
                    (a))**
                  **(c)**Equity
                    compensation plans approved by security holders
                910,000
                $0.11
                590,000Equity
                    compensation plans not approved by security holders
                2,800,000
                $0.0879
                ---Total
                3,710,000
                $0.0933
                590,000
  Our
            1999 Stock Incentive Plan authorizes the issuance of various forms
            of
            stock-based awards including incentive and nonqualified stock options,
            stock
            appreciation rights attached to stock options, and restricted stock awards
            to
            our directors, officers and other key employees. The plan has been approved
            by our stockholders and as such, provides certain income tax advantages
            to
            employees as provided under Sections 421, 422, and 424 of the Internal
            Revenue
            Code. Stock options are granted at an exercise price as determined by our
            board at the time the option is granted and may not be less than the
            par value
            of such shares of common stock. Stock options vest quarterly over three
            years
            and have a term of up to ten years. The plan authorizes an aggregate
            of
            1,500,000 shares of common stock that may be issued.
 -16-
 Table
              of Contents
  In
            addition, we issue various forms of stock-based awards including nonqualified
            stock options and restricted stock awards to directors, officers, other
            key
            employees and third-party consultants, outside of the Stock Incentive
            Plan.
            Awards granted outside of the plan have been granted pursuant to equity
            compensation arrangements that have not been approved by our stockholders.
            These awards are granted at an exercise price as determined by our
            board at
            the time of grant and are not less than the par value of such shares
            of common
            stock. Stock options granted outside of the plan vest as determined by our
            board at the time of grant and have a term of up to ten years. Non-employee
            directors, though treated as employees for financial reporting purposes
            under
            Financial Accounting Standards Board Interpretation No. 44, are excluded
            from
            the income tax advantages afforded employees by the Internal Revenue
            Code.
 
 All
            issued options, whether under the plan or not, create the obligation
            for stock
            issuance at the established exercise price.
                   
 -17-
 Table
              of Contents
  **ITEM
          6. MANAGEMENT’S
          DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**
  The
          following discussion should be read together with our consolidated
          financial statements for the period ended December 31, 2004 and the notes
          to the
          consolidated financial statements.
  **CRITICAL
          ACCOUNTING POLICIES**  Our
                critical accounting policies, including the assumptions and judgments
                underlying
                them, are more fully described in the Notes to the Financial Statements.
                We have
                consistently applied these policies in all material respects. These
                policies
                primarily address matters of expense recognition and revenue recognition,
                including amortization of software development cost and the calculation of
                reserve for returns. Investors are cautioned that these policies
                are not
                guarantees of future performance and involve risks and uncertainties,
                and that
                actual results may differ materially. Below are the accounting policies
                that we
                believe are the most critical in order to gain an understanding of
                our financial
                results and condition.
  ***Use
                of
                Estimates***
 
 The
                preparation of consolidated financial statements in conformity with
                Generally
                Accepted Accounting Principles requires management to make estimates
                and
                assumptions that affect the amounts reported in the financial statements
                and the
                accompanying notes. Significant estimates used in the consolidated
                financial
                statements include the estimates of (i) doubtful accounts, sales
                returns, price
                protection and rebates, (ii) provision for income taxes and realizability
                of the
                deferred tax assets, (iii) the life and realization of identifiable
                intangible
                assets, and (iv) provisions for obsolete inventory. The amounts we
                will
                ultimately incur or recover could differ materially from current
                estimates.
  *****Royalty
                Agreements***
 
 We
                have entered into certain agreements whereby we are obligated
                to
                pay royalties for content of software published. We generally pay
                royalties
                based on a percentage of sales on respective products or on a fee
                per unit sold
                basis. We expense software royalties as product costs during
                the period in
                which the related revenues are recorded.
  ***Accounts
                Receivable***
 
 Accounts
                receivable arise in the normal course of business. It is the policy
                of
                management to review the outstanding accounts receivable quarterly,
                as well as
                the bad debt write-offs experienced in the past, and establish an
                allowance for
                doubtful accounts for uncollectible amounts. Individual accounts
                are charged
                against the allowance when they are deemed uncollectible.
  ***Inventory***
 
 Inventory,
                including out on consignment, consists primarily of software media,
                manuals and
                related packaging materials and is recorded at the lower of cost
                or market
                value, determined on a first-in, first-out, and adjusted on a per-item,
                basis.
  **Intangible
                Assets**
  In
                accordance with SFAS No. 142,*Goodwill
                and Other Intangible Assets*,
                intangible assets with an indefinite useful life are not amortized.
                Intangible
                assets with a finite useful life are amortized on the straight-line
                method over
                the estimated useful lives. All intangible assets are tested for
                impairment
                annually during the fourth quarter.
  -18-
 Table
                    of Contents
  ***Software
                  Development Costs***
 
 In
                accordance with SFAS No. 86 ,
                *Accounting for the Costs of Computer Software to Be Sold, Leased,
                or
                Otherwise Marketed* ,
                software development costs are expensed as incurred until technological
                feasibility and marketability has been established, generally with
                release of a
                beta version for customer testing. Once the point of technological
                feasibility
                and marketability is reached, direct production costs (including
                labor directly
                associated with the development projects), indirect costs (including
                allocated
                fringe benefits, payroll taxes, facilities costs, and management
                supervision),
                and other direct costs (including costs of outside consultants, purchased
                software to be included in the software product being developed,
                travel
                expenses, material and supplies, and other direct costs) are capitalized
                until
                the product is available for general release to customers. We amortize
                capitalized costs on a product-by-product basis. Amortization for
                each period is
                the greater of the amount computed using (i) the straight-line basis
                over the
                estimated product life (generally from 12 to 18 months), or (ii)
                the ratio of
                current revenues to total projected product revenues.
 
 Capitalized
                software development costs are stated at the lower of amortized costs
                or net
                realizable value. Recoverability of these capitalized costs is determined
                at
                each balance sheet date by comparing the forecasted future revenues
                from the
                related products, based on management’s best estimates using appropriate
                assumptions and projections at the time, to the carrying amount of
                the
                capitalized software development costs. If the carrying value is
                determined not
                to be recoverable from future revenues, an impairment loss is recognized
                equal
                to the amount by which the carrying amount exceeds the future
                revenues.
 
 SFAS
                No. 2, *Accounting
                for Research and Development Costs* ,
                establishes accounting and reporting standards for research and development.
                In
                accordance with SFAS No. 2, costs we incur to enhance our existing
                products
                after general release to the public (bug fixes) are expensed in the
                period they
                are incurred and included in research and development costs.
 
 We
                capitalize costs related to the development and maintenance of our
                Website in
                accordance with Financial Accounting Standard Board’s (“FASB’s”) Emerging Issues
                Task Force (“EITF”) Issue No. 00-2, *Accounting
                for Website Development Costs* .
                Under EITF Issue No. 00-2, costs expensed as incurred are as
                follows:
 
 •
                      planning
                          the Website,•
                      developing
                          the applications and infrastructure until technological
                          feasibility is
                          established,•
                      developing
                          graphics such as borders, background and text colors, fonts,
                          frames, and
                          buttons, and•
                      operating
                          the site such as training, administration and
                          maintenance.
  Capitalized
                  costs include those incurred to:
 
 •
                        obtain
                            and register an Internet domain name,•
                        develop
                            or acquire software tools necessary for the development
                            work,•
                        develop
                            or acquire software necessary for general Website
                            operations,•
                        develop
                            or acquire code for web applications,•
                        develop
                            or acquire (and customize) database software and software
                            to integrate
                            applications such as corporate databases and accounting
                            systems into web
                            applications,•
                        develop
                            HTML web pages or templates,•
                        install
                            developed applications on the web server,•
                        create
                            initial hypertext links to other Websites or other locations
                            within the
                            Website, and•
                        test
                            the Website applications.
 
 We
                  amortize W ebsite
                  development costs on a straight-line basis over the estimated life
                  of the site,
                  generally 36 months.
 ***Revenue
                  Recognition***
 
 We
                  derive revenues from the sale of packaged software products, product
                  support and
                  multiple element arrangements that may include any combination
                  of these items.
                  We recognize software revenue for software products and related
                  services in
                  accordance with American
                  Institute of Certified Public Accountants Statement of Position
                  (“SOP”)
                  97-2, *Software
                  Revenue Recognition* ,
                  as modified by SOP 98-9, *Modification
                  of SOP 97-2, With Respect to Certain Transactions* .
                  We recognize revenue when persuasive evidence of an arrangement
                  exists
                  (generally a purchase order), we have delivered the product, the
                  fee is fixed or
                  determinable and collectibility is probable.
 -19-
 Table
                    of Contents
  In
                  some situations, we receive advance payments from our customers.
                  We defer
                  revenue associated with these advance payments until we ship the
                  products or
                  offer the support.
 
 In
                accordance with EITF Issue No. 01-9, *Accounting
                for Consideration Given by a Vendor to a Customer or a Reseller of
                the Vendor’s
                Product* ,
                we generally account for cash considerations (such as sales incentives
                - rebates
                and coupons) that we give to our customers as a reduction of revenue
                rather than
                as an operating expense.
 
 We
                reduce product revenue for estimated returns and price protections
                that are
                based on historical experience and other factors such as the volume
                and price
                mix of products in the retail channel, trends in retailer inventory
                and economic
                trends that might impact customer demand for our products. We also
                reduce
                product revenue for the estimated redemption of end-user rebates
                on certain
                current product sales. Our rebate reserves are estimated based on
                the terms and
                conditions of the specific promotional rebate program, actual sales
                during the
                promotion, the amount of redemptions received and historical redemption
                trends
                by product and by type of promotional program.
 
 We
                record the amounts we charge our customers for the shipping and handling
                of our
                software products as product revenue and we record the related costs
                as cost of
                sales on our consolidated statements of operations.
  ***Income
                Taxes***
 
 We utilize
                SFAS No. 109, *Accounting
                for Income Taxes* .
                SFAS No. 109 requires the use of the asset and liability method of
                accounting
                for income taxes. Under this method, deferred income taxes are provided
                for the
                temporary differences between the financial reporting basis and the
                tax basis
                of our assets and liabilities. Deferred tax assets and liabilities
                are
                measured using enacted tax rates expected to apply to taxable income
                in the
                years in which those temporary differences are expected to be recovered
                or
                settled.
 **RESULTS
            OF
            OPERATIONS FOR YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31,
            2003**
   Our
          income before taxes decreased approximately $1,233,000 from an income of
          approximately $1,473,000 for the twelve months ended December 31, 2003
          to an
          income of approximately $240,000 for the twelve months ended December 31,
          2004.
          This decrease is a result of the following items. For the twelve months
          ended
          December 31, 2003, we wrote down accrued royalties of approximately $584,000
          and
          wrote off a note payable of approximately $650,000 and the interest associated
          with the note of approximately $217,000. Both of these write down items
          are
          included in other income. We also wrote down a distinct category of obsolete
          inventory of approximately $61,000, which is included in cost of sales.
          For the
          twelve months ended December 31, 2004, we wrote down the reserve for rebates
          payable from a change in accounting estimate of approximately $142,000
          and wrote
          down actual rebates payable of approximately $61,000 due to an overstatement.
          Both of these write down items are recognized as an adjustment to revenue.
          We
          also wrote down a distinct category of obsolete inventory of approximately
          $32,000 which is included in cost of sales, and incurred an expense of
          approximately $155,000 related to a settlement with an institutional private
          equity investor which is included in other adjustments. Furthermore, for
          the
          twelve months ended December 31, 2004, we recognized approximately a $1,000,000
          gain from extinguishment of debt which is classified as other income. The
          extinguishment of debt is a direct result from settling with various vendors
          and
          content providers for lump-sum payments at a reduced amount of balances
          owed.
  Non-cash
            expenses related to shares of common stock issued for services increased
            by
            approximately $126,000. For the year ended December 31, 2004, we recognized
            approximately $149,000 in non-cash expenses related to shares of common
            stock
            and warrants issued for services and approximately $30,000 in non-cash
            expenses
            related to shares of common stock issued in a settlement agreement.
            Comparatively, for the year ended December 31, 2003, we recognized expenses
            of
            approximately $53,000 relating to shares of common stock issued for services.
            Overall, interest expense for the twelve months ended December 31, 2004
            decreased by approximately $45,000 compared to 2003. This is due to our
            reducing
            trade payables and meeting the scheduled terms. Furthermore, the note
            liabilities interest was reduced due in part to the reclassification
            of the note
            payable in the fourth quarter of 2003. Amortization expense for the twelve
            months ended December 31, 2004 increased by approximately $15,000 compared
            to
            2003. This reflects the continual amortization of the software license
            along
            with the amortization for the launch of our Website, www.quickverse.com,
            during
            the second quarter of 2004. Amortization expense related to software
            development
            costs, which is included in cost of sales, increased approximately $220,000
            for
            the twelve months ended December 31, 2004 compared to 2003. This is a
            direct
            result from QuickVerse ® 8.0
            shipping in late December 2003, Membership Plus ® 8.0
            shipping in January 2004, QuickVerse ® PDA 2005
            shipping in September 2004, and QuickVerse ® 2005
            shipping in early December 2004.
 -20-
 Table
              of Contents
 *Revenues*
  We
            derive
            revenues from the sale of packaged software products, product support
            and
            multiple element arrangements that may include any combination of these
            items.
            Revenue is recognized when persuasive evidence of an arrangement exists
            (generally a purchase order), we have delivered the product, the fee
            is fixed or
            determinable and collectibility is probable. For our packaged software
            products,
            we typically recognize revenue from the sale when we ship the product.
            We sell
            some of our products on consignment to a limited number of resellers.
            We
            recognize revenue for these consignment transactions only when the end-user
            sale
            has occurred. Service revenue resulting from technical support plans
            is
            recognized over the life of the plan which is generally one year. Revenue
            associated with advance payments from our customers is deferred until
            we ship
            the product or offer the support service. Revenue for software distributed
            electronically via the Internet is recognized when the customer has been
            provided with the access codes that allow the customer to take immediate
            possession of the software on its hardware and evidence of the arrangements
            exists. For
            revenue arrangements involving multiple products or products and services,
            we
            allocate and defer revenue for the undelivered products or products and
            services
            based on their vendor-specific objective evidence of fair value, which
            is
            generally the price charged when that product or product and service
            is sold
            separately.
  We
          reduce
          product revenue for estimated returns and price protections that are based
          on
          historical experience and other factors such as the volume and price mix
          of
          products in the retail channel, trends in retailer inventory and economic
          trends
          that might impact customer demand for our products. Estimated returns are
          also
          based upon a percentage of total retail and direct sales. Direct sales
          accounted
          for approximately 65% of our 2004 fiscal year revenue. We account for cash
          considerations (such as sales incentives - rebates and coupons) that we
          give our
          customers as a reduction of revenue rather than as an operating expense.
          Product
          revenue is also reduced for the estimated redemption of end-user rebates
          on
          certain current product sales. We did not have any rebate programs during
          the
          twelve months ended December 31, 2003 and 2004, respectively.
 Trends
            that our returns typically follow include (i) the seasonality of sales,
            and (ii)
            the fact that, generally, relatively higher return rates occur during
            periods of
            new title or title version releases. Historically, actual returns have
            been
            within management’s prior estimates, however, we cannot be certain that any
            future write-offs exceeding reserves will not occur or that amounts written
            off
            will not have a material adverse effect on our business, our financial
            condition, including liquidity and profitability, and our results of
            operations.
            Management continually monitors and adjusts these allowances to take
            into
            account actual developments and sales results in the marketplace. In
            the past,
            particularly during title and title version transitions, we have had
            to increase
            price concessions to our retail customers.
  Product
            returns from distributors and Christian bookstores are allowed primarily
            in
            exchange for new products or for credit towards purchases as part of
            a
            stock-balancing program. These returns are subject to certain limitations
            that
            may exist in the contract in each case. Under certain circumstances,
            such as
            termination or when a product is defective, distributors and bookstores
            could
            receive a cash refund if returns exceed amounts owed. Returns from sales
            made
            directly to the consumer are accepted within 45 days of purchase and
            are issued
            a cash refund. Product returns, price protections or price concessions
            that
            exceed our reserves could materially adversely affect our business and
            operating
            results and could increase the magnitude of quarterly fluctuations in
            our
            operating and financial results.
 
 Software
            products are sold separately, without an obligation of future performance
            such
            as upgrades, enhancements or additional software products, and are sold
            with
            post contract customer support services such as customer service and
            technical
            support assistance. In connection with the sale of certain products,
            we provide
            a limited amount of free technical support assistance to our customers.
            We do
            not defer the recognition of any revenue associated with sales of these
            products, since the cost of providing this free technical support is
            insignificant. The technical support is provided within one year after
            the
            associated revenue is recognized and free product enhancements (bug fixes)
            are
            minimal and infrequent. We accrue the estimated cost of providing this
            free
            support upon product shipment and include it in cost of sales.
  -21-
 Table
                of Contents
  Shipping
            and handling costs in connection with our software products are expensed
            as
            incurred and included in cost of sales.
   **Twelve
                        Months Ended December 31**
                    
                    
                    **2004**
                    
                    
                    **%
                        to Gross Sales**
                    
                    
                    
                    
                    2003
                    
                    
                    %
                        to Gross Sales
                    
                    
                    
                    
                    Change
                    
                    
                    %Gross
                        sales
                    
                    **$**
                    **5,786,427**
                    
                    
                    **100**
                    
                    **%**
                    
                    $
                    4,787,545
                    
                    
                    100
                    
                    %
                    
                    $
                    998,882
                    
                    
                    21
                    %Add
                        rebate adjustments
                    
                    
                    **203,313**
                    
                    
                    **4**
                    
                    **%**
                    
                    
                    170,154
                    
                    
                    4
                    
                    %
                    
                    
                    33,159
                    
                    
                    19
                    %Less
                        reserve for sales returns and allowances
                    
                    
                    **(567,643**
                    **)**
                    
                    **(10**
                    **)**
                    **%**
                    
                    
                    (396,788
                    )
                    
                    (8
                    )
                    %
                    
                    
                    (170,855
                    )
                    
                    43
                    %Net
                        sales
                    
                    **$**
                    **5,422,097**
                    
                    
                    **94**
                    
                    **%**
                    
                    $
                    4,560,911
                    
                    
                    96
                    
                    %
                    
                    $
                    861,186
                    
                    
                    19
                    %
   Gross
            revenues increased approximately $999,000 from approximately $4,788,000
            for the
            year ended December 31, 2003 to approximately $5,787,000 for the year
            ended
            December 31, 2004. Such increase is due to our release of an enhanced
            version of
            Membership Plus ® ,
            during
            the first quarter of 2004 and an enhanced version of QuickVerse ® ,
            during
            the fourth quarter of 2004. However, delays in duplication, packaging
            and
            distribution caused our QuickVerse ® 2005 to
            begin shipping in early-December 2004, long after the holiday season
            had been
            underway. Due to these delays, we believe we experienced reduced revenues
            of
            approximately $500,000 for the year ended December 31, 2004. In addition
            to the
            QuickVerse ® and
            Membership Plus ® releases, there were several other new product releases in the year 2004
            such as
            an enhanced version of our QuickVerse ® PDA.
            However, the retail value of the products ranged from $9.95 to $59.95
            compared
            to $99.95 to $349.95 for the QuickVerse ® and
            Membership Plus ® titles.
            During the year 2003, we only had one major product release,
            QuickVerse ® 8.0,
            which shipped in late December 2003. During the years of 2003 and 2004,
            our
            sales efforts were focused on targeting end-users through telemarketing
            and
            Internet sales. These efforts resulted in more consistent sales during
            the two
            years. Sales into the retail market (both CBA and secular) continue to
            increase;
            however, they are not back to the levels of 1999 and 2000.
    Sales
            returns and allowances increased approximately $171,000 from approximately
            $397,000 for the year ended December 31, 2003 to approximately $568,000
            for the
            year ended December 31, 2004 and increased as a percentage of gross sales
            from
            approximately 8% for the year ended December 31, 2003 to approximately
            10% for
            the year ended December 31, 2004. The upward trend in sales returns
            and
            allowances as a percentage is attributable to our release of enhanced
            versions
            of QuickVerse®and
            Membership Plus®in late
            December of 2003 and January of 2004, respectively. The release of these
            two
            enhanced products resulted in an increased quantity of sales returns
            and
            allowances of prior versions as distributors and stores made shelf space
            during
            the first quarter of 2004. Furthermore, the release of QuickVerse®8.0 in
            late December of 2003 was the only enhancement to the product within
            a three
            year timeframe. We released QuickVerse®2005
            earlier in the fourth quarter of 2004 with only an eleven month difference
            from
            the last enhancement. Due to the earlier release, we anticipated stores
            would
            have more time to return the previous version of QuickVerse®than
            compared to a year ago. Product returns during the other quarters were
            consistent. We anticipate the sales return and allowances as a percentage
            to
            follow a downward trend due to our focused sales efforts to the
            end-users
            and our decreased presence in the retail market, because incidents of
            return are
            lower for sales direct to the end-user than sales into the retail stores.
            We
            also wrote down a reserve for rebates payable due to a change in accounting
            estimate of approximately $142,000 and approximately $124,000 and wrote
            down
            actual rebates payable due to an overstatement of approximately $61,000
            and
            approximately $46,000, both of which are included as an adjustment to
            revenue in
            accordance with EITF Issue No. 01-09 for the twelve months ended December
            31,
            2004 and 2003, respectively.
 -22-
 Table
              of Contents
  ***Cost
          of Sales***
  **Twelve
                        Months Ended December 31**
                    
                    
                    **2004**
                    
                    
                    **%
                        to Gross Sales**
                    
                    
                    
                    2003
                    
                    
                    %
                        to Gross Sales
                    
                    
                    
                    Change
                    
                    
                    %Direct
                        costs
                    
                    **$**
                    **579,946**
                    
                    
                    **10**
                    **%**
                    
                    $
                    539,595
                    
                    
                    11
                    %
                    
                    $
                    40,351
                    
                    
                    7
                    %Amortization
                        of software development costs
                    
                    
                    **575,480**
                    
                    
                    **10**
                    **%**
                    
                    
                    355,283
                    
                    
                    7
                    %
                    
                    
                    220,197
                    
                    
                    62
                    %Royalties
                    
                    
                    **417,604**
                    
                    
                    **7**
                    **%**
                    
                    
                    264,050
                    
                    
                    6
                    %
                    
                    
                    153,554
                    
                    
                    58
                    %Fulfillment
                    
                    
                    **74,889**
                    
                    
                    **1**
                    **%**
                    
                    
                    43,375
                    
                    
                    1
                    %
                    
                    
                    31,514
                    
                    
                    73
                    %Freight-out
                    
                    
                    **172,634**
                    
                    
                    **3**
                    **%**
                    
                    
                    125,680
                    
                    
                    3
                    %
                    
                    
                    46,954
                    
                    
                    37
                    %Cost
                        of sales
                    
                    **$**
                    **1,820,553**
                    
                    
                    **31**
                    **%**
                    
                    $
                    1,327,983
                    
                    
                    28
                    %
                    
                    $
                    492,570
                    
                    
                    37
                    %
  Cost
            of
            sales consists primarily of royalties to third-party providers of intellectual
            property and the direct costs and manufacturing overhead required to
            reproduce,
            package, fulfill and ship the software products. Direct costs and manufacturing
            overhead also include the amortized software development costs and the
            non-capitalized technical support wages. The direct costs and manufacturing
            overhead increased from 22.2% of gross revenues in 2003 to 24.3% of gross
            revenues in 2004. The increase resulted directly from amortization of
            software
            development costs. The amortization recognized during the twelve months
            ended
            December 31, 2003 resulted from several new software releases in 2003
            including
            the then newly released QuickVerse®8.0.
            However, the shorter timeframe between our product upgrades during the
            year of
            2004 led to an increased amount of amortization recognized. During the
            twelve
            months ended December 31, 2004 we continued to amortize the costs associated
            with QuickVerse®8.0
            along with the newly released Membership Plus®8.0, the
            updated release of QuickVerse®PDA 2005
            and the release of QuickVerse®2005.
            Fulfillment costs from a third-party warehouse and included in the manufacturing
            overhead costs noted above, increased approximately $32,000 as we released
            three
            major product upgrades beginning late December 2003 through December
            2004.
            Furthermore, the direct costs and manufacturing overhead include the
            write downs
            of obsolete inventory of approximately $61,000 and approximately $32,000
            for the
            twelve months ended December 31, 2003 and 2004, respectively. The direct
            costs
            and manufacturing overhead percentage is expected to continue at the
            2004 levels
            as working capital remains more consistent and as more development projects
            are
            implemented in a shortened timeframe.
  Royalties
              to third-party providers of intellectual property also increased
              from 5.5%
              of gross revenues in 2003 to 7.2% of gross revenues in 2004. The increase
              of
              royalties reflects the release of the QuickVerse ® 8.0
              editions in late December 2003 and the release of the QuickVerse ® 2005
              editions in early December 2004. Furthermore, we sold some of the older
              QuickVerse ® versions
              to liquidators at a reduced price throughout the year but had no
              such sales during the year ended 2003. During the year
              ended 2004, we
              also renegotiated several royalty contracts which resulted in some
              cases in a
              higher royalty rate along with access to more content. The royalty
              rate as a
              percentage of gross sales is expected to increase in the future as
              the new
              QuickVerse ® 2005 is
              released into the retail market and sales to new users are expected
              to increase
              significantly. However, upgrade sales will continue to be subject to
              royalties
              only on content additions of the upgraded version.
 Software
              development costs are expensed as incurred as research and development
              until
              technological feasibility and marketability have been established,
              at which time
              development costs are capitalized until the software title is available
              for
              general release to customers. Software
              development is segregated by title and technology platform. Once a
              product has
              been successfully released, subsequent revisions and upgrades are considered
              development and the costs of the revision and upgrade are capitalized.Capitalized costs are amortized on a product-by-product basis
              using the
              greater of straight-line amortization over the estimated life of the
              product
              or the ratio of current revenues from the product to the total
              projected
              revenue over the life of the product. Generally, we consider technological
              feasibility to have been established with the release of a beta version
              for
              testing. Software development costs are summarized in the table below.
              The
              software development costs, consisting primarily of direct and indirect
              labor
              and related overhead charges, capitalized during the twelve months
              ended
              December 31, 2003 and 2004 were approximately $659,000 and approximately
              $692,000, respectively. Accumulated amortization of these development
              costs
              included in cost of sales totaled approximately $355,000 and approximately
              $575,000 for the twelve months ended December 31, 2003 and 2004, respectively.
              The increase in both the capitalization and amortization is a direct
              result of
              the increase in the number of development projects.
 -23-
 Table
              of Contents
  **Twelve
                  Months Ended December 31**
                
                
                **2004**
                
                
                2003Beginning
                    balance
                
                **$**
                **584,706**
                
                $
                280,502Capitalized
                
                ****
                **692,063**
                
                
                659,487Amortized
                    (cost of sales)
                
                ****
                **575,480**
                
                
                355,283Ending
                    balance
                
                **$**
                **701,289**
                
                $
                584,706Research
                    and development expense (General and administrative)
                
                **$**
                **64,653**
                
                $
                128,159
  ***Sales,
          General
          and Administrative***
  **Twelve
                      Months Ended December 31**
                  
                  **2004**
                  
                  **%
                      to Gross Sales**
                  
                  
                  2003
                  
                  %
                      to Gross Sales
                  
                  
                  Change
                  
                  %***Selected
                      expenses:***Commissions
                  
                  **$**
                  **814,623**
                  
                  
                  **14**
                  **%**
                  
                  $
                  570,381
                  
                  
                  12
                  %
                  
                  $
                  244,242
                  
                  
                  43
                  %Advertising
                      and direct marketing
                  
                  
                  **455,238**
                  
                  
                  **8**
                  **%**
                  
                  
                  240,062
                  
                  
                  5
                  %
                  
                  $
                  215,176
                  
                  
                  90
                  %Marketing
                      and customer service
                  
                  
                  **10,900**
                  
                  
                  **0**
                  **%**
                  
                  
                  5,511
                  
                  
                  ---
                  %
                  
                  $
                  5,389
                  
                  
                  98
                  %**Total
                      sales and marketing**
                  
                  
                  **1,280,761**
                  
                  
                  **22**
                  **%**
                  
                  
                  815,954
                  
                  
                  17
                  %
                  
                  $
                  464,807
                  
                  
                  57
                  %Research
                      and development
                  
                  
                  **64,653**
                  
                  
                  **1**
                  **%**
                  
                  
                  128,159
                  
                  
                  3
                  %
                  
                  $
                  (63,506
                  )
                  
                  -50
                  %Personnel
                      costs
                  
                  
                  **1,310,506**
                  
                  
                  **23**
                  **%**
                  
                  
                  986,165
                  
                  
                  21
                  %
                  
                  $
                  324,341
                  
                  
                  33
                  %Legal
                  
                  
                  **71,003**
                  
                  
                  **1**
                  **%**
                  
                  
                  77,037
                  
                  
                  2
                  %
                  
                  $
                  (6,034
                  )
                  
                  -8
                  %Rent
                  
                  
                  **75,555**
                  
                  
                  **1**
                  **%**
                  
                  
                  51,039
                  
                  
                  1
                  %
                  
                  $
                  24,516
                  
                  
                  48
                  %Telecommunications
                  
                  
                  **149,443**
                  
                  
                  **3**
                  **%**
                  
                  
                  79,558
                  
                  
                  2
                  %
                  
                  $
                  69,885
                  
                  
                  88
                  %Corporate
                      services
                  
                  
                  **94,000**
                  
                  
                  **2**
                  **%**
                  
                  
                  ---
                  
                  
                  ---
                  %
                  
                  $
                  94,000
                  
                  
                  -Other
                      general and administrative costs
                  
                  
                  **544,678**
                  
                  
                  **9**
                  **%**
                  
                  
                  429,276
                  
                  
                  9
                  %
                  
                  $
                  115,402
                  
                  
                  27
                  %**Total
                      general and administrative**
                  
                  
                  **2,309,838**
                  
                  
                  **40**
                  **%**
                  
                  
                  1,751,234
                  
                  
                  37
                  %
                  
                  $
                  558,604
                  
                  
                  32
                  %
 Operating
              expenses for 2004 include approximately $149,000 in non-cash expenses
              related to
              shares of common stock and warrants issued for services and approximately
              $30,000 in non-cash expenses related to shares of common stock issued
              in a
              settlement agreement compared with approximately $53,000 for 2003.
              With gross
              revenues increasing approximately $999,000 from 2003 to 2004, sales
              expenses
              also increased approximately $465,000 from approximately $816,000 for
              2003 to
              approximately $1,281,000 for 2004. Included in sales expenses, commissions
              to a
              third-party telemarketing firm increased approximately $244,000 as
              our sales
              focus to the direct consumer increased along with the number of new
              and enhanced
              product releases during 2004 compared with that of 2003; advertising,
              and direct
              marketing increased approximately $215,000 as we launched a full-service
              online
              store, began marketing our products online through multiple sources,
              attended
              more retail conferences, and increased the number of new product upgrades
              throughout the year; and marketing and customer service costs increased
              approximately $5,000 as our sales efforts continue to be more focused
              towards
              the consumer instead of the retail store.
  Research
                and development costs include salaries and benefits of personnel
                and third
                parties conducting research and development of software products.
                Software
                development costs expensed as research and development (see table
                above)
                amounted to approximately $65,000 for the twelve months ended December
                31, 2004
                compared to approximately $128,000 incurred for the twelve months
                ended December
                31, 2003. The decrease in 2004 reflects further development of existing
                products
                whereas in 2003 we had more research and development costs associated
                with new
                titles such as QuickVerse ® PDA for
                both Pocket PC ® and Palm
                OS ® operating systems. Research and development expenses are expected
                to increase in
                future periods as we add new products and versions to our product
                mix.
 -24-
 Table
              of Contents
 Personnel
            costs increased approximately $325,000 from approximately $986,000 for
            the
            twelve months ended December 31, 2003 to approximately $1,311,000 for
            the twelve
            months ended December 31, 2004. This increase is primarily from the increase
            in
            our sales and marketing team and technical support staff and the associated
            health care costs. We also recognized approximately $14,000 of expense
            related
            to 635,000 restricted shares of common stock issued to employees and
            approximately $67,000 in expense for upper management year-end bonus
            accrual.
            Furthermore, the capitalization of direct and indirect labor and related
            overhead charges as software development costs and the cost of providing
            free
            technical support to our customers (see “Cost of Sales” above) decreased by
            approximately $23,000 from approximately $557,000 for the twelve months
            ended
            December 31, 2003 to approximately $534,000 for the twelve months ended
            December
            31, 2004. This decrease is due to the shortened development time period
            for the
            new development projects that began during the year 2004. It is anticipated
            that
            personnel costs will continue to increase in future periods as operating
            capital
            is available to fund full staffing of our product development team and
            expansion
            of the direct marketing staff. In addition, interest and penalty fees
            related to
            back payroll taxes increased approximately $95,000 for the twelve months
            ended
            December 31, 2004.
 Direct
            legal costs increased approximately $38,000 for the twelve months ended
            December
            31, 2004 as the disputes with TLC and Zondervan were finalized in March
            2004.
            However, approximately $44,000 of legal costs were related to the stock
            offering
            costs incurred in July 2004 and
            the
            related preparation of a 14C information statement and SB-2 registration
            statement; and therefore was recorded as a reduction to additional
            paid-in capital. It
            is
            anticipated that legal costs will increase as we hold our first annual
            meeting
            of stockholders later this year and pursue our business plan for growth
            by
            acquiring companies and software title properties that are synergistic
            with our
            current product line and customer base.Rent expense increased
            approximately $25,000 as we opened a new product development facility
            located in
            Naperville, IL. The increase is also attributed to the capitalization
            of related
            overhead charges as software development costs. See “Cost of Sales” above.
            Telecommunications costs increased approximately $70,000 as the call
            volume
            increased in technical support and customer service due to the release
            of the
            three major product upgrades beginning late December 2003 through December
            2004.
            Corporate service fees increased approximately $94,000 for the twelve
            months
            ended December 31, 2004. These fees are related to the recent hire of
            an outside
            consultant, the expense for an issuance of a warrant to purchase 600,000
            shares
            of common stock allocated over the term of the consulting contract, and
            the
            expense for a previous issuance of a warrant to purchase 250,000 shares
            of
            common stock.
 ******Other
            Income and Adjustments******
  We
          recorded an adjustment to the balance of accrued royalties for the year
          ended
          December 31, 2003 in the amount of approximately $584,000. This adjustment
          was a
          result of our having reached a settlement with TLC regarding the offset
          credit
          to which we were entitled against the balance due on the 1999 license.
          The
          offset credit was related to sales made to TLC that remained in dispute
          until
          verified by an independent third-party audit of the sales and related royalty
          calculations. The royalty liabilities had been accrued based on our sales
          to TLC
          as originally reported and were part of the calculation of the June 30,
          2001 bad
          debt provision totaling $2,391,000. This has been included in other
          income.
  We
            also
            reclassified as other income proceeds totaling $650,000, and the corresponding
            accrued interest payable totaling approximately $217,000, that were previously
            recorded as an unsecured note payable. The determination to reclassify
            the
            obligation was made on the basis of the combined facts that (i) the obligation
            exists, if at all, solely pursuant to an oral loan agreement made over
            three
            years ago in the State of North Carolina with a representative of the
            party to
            whom the obligation was believed to have been owed, (ii) no party has
            ever made
            any demand for repayment thereof despite the fact that no payments have
            ever
            been made on the obligation, (iii) the party believed to be owed the
            obligation,
            upon inquiry, claims no record of any such obligation, and (iv) the State
            of
            North Carolina Statute of Limitations applicable to oral agreements,
            believed to
            govern the continued enforceability of the obligation, has expired.
 
 -25-
 Table
                of Contents
  During
            the year ended December 31, 2004, we recognized an approximately $1,000,000
            gain from extinguishment of debt which is included in other income. The
            extinguishment of debt is a direct result from one-time settlment arrangements
            with various vendors and content providers for lump-sum payments ranging
            from
            approximately 17% to approximately 60% of balances owed at the time.
            Vendors who
            were offered the settlement had previously provided services and/or goods
            to us,
            and the content providers were owed royalties from us. We do not anticipate
            this
            to be a recurring event in the future. Below is a list of the vendors
            and
            content providers who we settled with:
  •
                    American
                        Bible Society (content provider)•
                    David
                        Epstein (content provider)•
                    Depository
                        Trust Company (corporate services)•
                    Explorer’s
                        Bible Study (content provider)•
                    Genesis
                        Marketing Group (sales services)•
                    Historical
                        Exegetical Electronic Publishing (content provider)•
                    Innovative
                        Church Marketing Group (advertising services)•
                    Interactive
                        Pictures Corporation (content provider)•
                    InterVarsity
                        Press (content provider)•
                    Ivy
                        Hill/Warner Media Services (manufacturing services)•
                    Lernout
                        & Hauspie Speech Products (content provider)•
                    MicroBytes,
                        Inc. (CD duplication services)•
                    Moody
                        Publishers (content provider)•
                    National
                        Council of the Churches of Christ in the United States of
                        America (content
                        provider)•
                    NavPress
                        Publishing Group (content provider)•
                    Oxford
                        University Press (content provider)•
                    Pillsbury,
                        Madison & Sutro LLP (legal services)•
                    Rutledge
                        Hill Press (content provider)•
                    Sonopress
                        (manufacturing services)•
                    Standard
                        Publishing (content provider)•
                    The
                        Lockman Foundation (content provider)•
                    World
                        Publishing (content provider)
  Furthermore
                during the year ended December 31, 2004, we incurred approximately
                $155,000 in
                expenses related to a settlement agreement with Swartz Private Equity,
                an
                institutional private equity investor, for early termination of the
                agreement.
                As part of a settlement agreement, we issued 295,692 shares of common
                stock and
                paid a cash lump sum of $125,000. The shares were valued at $0.10
                per share.
                This has been included in other adjustments.
 ***Amortization***
  Amortization
          expense increased approximately $15,000 for the twelve months ended December
          31,
          2004. The software license acquired from TLC in July of 1999 is
          amortized
          over a 10 year useful life. Amortization expense for 2004 reflects the
          continual
          amortization of the software license along with the amortization for the
          launch
          of our new Website, www.quickverse.com, during the second quarter of 2004.
   ***Income
          Tax
          Benefits***
 
 Our
          effective tax rate differs from the statutory federal rate due to differences
          between income and expense recognition prescribed by the Internal Revenue
          Code
          and Generally Accepted Accounting Principles. We utilize different methods
          and
          useful lives for depreciating property and equipment. Changes in estimates
          (reserves) are recognized as expense for financial reporting but are not
          deductible for income tax purposes.
 We
            have
            recognized a net deferred tax asset whose realization depends on generating
            future taxable income. At December 31, 2003, management established the
            valuation allowance equal to the total deferred tax assets due to the
            uncertainty about our ability to continue as a going concern. At December
            31,
            2004, management adjusted the amount of valuation allowance based on
            the
            assessment that we will continue as a going concern and will produce
            sufficient income in the future to realize our net deferred tax
            asset. The
            resulting deferred tax liability reflects income taxes payable in future
            periods
            on the net deductible differences related to the 1999 license. We currently
            have
            net operating loss carryforwards, for income tax purposes, of approximately
            $7,648,000. The carryforwards are the result of income tax losses generated
            in
            2000 ($2,480,000 expiring in 2020) and 2001 ($5,168,000 expiring in 2021).
            We
            will need to achieve a minimum annual taxable income, before deduction
            of
            operating loss carryforwards, of approximately $450,000 to fully utilize
            the
            current loss carryforwards. We believe this is achievable through careful
            expense management and continued introduction of new products and enhanced
            versions of our existing products.
 -26-
 Table
              of Contents
  Although
          there can be no assurance, management expects the deductible temporary
          differences (reserves) to reverse sometime beyond the next fiscal year.
  **LIQUIDITY
            AND
            CAPITAL RESOURCES**
  
   As
          of
          December 31, 2004, we had $1,551,447 in current assets, $1,383,143 in current
          liabilities and a retained deficit of $5,879,159. We had income before
          income
          taxes of $239,866 and a net income after income taxes of $1,255,725 for
          the year
          ended December 31, 2004. Operating expenses for 2004 included approximately
          $149,000 in non-cash expenses related to shares of common stock and warrants
          issued for services and approximately $30,000 in non-cash expenses related
          to
          shares of common stock issued in a settlement agreement. Other income for
          2004
          included approximately $1,000,000 from extinguishment of debt. See “Results Of
          Operations” above.
   **Cash
                        Flows for Twelve Months Ended December 31**
                    
                    
                    **2004**
                    
                    
                    2003
                    
                    
                    ChangeCash
                        flows provided (used) by operating activities
                    
                    **$**
                    **(643,668**
                    **)**
                    $
                    882,221
                    
                    $
                    (1,525,889
                    )Cash
                        flows (used) by investing activities
                    
                    **$**
                    **(746,932**
                    **)**
                    $
                    (814,457
                    )
                    $
                    67,525Cash
                        flows provided (used) by financing activities
                    
                    **$**
                    **1,690,291**
                    
                    $
                    (64,747
                    )
                    $
                    1,755,038
 Net
            cash
            provided by operating activities was approximately $882,000 for the year
            ended
            December 31, 2003 and net cash used by operating activities was approximately
            $644,000 for the year ended December 31, 2004. The increase in cash used
            was
            primarily due to an increase in the amounts paid to suppliers and employees
            which would include all royalty payments to our content providers.
  Net
            cash
            used in investing activities was approximately $814,000 and $747,000
            for the
            years ended December 31, 2003 and 2004, respectively. The decrease in
            cash used
            for investing activities results from our merchant banker reserving cash
            for a
            potential increase in credit card chargebacks due to increased purchases
            during
            the year ended December 31, 2003, and then refunding or holding only
            half of
            that original reserve in cash during the year ended December 31,
            2004.
  Net
            cash
            used by financing activities was approximately $65,000 for the year ended
            December 31, 2003 and net cash provided by financing activities was
            approximately $1,690,000 for the year ended December 31, 2004. Cash used
            by
            financing activities reflects final settlement on our accounts receivable
            line
            of credit, payments made on debt obligations, and stock offering costs
            associated with private placement equity financing. Cash provided by
            financing
            activities reflects proceeds from issuance of stock and promissory
            notes.
  -27-
 Table
                of Contents
 On
              March
              19, 2001, we entered into an Accounts Receivable Financing Agreement
              with
              Alliance Financial Capital, Inc. Pursuant to this agreement, Alliance
              agrees to
              purchase selected accounts receivable on a discounted basis, including,
              without
              limitation, full power to collect, compromise, sue for, assign, or
              in any manner
              enforce collection thereof. The agreement provides for advances of
              60% toward
              the purchase of the invoices with a credit line of $250,000. The terms
              call for
              40% to be held in a reserve account from the collection of each invoice.
              Invoices not paid by the customer within 90 days of shipment are required
              to be
              repurchased by us out of the reserve account. The agreement carries
              a 12 month
              term with a minimum monthly fee equal to one half of one percent (.5%).
              The term
              renews automatically every 12-months unless a written request for termination
              is
              received by Alliance at least 30 days before the renewal date. During
              the twelve
              months ended December 31, 2004, we transferred accounts receivable
              totaling
              $300,966 to Alliance for cash advances of $180,580. As accounts are
              paid, the
              collected funds (less the amount advanced and appropriate fees) are
              disbursed to
              us. The transfer agreement includes a repurchase requirement and, accordingly,
              the proceeds were accounted for as a secured borrowing. At December
              31, 2004,
              the balance of receivables transferred and included in trade receivables
              was $0.
              The remaining secured borrowing balance included in accrued expenses
              was $0. On
              July 20, 2004, we terminated the Accounts Receivable Financing Agreement
              with
              Alliance.
 On
              July
              19, 2004, we completed an equity financing in the amount of $1,750,000
              through a
              private placement with Barron Partners. Under the terms of the agreement,
              Barron
              purchased 21,875,000 restricted shares of common stock at a price of
              $0.08 per
              share. In addition, according to the terms of the agreement, Barron
              received two
              warrants to purchase common stock. The first warrant entitles the
              holder to purchase up to 10,937,500 shares of common stock at
              a price of
              $0.18 per share and the second warrant entitles the holder to
              purchase
              up to 10,937,500 additional shares of common stock at a price of $0.60
              per
              share;
              each
              warrant is subject to standard adjustment provisions. See Exhibits 10.10,
              10.11, 10.12 and 10.13.
  On
              September 30, 2004, we issued promissory notes to each of two different
              individuals. Each of these promissory notes was in the principal amount
              of
              $120,000 and, pursuant to a separate side letter agreement in each
              case, was
              convertible at the option of the holder into 1,000,000 restricted shares
              of
              common stock. On November 16, 2004, the holders of the promissory notes
              converted those notes into a total of 2,000,000 shares of our common
              stock.
  We
            were in arrears with the Internal Revenue Service for back payroll
            taxes
            and had been paying the payroll taxes in monthly installments previously
            approved by the Internal Revenue Service. Subsequent to the financing
            received
            in July of 2004, we paid all back payroll taxes that were due
            to the
            Internal Revenue Service.
  In
            July
            2004, we made the final payment to Zondervan for $100,000 plus 5% simple
            interest. This payment completed all of our obligations that were previously
            outlined in the settlement with The Zondervan Corporation and TLC dated
            October
            2003. See Note 16 - Commitments and Contingencies. In addition, according
            to the
            settlement agreement, the term of the 1999 license has been effectively
            extended
            indefinitely. However, we continue to amortize the license using the
            original 10
            year economic life.
   **RISK
            FACTORS**
 
 Several
            of the matters discussed in this document contain forward-looking statements
            that involve risks and uncertainties. Factors associated with the
            forward-looking statements that could cause actual results to differ
            from those
            projected or forecast are included in the statements below. In addition
            to other
            information contained in this report, readers should carefully consider
            the
            following cautionary statements and risk factors.
  **GENERAL
            BUSINESS RISKS**
  ***Our
              liquidity and capital resources are very limited.***
  Our
              ability to fund working capital and anticipated capital expenditures
              will depend
              on our future performance, which is subject to general economic
              conditions, our customers, actions of our competitors
              and other
              factors that are beyond our control. Our ability to fund operating
              activities is
              also dependent upon (i) the extent and availability of bank and other
              credit
              facilities, (ii) our ability to access external sources of financing,
              and (iii)
              our ability to effectively manage our expenses in relation to revenues.
              We
              believe that the net proceeds received from our 2004 sales of common
              stock,
              warrants and convertible promissory notes, together with future cash
              flow from
              operations, and funds from external sources of credit-based debt financing,
              will
              be adequate to meet our anticipated liquidity requirements over the
              next twelve
              months and will provide additional capital for potential acquisitions.
              Given our
              initiative towards rapid revenue growth, there can be no assurance,
              however,
              that our operations and access to external sources of financing will
              continue to
              provide resources sufficient to satisfy our liabilities arising in
              the ordinary
              course of business.
  -28-
 Table
                of Contents
 ***Our
                accumulated deficit makes it harder for us to borrow
                funds.***
 
 As
                of June 30, 2005, and as a result of historical losses in
                prior years, our
                accumulated deficit was $5,967,127. The fact that we maintain an
                accumulated
                deficit, as well as the extent of our accumulated deficit relative
                to recent
                earnings, negatively affects our ability to borrow funds because
                lenders
                generally view an accumulated deficit as a negative factor in evaluating
                creditworthiness. Any inability on our part to borrow funds if and
                when
                required, or any reduction in the favorability of the terms upon
                which we are
                able to borrow funds if and when required, including amount, applicable
                interest
                rate and collateralization, would likely have a material adverse
                effect on our
                business, our financial condition, including liquidity and profitability,
                and
                our results of operations.
  **RISKS
                ASSOCIATED WITH OUR BUSINESS AND INDUSTRY**
 
 ***We
            face serious competition in our business segment.***
  The
            market for our products is rapidly evolving and intensely competitive
            as new
            consumer software products and platforms are regularly introduced. Competition
            in the consumer software industry is based primarily upon:
 •
                    brand
                        name recognition;
 •
                    availability
                        of financial resources;
 •
                    the
                        quality of titles;
 •
                    reviews
                        received for a title from independent reviewers who publish
                        reviews in
                        magazines, Websites, newspapers and other industry publications;
 •
                    publisher’s
                        access to retail shelf space;
 •
                    the
                        price of each title; and
 •
                    the
                        number of titles then available.
 
 We
              face
              competition from other software publishers, all of which generally
              sell through
              the same combination of channels that we do, including chain store,
              secular,
              CBA, direct and online sales. Specifically, we currently compete with
              Logos
              Research Systems, Inc., Biblesoft, Inc., Thomas Nelson, Inc., WordSearch
              Bible
              Publishers and The Zondervan Corporation, among others.
 
 To
              remain
              competitive in our market segment we rely heavily upon our product
              quality,
              marketing and sales abilities, proprietary technology and product development
              capability. However, some of our competitors have longer operating
              histories,
              larger customer bases and greater financial, marketing, service, support,
              technical and other resources than we do. Due to these greater resources,
              certain of our competitors have the ability to undertake more extensive
              marketing campaigns, adopt more aggressive pricing policies, pay higher
              fees to
              licensors and pay more to third-party software developers than we can.
              Only a
              small percentage of titles introduced into the software market achieve
              any
              degree of sustained market acceptance. If our titles, including special
              editions, are not successful, our business, our financial condition,
              including
              liquidity and profitability, and our results of operations will be
              negatively
              impacted. Moreover, we believe that competition from new entrants will
              increase
              as the market for faith-based products and services continues to expand.
  ***We
              depend on only two titles for the overwhelming majority of our
              revenue.***
 In
                fiscal
                year 2004, approximately 91% of our total revenue was derived from
                two software
                titles; QuickVerse ® ,
                comprising 63% of total revenue, and Membership Plus ® ,
                comprising 28% of total revenue. We expect that a very limited number
                of popular
                products will continue to produce a disproportionately large amount
                of our
                revenue for the foreseeable future. Due to this dependence on a limited
                number
                of titles, the failure of one or more titles or title versions to
                achieve
                anticipated results would likely have a material adverse effect on
                our business,
                our financial condition, including liquidity and profitability, and
                our results
                of operations.
 -29-
 Table
                  of Contents
 ******We
                have experienced, and may continue to experience, reduced revenues
                and
                fluctuations in our quarterly operating results due to delays in
                the
                introduction and distribution of our
                products.******
 A
                significant portion of our revenue for any given quarter is generated
                by the
                sale of new titles and title versions introduced during that quarter
                or shipped
                in the immediately preceding quarter. Our inability to timely begin
                volume
                shipments of a new title or title version in accordance with our
                internal
                development schedule, as has repeatedly been the case in the past,
                will cause
                earnings fluctuations and will negatively impact our business, our
                financial
                condition, including liquidity and profitability, and our results
                of operations.
                Timely introduction of a new title or title version is largely contingent
                upon
                the timing of a variety of other factors. Included amongst these
                are development
                processes themselves, debugging, approval by third-party content
                licensors and
                duplication and packaging processes. Furthermore, the complexity
                of
                next-generation systems (such as PDA) has resulted in longer development
                cycles,
                higher development expenditures and the need to more carefully monitor
                and plan
                development processes associated with these products.
 
 We
                cannot be certain that we will be able to meet planned release dates
                for some or
                all of our new titles or title versions. In the past, we have experienced
                significant delays in our introduction of some new titles and title
                versions.
                For instance, delays in duplication, packaging and distribution caused
                our
                QuickVerse ® 2005 to begin shipping in early-December 2004, long after the holiday
                season had
                been underway. As a result, we experienced fewer sales than we might
                otherwise
                have had the product been available before the holiday selling season
                began,
                which we believe had a material adverse effect on our results of
                operations for
                the 2004 fourth quarter. It is likely in the future that delays will
                continue to
                occur and that some new title or title versions will not be released
                in
                accordance with our internal development schedule or the expectations
                of public
                market analysts and investors, having a negative impact on our business,
                our
                financial condition, including liquidity and profitability, and our
                results of
                operations in that period.
  ***We
                have experienced, and may continue to experience, reduced revenues
                and
                fluctuations in our quarterly operating results*** ** ***due
                to the limited life cycle of our products.*** ****
  The
                average life cycle of a new title ranges anywhere from a few
                years to
                indefinitely, and the average life cycle of a new title version ranges
                anywhere
                from twelve to upwards of eighteen months. The
                majority of sales
                for a new title or title version occur within the first thirty to
                one hundred
                and twenty days following release and net revenue associated with
                the initial
                introduction generally constitutes a high percentage of the total
                net revenue
                over the life of the title or title version. Factors such as competition,
                market
                acceptance, seasonality and technological, developmental and/or promotional
                expenses associated with a title or title version can shorten the
                life cycle of
                older titles and title versions and increase the importance of our
                ability to
                regularly release new titles and title versions. Consequently, if
                net revenue in
                a given period is below expectation, our business, our financial
                condition,
                including liquidity and profitability, and our results of operations
                in that
                period are likely to be negatively affected, as has repeatedly occurred
                in the
                past.
  ***Product
                returns, price protections or concessions that exceed our anticipated
                reserves
                could result in worse than expected operating
                results.***
 At
                  the
                  time we ship our products we establish reserves, including reserves
                  that
                  estimate the potential for future product returns and price concessions.
                  In the
                  past, particularly during title version transitions, we have had
                  to increase
                  price concessions to our wholesale retail customers. If consumer
                  demand for
                  a specific title or title version falls below expectations or significantly
                  declines below previous rates of retail sell-through, then a price
                  concession or
                  credit may be requested by our wholesale retail customers to spur
                  further retail
                  channel sell-through. Coupled with more competitive pricing, if
                  product
                  returns, price protections or price concessions exceed
                  our reserves
                  the magnitude of quarterly fluctuations will increase and our operating
                  and
                  financial results will be negatively impacted. Furthermore, if
                  we incorrectly
                  assess the creditworthiness of any one of our wholesale customers
                  who take
                  delivery of our products on credit, we could be required to significantly
                  increase reserves previously established.
 -30-
 Table
                of Contents
 Typically
              we experience the highest reserves at the end of the first quarter
              and fourth
              quarter and the lowest at the end of the third quarter. Historically,
              actual
              returns have been within management ’ s
              prior
              estimates, however, we cannot be certain that any future write-offs
              exceeding
              reserves will not occur or that amounts written off will not have a
              material
              adverse effect on our business, our financial condition, including
              liquidity and
              profitability, and our results of operations.
 ***Errors
            or defects in our software products may cause a loss of market acceptance
            and
            result in fewer sales of our products.***
  Our
              products are complex and may contain undetected errors or defects when
              first
              introduced or as new versions are released. In the past, we have discovered
              software errors in some of our new products and enhancements after
              their
              introduction into the market. Because our products are complex, we
              anticipate
              that software errors and defects will be present in new products or
              releases in
              the future. To date we have not discovered any material errors, however,
              future
              errors and defects could result in adverse product reviews and a loss
              of, or
              delay in, market acceptance of our products.
  ***We
              may not have available funds to develop products that consumers
              want.***
  The
            Bible-study, inspirational content and organizational management software
            markets are subject to rapid technological developments. Although the
            life of
            most of our titles may be quite long, the life of any given version tends
            to be
            relatively short, in many cases less than three years. To develop products
            that
            consumers, church and other faith-based organizations desire, we must
            continually improve and enhance our existing products and technologies
            and
            develop new products and technologies that incorporate these technological
            developments. Our
            inability to do this would likely have a material adverse effect on our
            business, our financial condition, including liquidity and profitability,
            and
            our results of operations.
 We
              focus
              our development and publishing activities principally on new versions
              of our
              existing titles. We cannot, however, be certain that we will have the
              financial
              and technical resources available to continue to develop these new
              title
              versions particularly since we must undertake these initiatives while
              remaining
              competitive in terms of performance and price. This will require substantial
              investments in research and development, often times well in advance
              of the
              widespread release of a product into the market and any revenues these
              products
              may generate.
  Our
              cash
              outlays for product development for the fiscal year ended December
              31, 2004 were
              higher than the fiscal year ended December 31, 2003. Our product development
              cash outlays may increase in the future as a result of the higher costs
              associated with releasing more software titles or new title versions
              across
              multiple user interface platforms, and the complexity of developing
              such titles
              and title versions for next-generation systems, among other reasons.
              We
              anticipate that our profitability will continue to be impacted by the
              levels of
              research and development expenditures relative to revenue and by fluctuations
              relating to the timing of development in anticipation of future user
              interface
              platforms.
 ******The
                loss of any of our key executives could have a material adverse effect
                on our
                business.******
 Our
                  success depends to a large degree upon the skills of our three
                  key
                  executives, Steven Malone, Kirk R. Rowland and William Terrill.
                  We
                  presently do not maintain key person life insurance on any of our
                  three key
                  executives. Although we have employment agreements with each of
                  our three key
                  executives, there can be no assurance that we will be able to retain
                  our
                  existing key personnel or attract and retain additional key personnel.
                  The loss
                  of any one of our three key executives would likely have a material
                  adverse
                  effect on our business, our financial condition, including liquidity
                  and
                  profitability, and our results of operations.
 
 -31-
 Table
                  of Contents
  ******The
              successful development of our products depends on our ability to attract,
              integrate, motivate and retain highly skilled
              personnel.******
 Our
              success depends to a large extent on our ability to attract, hire and
              retain
              skilled software developers, programmers and other highly skilled technical
              personnel. The software industry is characterized by a high level of
              employee
              mobility and aggressive recruiting among competitors for personnel
              with
              programming, technical and product development skills. We may not be
              able to
              attract and retain skilled personnel or may incur significant costs
              in order to
              do so. If we are unable to attract additional qualified employees or
              retain the
              services of key personnel, our business, our financial condition, including
              liquidity and profitability, and our results of operations could be
              negatively
              impacted.
 ***Our
              intellectual property may not be adequately protected from unauthorized
              use by
              others, which could increase our litigation costs and adversely affect
              our
              sales.***
   Our
              copyrighted software content and the brand recognition associated with
              our
              related product trademarks are the most important assets that we possess
              in our
              ability to generate revenues and profits, and we rely very significantly
              on
              these intellectual property assets in being able to effectively compete
              in our
              market. There can be no assurance that these intellectual property
              assets will
              provide meaningful protection to us from unauthorized use by others,
              which could
              result in an increase in competing products and a reduction in our
              own sales. If
              we must pursue litigation in the future to enforce or otherwise protect
              our
              intellectual property rights, or to determine the validity and scope
              of the
              proprietary rights of others, we may not prevail and will likely have
              to make
              substantial expenditures and divert valuable resources in any case.
              This is
              particularly true given the fact that the copyrights that we own to
              the source
              code and other improvements made to our largest-selling products since
              1999 have
              not been registered, which means that we may not rely upon the otherwise
              existing advantage of a rebuttable presumption of ownership in the
              event of, and
              in connection with, any such litigation.
  ***Our
              exclusive rights to publish and sell our largest-selling titles are
              limited to
              non-secular channels.***
 Approximately
                97% of our revenues in 2004, including those generated from sales
                of
                QuickVerse®and
                Membership Plus®,
                by far
                our two largest selling software titles, were derived from the publishing
                and
                sales of software titles to which we have only the exclusive license
                to publish
                and sell into non-secular channels. Although we do not believe that
                any third
                parties have been granted any rights to date in addition to our own
                to publish
                or sell these titles into secular channels, and do believe that,
                even if this
                has occurred or should occur in the future, the barriers to entry
                created by the
                extensive developments that we have made and now own to these otherwise
                licensed
                titles would make it practically infeasible for any third party to
                effectively
                compete with us in relation to these products in any market, there
                can be no
                assurance that one or more competitors will not emerge at some point
                or that
                they will not impact on our sales and revenues.
  ***If
              our products infringe any proprietary rights of others, a lawsuit may
              be brought
              against us that could require us to pay large legal expenses and judgments
              and
              redesign or discontinue selling one or more of our
              products.***
 We
                    are
                    not aware of any circumstances under which our products infringe
                    upon any valid
                    existing proprietary rights of third parties. Any infringement
                    claims, however,
                    whether or not meritorious, could result in costly litigation
                    or require us to
                    enter into royalty or licensing agreements. If we are found to
                    have infringed
                    the proprietary rights of others, we could be required to pay
                    damages, redesign
                    the products or discontinue their sale. Any of these outcomes,
                    individually or
                    collectively, could have a material adverse effect on our business,
                    our
                    financial condition, including liquidity and profitability, and
                    our results of
                    operations.
 ***New
                Internet access devices may change the way information is displayed
                requiring us
                to change our products.***
  Recent
                increases in the use of Internet devices to access inspirational
                content and the
                continued development of Internet devices as a medium for the delivery
                of
                network-based information, content, and services may require us to
                change our
                products. Our success depends on our ability to understand the method
                upon which
                our search engines operate and our ability to service new and emerging
                devices
                to access the Internet, such as browser phones, personal digital
                assistants, and
                other wireless devices. To the extent these new Internet access devices
                change
                the way that information is displayed to the end-user or causes a
                change in the
                medium that is searched, we may be required to revise the methodology
                of our
                products. We cannot predict the impact that new devices will have
                on our
                services across the entire spectrum of developing technologies, and
                any required
                product adaptations may result in loss of revenue and goodwill, increased
                expenses, and reduced operating margins.
 -32-
 Table
                    of Contents
  ***Revenue
                varies due to the seasonal nature of consumer software purchases.***
 Our
                    business is highly seasonal. More than 50% of our annual sales
                    are expected to
                    occur in the five months of September through January; the five
                    months of April
                    through August are generally our weakest, generating only about
                    33% of our
                    annual sales. The seasonal pattern is due primarily to the increased
                    consumer
                    demand for software during the year-end holiday selling season
                    and the reduced
                    demand for software during the summer months. Our earnings vary
                    significantly
                    and are materially affected by releases of popular titles and
                    title versions
                    and, accordingly, may not necessarily reflect the seasonal patterns
                    of the
                    industry as a whole. We expect that operating results will continue
                    to fluctuate
                    seasonally in the future.
 **RISKS
                ASSOCIATED WITH AN INVESTMENT IN OUR COMMON
                STOCK**
  ***We
              face serious financial penalties for any continuing failure to meet
              our
              registration obligations to Barron Partners, LP.***
 
 On
              July
              19, 2004, we entered into a certain Stock Purchase Agreement pursuant
              to which
              we agreed to issue and sell 21,875,000 restricted shares of our common
              stock,
              and warrants to purchase another 21,875,000 shares of our common stock,
              to
              Barron Partners, LP, a New York based institutional investor. As part
              of the
              financing transaction, we also entered into a certain Registration
              Rights
              Agreement with Barron Partners, LP pursuant to which we became committed
              to
              registering all of the shares issued as part of such transaction, including
              those issuable under the warrants. On November 22, 2004, we filed a
              registration
              statement on Form SB-2 covering the shares issued to Barron Partners,
              as well as
              the shares underlying the warrants issued to Barron Partners. Under
              the terms of
              the Registration Rights Agreement, as amended, we had until April 22,
              2005 to
              cause such registration statement to be declared effective by the SEC.
              In
              accordance with the terms of the Registration Rights Agreement, any
              delays in
              meeting this obligation subject us to liability to Barron Partners,
              LP in
              an amount equal to $1,726 per day for the duration of any such delay.
  As
              of the
              date of this filing, the registration statement filed on November 22,
              2004 had
              not yet been declared effective. Pursuant to a tentative agreement
              reached with
              Barron Partners in relation to the associated accruing penalties, we
              agreed in
              May to, and did, pay Barron Partners an amount in cash equal to $100,000
              in
              order to toll the accrual of further penalties until June 21, 2005.
              Since June
              21, 2005, however, penalties have continued to accrue as we have experienced
              ongoing delays in effectiveness of the registration statement due principally
              to
              ongoing efforts made necessary by our determination to restate certain
              of our
              historical financials information. Although there can be no assurance,
              management is hopeful that we will be able to cause the registration
              statement to be declared effective within the next several months and
              that,
              because of their interest in our financial prosperity, we will be able
              to obtain
              an agreement with Barron Partners with respect to accruing penalties
              such that
              any amounts owed by us as of the time the registration statement is
              declared
              effective can be paid by us in installments over time on the basis
              of a schedule
              that we will be able to meet without undue financial hardship. If we
              are
              unsuccessful in causing the registration statement to be declared effective
              by
              the SEC in the near future, however, it is likely to have a very material
              adverse effect on our business, our financial condition, including
              liquidity and
              profitability, and our results of operations.
  ***Up
              to 47,491,666 shares of our common stock are likely to become eligible
              for
              public sale as a result of a resale registration statement filing which
              is
              likely to depress our stock price.***
 As
                of the
                date of filing of this annual report with the SEC on Form 10-KSB/A,
                we also have
                a registration statement filed with the SEC on Form SB-2 which, once
                declared
                effective by the SEC, will cause to be
                eligible for immediate resale on the public market 24,341,666
                shares of our common stock and an additional 23,150,000
                shares of our common stock underlying warrants (the
                resale offering of which shall only be made by means of a separate
                prospectus) .
                As a
                percentage of our total outstanding common stock, this represents
                66.2%. If a
                significant number of shares are offered for sale simultaneously,
                which is
                likely to occur, it would have a depressive effect on the trading
                price of our
                common stock on the public market. Any such depressive effect may
                encourage
                short positions and short sales, which could place further downward
                pressure on
                the price of our common stock. Moreover, all of the shares sold in
                the offering
                will be freely transferable thereafter without restriction or further
                registration under the Securities Act (except for any shares purchased
                by our “ affiliates ” ,
                as
                defined in Rule 144 of the Securities Act), which could place even
                further
                downward pressure on the price of our common stock. Furthermore,
                should a
                simultaneous sell-off occur, and due to the thinly-traded market
                for our common
                stock, stockholders may have difficulty selling shares of our common
                stock, at
                or above the price paid, at a fair market value or even at all.
  -33-
 Table
                    of Contents
  ***Unless
              an active trading market develops for our common stock, you may not
              be able to
              sell your shares.***
 We
                are a
                reporting company and our common stock is listed on the OTC Bulletin
                Board
                (owned and operated by the Nasdaq Stock Market, Inc.), however, there
                is no
                active trading market for our common stock. There can be no assurance
                that an
                active trading market will ever develop for our common stock or,
                if it does
                develop, that it will be maintained. Failure to develop or maintain
                an active
                trading market will have a generally negative effect on the price
                of our common
                stock, and you may be unable to sell your shares or any attempted
                sale of such
                shares may have the effect of lowering the market price, and therefore
                your
                investment could be a complete or partial loss.
 ***Since
            our common stock is thinly traded, it is more susceptible to extreme
            rises or
            declines in price, and you may not be able to sell your shares at or
            above the
            price you paid.***
 
 You
            may
            have difficulty reselling shares of our common stock, either at or above
            the
            price you paid, or even at a fair market value. The stock markets often
            experience significant price and volume changes that are not related
            to the
            operating performance of individual companies, and because our common
            stock is
            thinly traded, it is particularly susceptible to such changes. These
            broad
            market changes may cause the market price of our common stock to decline
            regardless of how well we perform as a company, and, depending on when
            you
            determine to sell, you may not be able to obtain a price at or above
            the price
            you paid.
  ***Trading
            in our common stock on the OTC Bulletin Board may be limited thereby
            making it
            more difficult for you to resell any shares you may
            own.***
 
 Our
            common stock trades on the OTC Bulletin Board owned and operated by the
            Nasdaq
            Stock Market, Inc. The OTC Bulletin Board is not an exchange and, because
            trading of securities on the OTC Bulletin Board is often more sporadic
            than the
            trading of securities listed on a national exchange or on the Nasdaq
            National
            Market, you may have difficulty reselling any of the shares of our common
            stock
            that you purchase from the selling stockholders.
 
 ***Our
            common stock is subject to the “penny stock” regulations, which is likely to
            make it more difficult to sell.***
 
 Our
            common stock is considered a “penny stock”, which generally is a stock trading
            under $5.00 and not registered on national securities exchanges or quoted
            on the
            Nasdaq National Market. The SEC has adopted rules that regulate broker-dealer
            practices in connection with transactions in penny stocks. This regulation
            generally has the result of reducing trading in such stocks, restricting
            the
            pool of potential investors for such stocks, and making it more difficult
            for
            investors to sell their shares. Prior to a transaction in a penny stock,
            a
            broker-dealer is required to:
 •
                      deliver
                            a standardized risk disclosure document that provides
                            information about
                            penny stocks and the nature and level of risks in the
                            penny stock
                            market;
 •
                      provide
                            the customer with current bid and offer quotations for
                            the penny
                            stock;
 •
                      explain
                            the compensation of the broker-dealer and its salesperson
                            in the
                            transaction;
 •
                      provide
                            monthly account statements showing the market value of
                            each penny stock
                            held in the customer’s
                            account; and
 •
                      make
                            a special written determination that the penny stock
                            is a suitable
                            investment for the purchaser and receive the purchaser’s written agreement
                            to the transaction.
 These
              requirements may have the effect of reducing the level of trading activity
              in
              the secondary market for a stock that is subject to the penny stock
              rules. Since
              our common stock is subject to the penny stock rules, investors in
              our common
              stock may find it more difficult to sell their shares.
  -34-
 Table
                of Contents
  ***Our
            stock price could be volatile, and your investment could suffer a decline
            in
            value.***
 
 The
            trading price of our common stock is likely to be highly volatile and
            could be
            subject to extreme fluctuations in price in response to various factors,
            many of
            which are beyond our control, including:
 •
                      the
                              trading volume of our
                              shares;
 •
                      the
                              number of securities analysts, market-makers and brokers
                              following our
                              common stock;
 •
                      changes
                              in, or failure to achieve, financial estimates by securities
                              analysts;
 •
                      new
                              products introduced or announced by us or our
                              competitors;
 •
                      announcements
                              of technological innovations by us or our
                              competitors;•
                      our
                          ability to produce and distribute retail packaged versions
                          of our software
                          in advance of peak retail selling seasons;•
                      actual
                          or anticipated variations in quarterly operating
                          results;•
                      conditions
                          or trends in the consumer software and/or Christian products
                          industries;•
                      announcements
                          by us of significant acquisitions, strategic partnerships,
                          joint ventures,
                          or capital commitments;•
                      additions
                          or departures of key personnel;•
                      sales
                          of our common stock; and•
                      stock
                          market price and volume fluctuations of publicly-traded,
                          particularly
                          microcap, companies
                          generally.
  The
            volatility of our common stock is illustrated by reference to the fact
            that,
            during fiscal year 2004, our trading price fluctuated from a low of $0.018
            to a
            high of $0.40 per share.
 The
              stock
              market has recently experienced significant price and volume fluctuations.
              Volatility in the market price for particular companies has often been
              unrelated
              or disproportionate to the operating performance of those companies.
              These broad
              market and industry factors may seriously harm the market price of
              our common
              stock, regardless of our operating performance. In addition, securities
              class
              action litigation has often been initiated following periods of volatility
              in
              the market price of a company ’ s
              securities. A securities class action suit against us could result
              in
              substantial costs, potential liabilities and the diversion of
              management ’ s
              attention and resources from our business. Moreover, and as noted above,
              our
              shares are currently traded on the OTC Bulletin Board and, further,
              are subject
              to the penny stock regulation. Price fluctuations in such shares are
              particularly volatile and subject to manipulation by market-makers,
              short-sellers and option traders.
 ***Future
              sales of our common stock by our officers or directors may depress
              our stock
              price.***
  Although
              our officers and directors are contractually obligated to refrain from
              selling
              any of their shares until July 20, 2005, following that date, any shares
              owned
              by our officers or directors which are registered in another registration
              statement, or which otherwise may be sold in the future without registration
              under the Securities Act to the extent permitted by Rule 144 or other
              exemptions
              under the Securities Act, may be sold. Because of the perception by
              the
              investing public that a sale by such insiders may be reflective of
              their own
              lack of confidence in our prospects, the market price of our common
              stock could
              decline as a result of a sell-off following sales of substantial amounts
              of
              common stock by our officers and directors into the public market,
              or the mere
              perception that these sales could occur.
  ***Future
            issuances of our common or preferred stock may depress our stock price
            and
            dilute your interest.***
 
 We
            may
            want to issue additional shares of our common stock in future financings
            and may
            grant stock options to our employees, officers, directors and consultants
            under
            our stock incentive plan. Any such issuances could have the effect of
            depressing
            the market price of our common stock and, in any case, would dilute the
            interests of our common stockholders. In addition, we could issue serial
            preferred stock having rights, preferences and privileges senior to those
            of our
            common stock, including the right to receive dividends and/or preferences
            upon
            liquidation, dissolution or winding-up in excess of, or prior to, the
            rights of
            the holders of our common stock. This could depress the value of our
            common
            stock and could reduce or eliminate the amounts that would otherwise
            have been
            available to pay dividends on our common stock (which
            are unlikely in any case)or to make distributions on
            liquidation.
 
 ***If
            you require dividend income, you should not rely on an investment in
            our common
            stock.***
  Because
              we have very limited cash resources and a substantial accumulated deficit
              relative to recent earnings, we have not declared or paid any dividends
              on our
              common stock since our inception and we do not anticipate declaring
              or paying
              any dividends on our common stock in the foreseeable future. Rather,
              we intend
              to retain earnings, if any, for the continued operation and expansion
              of our
              business. It is unlikely, therefore, that holders of our common stock
              will have
              an opportunity to profit from anything other than potential appreciation
              in the
              value of our common stock held by them. If you require dividend income,
              you
              should not rely on an investment in our common stock.
  -35-
 Table
                  of Contents
  ***The
            lack of a majority of independent directors on our board of directors
            may affect
            our ability to be listed on a national securities exchange or quotation
            system.***
  We
            are
            not currently subject to the listing requirements of any national securities
            exchange or quotation system. The listing standards of the national securities
            exchanges and automated quotation systems require that a company’s board of
            directors consist of a majority of directors who are independent as defined
            by
            the Sarbanes-Oxley Act of 2002 and as defined by applicable listing standards,
            and that the audit committee of the board of directors must consist of
            at least
            three members, all of whom are independent.  Similarly, the compensation
            and nominating committees of company boards of directors must also consist
            of
            independent directors.  Currently, only two of our directors,
            who are the
            only members of our audit committee, meet the definition of an “independent”
            director as defined by the Sarbanes-Oxley Act of 2002 and as defined
            by listing
            standards.  Further, two of our four directors are currently executive
            officers and thereby do not satisfy these independence standards. 
            There is
            no guarantee that we will be able to appoint an additional director who
            will
            satisfy these independence requirements.  If we are unable to
            appoint an
            additional independent director to our board, we will be precluded from
            listing
            any of our capital stock on a national securities exchange or quotation
            system.
  ****The
            even number of members on each of our board of directors, audit committee
            and
            compensation committee could result in a stalemate on important company
            matters.****
 The
              fact that we currently have four members on our board of directors,
              and two
              members on each of our board of directors’ audit and compensation committees,
              could result in a tie vote on company matters, including those involving
              highly
              material corporate governance issues. Moreover, we do not currently
              have any
              duly adopted resolution procedures in place that would provide a means
              for
              resolving any stalemate that might occur in this regard. Although we
              are
              currently in the process of considering potential alternative procedures
              in
              order to be prepared for having to face such a potential situation,
              our current
              lack of any such procedure could result in our inability to be able
              to act under
              circumstances in which the failure to act or any delay in acting could
              have a
              material adverse effect on our business, our financial condition, including
              liquidity and profitability, and our results of operations.
 ***There
              may exist a potential conflict of interest between us and each of our
              former and
              current counsel.***
 
 In
              the
              past we have issued, and we may continue in the future to issue, warrants
              to
              purchase our common stock as equity compensation for legal and other
              services
              rendered in connection with the preparation of our securities filings.
              Specifically, we have issued warrants to the law firm of Membrado & Montell,
              LLP, and to Michael M. Membrado, our corporate counsel. Due to these
              issuances,
              there exists the potential for a conflict of interest between us and
              each of our
              current and former counsel insofar as the recipients may have been
              or may be
              motivated by personal interests that are not necessarily aligned with
              our
              own.
 -36-
 Table
                of Contents
  **ITEM
            7. FINANCIAL STATEMENTS.**
 **REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 **To
                the Board of Directors and Stockholders of Findex.com, Inc.:**
 
 We
                have
                audited the accompanying consolidated balance sheets of Findex.com,
                Inc. as of
                December 31, 2004 and 2003 and the related consolidated statements
                of
                operations, stockholders’ equity and cash flows for the years then ended. These
                financial statements are the responsibility of the Company’s management. Our
                responsibility is to express an opinion on these consolidated financial
                statements based on our audits.
  We
                conducted our audits in accordance with the standards of the Public
                Company
                Accounting Oversight Board (United States). Those standards require
                that we plan
                and perform the audits to obtain reasonable assurance about whether
                the
                consolidated financial statements are free of material misstatement.
                The Company
                has determined that it is not required to have, nor were we engaged
                to perform,
                an audit of its internal control over financial reporting. Our
                audit
                included consideration of internal control over financial reporting
                as a basis
                for designing audit procedures that are appropriate in the circumstances,
                but
                not for the purpose of expressing an opinion on the effectiveness
                of the
                Company’s internal control over financial reporting. Accordingly, we express
                no
                such opinion.An audit includes examining, on a test basis, evidence
                supporting the amounts and disclosures in the consolidated financial
                statements.
                An audit also includes assessing the accounting principles used and
                significant
                estimates made by management, as well as evaluating the overall consolidated
                financial statement presentation. We believe that our audits provide
                a
                reasonable basis for our opinion.
  In
                our
                opinion, the consolidated financial statements referred to above
                present fairly,
                in all material respects, the consolidated financial position of
                Findex.com,
                Inc. as of December 31, 2004 and 2003 and the results of its operations
                and cash
                flows for the years then ended in conformity with U.S. Generally
                Accepted
                Accounting Principles.
   As
                discussed in Note 19 to the consolidated financial statements, there
                were errors
                in reporting the Company’s settlement agreement for the software license and
                errors in reporting some of the classifications in the statement
                of operations
                that were discovered by management as a result of a regulatory review.
                Accordingly, the consolidated financial statements have been restated
                to correct
                the errors.
  Chisholm,
                Bierwolf & Nilson, LLC
 Bountiful,
                UT
 February
                18, 2005 except
                for Notes 5, 8, 9, 10, 11, 12, 13, 15, 16 and 19 dated August 19,
                2005
          F-1
 Table
                    of Contents
 **Findex.com,
                              Inc.****CONSOLIDATED
                              BALANCE SHEETS****December
                              31, 2004 and 2003****2004**
                          
                          
                          2003**(Restated)**
                          
                          
                          (Restated)**Assets**Current
                              assets:Cash
                              and cash equivalents
                          
                          **$**
                          **341,359**
                          
                          $
                          41,668Accounts
                              receivable, trade (Note 2)
                          
                          
                          **566,819**
                          
                          
                          365,803Inventories
                              (Note 3)
                          
                          
                          **234,000**
                          
                          
                          272,600Deferred
                              income taxes, net (Note 8)
                          
                          
                          **300,191**
                          
                          
                          **---**Other
                              current assets
                          
                          
                          **109,078**
                          
                          
                          21,920Total
                              current assets
                          
                          
                          **1,551,447**
                          
                          
                          701,991Property
                              and equipment, net (Note 4)
                          
                          
                          **131,019**
                          
                          
                          65,603Software
                              license, net (Note 5)
                          
                          
                          **2,265,783**
                          
                          
                          2,769,291Capitalized
                              software development costs, net (Note 1)
                          
                          
                          **701,289**
                          
                          
                          584,706Deferred
                              income taxes, net (Note 8)
                          
                          
                          **157,840**
                          
                          
                          ---Restricted
                              cash
                          
                          
                          **50,354**
                          
                          
                          100,354Other
                              assets
                          
                          
                          **94,101**
                          
                          
                          63,818Total
                              assets
                          
                          **$**
                          **4,951,833**
                          
                          $
                          4,285,763**Liabilities
                              and stockholders’ equity**Current
                              liabilities:Notes
                              payable (Note 6)
                          
                          **$**
                          **---**
                          
                          $
                          89,999Current
                              maturities of long-term debt (Note 7)
                          
                          
                          **35,495**
                          
                          
                          126,876Accrued
                              royalties
                          
                          
                          **287,514**
                          
                          
                          1,499,006Accounts
                              payable, trade
                          
                          
                          **621,804**
                          
                          
                          989,354Accrued
                              payroll
                          
                          
                          **209,984**
                          
                          
                          216,767Reserve
                              for sales returns
                          
                          
                          **100,180**
                          
                          
                          57,572Rebates
                              payable
                          
                          
                          **29,561**
                          
                          
                          233,189Payroll
                              taxes payable
                          
                          
                          **8,235**
                          
                          
                          221,600Other
                              current liabilities
                          
                          
                          **90,370**
                          
                          
                          89,554Total
                              current liabilities
                          
                          
                          **1,383,143**
                          
                          
                          3,523,917Long-term
                              debt (Note 7)
                          
                          
                          **42,972**
                          
                          
                          73,763Deferred
                              income taxes, net (Note 8)
                          
                          
                          **157,840**
                          
                          
                          717,151Commitments
                              and contingencies (Note 18)Stockholders’
                              equity (Note 9):Preferred
                              stock, $.001 par value5,000,000
                              shares authorizedSeries
                              A: -0- and 11,400 shares issued and outstanding,
                              respectively
                          
                          
                          **---**
                          
                          
                          11Series
                              B: -0- and 40,000 shares issued and outstanding,
                              respectively
                          
                          
                          **---**
                          
                          
                          40Common
                              stock, $.001 par value120,000,000
                              and 50,000,000 shares authorized, respectively48,619,855
                              and 21,011,438 shares issued and outstanding, respectively
                          
                          
                          **48,620**
                          
                          
                          21,011Paid-in
                              capital
                          
                          
                          **9,198,417**
                          
                          
                          7,080,629Retained
                              (deficit)
                          
                          
                          **(5,879,159**
                          **)**
                          
                          (7,130,759
                          )Total
                              stockholders’ equity
                          
                          
                          **3,367,878**
                          
                          
                          (29,068
                          )Total
                              liabilities and stockholders’ equity
                          
                          **$**
                          **4,951,833**
                          
                          $
                          4,285,763*See
                              accompanying notes.*
  F-2
 Table
                    of Contents
  **Findex.com,
                          Inc.****CONSOLIDATED
                          STATEMENTS OF OPERATIONS**Year
                          Ended December 31
                      
                      
                      **2004**
                      
                      
                      2003**(Restated)**
                      
                      
                      (Restated)Revenues,
                          net of reserves and allowances (Notes 11 and 19)
                      
                      **$**
                      **5,422,097**
                      
                      $
                      4,560,911Cost
                          of sales (Note 19)
                      
                      
                      **1,820,553**
                      
                      
                      1,327,983Gross
                          profit
                      
                      
                      **3,601,544**
                      
                      
                      3,232,928Operating
                          expenses:Sales
                          and marketing
                      
                      
                      **1,280,761**
                      
                      
                      815,954General
                          and administrative
                      
                      
                      **2,309,838**
                      
                      
                      1,751,234Bad
                          debt expense
                      
                      
                      **22,778**
                      
                      
                      23,208Amortization
                          expense
                      
                      
                      **519,850**
                      
                      
                      504,427Depreciation
                          expense
                      
                      
                      **44,478**
                      
                      
                      43,224Total
                          operating expenses
                      
                      
                      **4,177,705**
                      
                      
                      3,138,047Earnings
                          (loss) from operations
                      
                      
                      **(576,161**
                      **)**
                      
                      94,881Interest
                          income
                      
                      
                      **1,378**
                      
                      
                      9,727Other
                          income (Note 10)
                      
                      
                      **1,011,366**
                      
                      
                      1,458,121Other
                          adjustments (Note 10 )
                      
                      
                      **(154,569**
                      **)**
                      
                      ---(Loss)
                          on disposition of assets
                      
                      
                      **(141**
                      **)**
                      
                      (2,659
                      )Interest
                          expense
                      
                      
                      **(42,007**
                      **)**
                      
                      (87,144
                      )Income
                          before income taxes
                      
                      
                      **239,866**
                      
                      
                      1,472,926Provision
                          for income taxes (Note 8)
                      
                      
                      **1,015,859**
                      
                      
                      226,461Net
                          income
                      
                      **$**
                      **1,255,725**
                      
                      $
                      1,699,387Basic
                          earnings per share (Note 12):Basic
                      
                      **$**
                      **0.04**
                      
                      $
                      0.08Diluted
                      
                      **$**
                      **0.04**
                      
                      $
                      0.08Weighted
                          average shares outstanding (Note 12):Basic
                      
                      
                      **34,520,754**
                      
                      
                      20,411,438Diluted
                      
                      
                      **35,195,840**
                      
                      
                      22,365,438*See
                          accompanying notes.*
  F-3
 Table
                  of Contents
  **Findex.com,
                          Inc.****CONSOLIDATED
                          STATEMENTS OF STOCKHOLDERS’ EQUITY**RetainedPreferred
                          Stock
                      Common
                          Stock
                      
                      Paid-In
                      
                      
                      EarningsSeries
                          A
                      
                      
                      Series
                          B
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      (Deficit)
                      
                      
                      TotalBalance,
                          December 31, 2002 (Restated)
                      
                      $
                      11
                      
                      $
                      40
                      
                      
                      19,811,438
                      
                      $
                      19,811
                      
                      $
                      7,029,079
                      
                      $
                      (8,830,146
                      )
                      $
                      (1,781,205
                      )Common
                          stock issued for services
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      1,200,000
                      
                      
                      1,200
                      
                      
                      51,550
                      
                      
                      ---
                      
                      
                      52,750Net
                          income, December 31, 2003 (Restated)
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      1,699,387
                      
                      
                      1,699,387Balance,
                          December 31, 2003 (Restated)
                      
                      $
                      11
                      
                      $
                      40
                      
                      
                      21,011,438
                      
                      $
                      21,011
                      
                      $
                      7,080,629
                      
                      $
                      (7,130,759
                      )
                      $
                      (29,068
                      )Common
                          stock issued for services
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      2,774,105
                      
                      
                      2,774
                      
                      
                      100,445
                      
                      
                      ---
                      
                      
                      103,219Common
                          stock warrants issued for services
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      75,715
                      
                      
                      ---
                      
                      
                      75,715Common
                          stock cancelled
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      (48,387
                      )
                      
                      (48
                      )
                      
                      48
                      
                      
                      ---
                      
                      
                      ---Preferred
                          Series A common stock dividend
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      56,356
                      
                      
                      56
                      
                      
                      4,069
                      
                      
                      (4,125
                      )
                      
                      ---Conversion
                          of preferred stock
                      
                      
                      (11
                      )
                      
                      (40
                      )
                      
                      484,677
                      
                      
                      485
                      
                      
                      (434
                      )
                      
                      ---
                      
                      
                      ---Common
                          stock and warrants issued in connection withprivate
                          placement, net of $51,047 of issuance costs
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      21,875,000
                      
                      
                      21,875
                      
                      
                      1,677,078
                      
                      
                      ---
                      
                      
                      1,698,953Conversion
                          of notes payable
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      2,466,666
                      
                      
                      2,467
                      
                      
                      260,867
                      
                      
                      ---
                      
                      
                      263,334Net
                          income, December 31, 2004 (Restated)
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      ---
                      
                      
                      1,255,725
                      
                      
                      1,255,725**Balance,
                          December 31, 2004 (Restated)**
                      
                      **$**
                      **---**
                      
                      **$**
                      **---**
                      
                      
                      **48,619,855**
                      
                      **$**
                      **48,620**
                      
                      **$**
                      **9,198,417**
                      
                      **$**
                      **(5,879,159**
                      **)**
                      **$**
                      **3,367,878***See
                          accompanying notes.*
   F-4
 Table
                  of Contents
 **Findex.com,
                            Inc.****CONSOLIDATED
                            STATEMENTS OF CASH FLOWS**Year
                            Ended December 31
                        
                        
                        **2004**
                        
                        
                        2003**(Restated)**
                        
                        
                        (Restated)Cash
                            flows from operating activities:Cash
                            received from customers
                        
                        **$**
                        **5,062,396**
                        
                        $
                        4,228,649Cash
                            paid to suppliers and employees
                        
                        
                        **(5,673,088**
                        **)**
                        
                        (3,364,838
                        )Other
                            operating receipts
                        
                        
                        **9,276**
                        
                        
                        7,977Interest
                            paid
                        
                        
                        **(37,928**
                        **)**
                        
                        (43,203
                        )Interest
                            received
                        
                        
                        **1,378**
                        
                        
                        9,727Income
                            taxes (paid) refunded
                        
                        
                        **(5,702**
                        **)**
                        
                        43,909Net
                            cash provided (used) by operating activities
                        
                        
                        **(643,668**
                        **)**
                        
                        882,221Cash
                            flows from investing activities:Acquisition
                            of property, plant and equipment
                        
                        
                        **(58,247**
                        **)**
                        
                        (18,433
                        )Software
                            development costs
                        
                        
                        **(692,063**
                        **)**
                        
                        (659,486
                        )Website
                            development costs
                        
                        
                        **(31,838**
                        **)**
                        
                        (35,684
                        )Deposits
                            refunded (paid)
                        
                        
                        **35,216**
                        
                        
                        (100,854
                        )Net
                            cash (used) by investing activities
                        
                        
                        **(746,932**
                        **)**
                        
                        (814,457
                        )Cash
                            flows from financing activities:Proceeds
                            from (payments on) line of credit, net
                        
                        
                        **(20,935**
                        **)**
                        
                        14,657Payments
                            made on long-term notes payable
                        
                        
                        **(227,727**
                        **)**
                        
                        (79,404
                        )Proceeds
                            from convertible notes payable
                        
                        
                        **240,000**
                        
                        
                        ---Proceeds
                            from issuance of stock and warrants
                        
                        
                        **1,750,000**
                        
                        
                        ---Stock
                            offering costs paid
                        
                        
                        **(51,047**
                        **)**
                        
                        ---Net
                            cash provided (used) by financing activities
                        
                        
                        **1,690,291**
                        
                        
                        (64,747
                        )Net
                            increase in cash and cash equivalents
                        
                        
                        **299,691**
                        
                        
                        3,017Cash
                            and cash equivalents, beginning of year
                        
                        
                        **41,668**
                        
                        
                        38,651Cash
                            and cash equivalents, end of year
                        
                        **$**
                        **341,359**
                        
                        $
                        41,668Reconciliation
                            of net income to cash flows from operating activities:Net
                            income
                        
                        **$**
                        **1,255,725**
                        
                        $
                        1,699,387Adjustments
                            to reconcile net income to net cashprovided
                            (used) by operating activities:Software
                            development costs amortized
                        
                        
                        **575,481**
                        
                        
                        355,282Stock
                            and warrants issued for services
                        
                        
                        **178,929**
                        
                        
                        52,750Rebate
                            reserve adjustment
                        
                        
                        **(142,039**
                        **)**
                        
                        (124,262
                        )Provision
                            for bad debts
                        
                        
                        **22,778**
                        
                        
                        23,208Depreciation
                            & amortization
                        
                        
                        **564,328**
                        
                        
                        547,651Debt
                            forgiveness
                        
                        
                        **(1,002,090**
                        **)**
                        
                        (650,000
                        )Loss
                            on disposal of property, plant and equipment
                        
                        
                        **141**
                        
                        
                        2,659Change
                            in assets and liabilities:(Increase)
                            in accounts receivable
                        
                        
                        **(223,794**
                        **)**
                        
                        (160,770
                        )Decrease
                            in inventories
                        
                        
                        **38,600**
                        
                        
                        144,100(Increase)
                            decrease in refundable income taxes
                        
                        
                        **(2,948**
                        **)**
                        
                        43,909(Increase)
                            decrease in prepaid expenses
                        
                        
                        **(84,211**
                        **)**
                        
                        20,869(Decrease)
                            in accrued royalties
                        
                        
                        **(324,360**
                        **)**
                        
                        (631,607
                        )Increase
                            (decrease) in accounts payable
                        
                        
                        **(271,198**
                        **)**
                        
                        81,793(Decrease)
                            in income taxes payable
                        
                        
                        **(1,270**
                        **)**
                        
                        ---(Decrease)
                            in deferred taxes
                        
                        
                        **(1,017,343**
                        **)**
                        
                        (226,463
                        )(Decrease)
                            in other liabilities
                        
                        
                        **(210,397**
                        **)**
                        
                        (296,285
                        )Net
                            cash provided (used) by operating activities
                        
                        **$**
                        **(643,668**
                        **)**
                        $
                        882,221*See
                            accompanying notes.*
 F-5
 Table
                  of Contents
  **Findex.com,
                Inc.**
 **Notes
                to Consolidated Financial Statements**
 December
                31, 2004and
                2003
 
 **NOTE
                1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  **ORGANIZATION**
  Findex.com,
                Inc. was incorporated under the laws of the State of Nevada
                on November 7,
                1997, as EJH Entertainment, Inc. On December 4, 1997, we acquired
                EJH
                Entertainment, Inc., an Idaho corporation, in a stock-for-stock transaction.
                EJH
                Idaho was incorporated on June 21, 1968, as Alpine Silver, Inc. Alpine
                changed its name to The Linked Companies, Inc. on December
                4, 1992. On
                September 9, 1996, The Linked Companies acquired Worldwide Entertainment,
                Inc.,
                a Delaware corporation, in a stock-for-stock transaction and changed
                its name to
                Worldwide Entertainment, Inc. On June 27, 1997, Worldwide Entertainment
                changed
                its name to EJH Entertainment, Inc.
 On
                    April
                    30, 1999, we acquired Findex Acquisition Corporation, a Delaware
                    corporation in
                    a stock-for-stock transaction and our name of was changed to
                    Findex.com, Inc.
                    Findex Acquisition Corporation is a wholly-owned subsidiary without
                    current
                    business operations. It was incorporated on February 19, 1999
                    and acquired
                    FinSource Ltd., a Delaware corporation in April 1999, in a stock-for-stock
                    transaction. The mergers with Findex Acquisition Corporation
                    and FinSource were
                    treated as reorganization mergers with the accounting survivor
                    being
                    FinSource.
  On
                    March
                    7, 2000, we acquired Reagan Holdings, Inc., a Delaware corporation
                    in a
                    stock-for-stock transaction. Reagan was incorporated on July
                    27, 1999 and is a
                    wholly-owned subsidiary without current business operations.
  We
                    are a
                    retail, wholesale and Internet supplier of personal computer
                    software products
                    to business and religious organizations and individuals around
                    the world. In
                    July 1999, we completed a license agreement with Parsons Technology,
                    Inc., a
                    subsidiary of TLC Multimedia, LLC, formerly Mattel Corporation,
                    for the Parsons
                    Church Division of Mattel. In so doing, we obtained the right
                    to market, sell
                    and continue to develop several Bible study software products.
                    We develop and
                    publish church and Bible study software products designed to
                    simplify biblical
                    research and streamline church office tasks.
 **ACCOUNTING
                  METHOD**
  We
                recognize income and expenses on the accrual basis of accounting.
  **PRINCIPLES
                OF
                CONSOLIDATION**
  The
                consolidated financial statements include the accounts of the company
                and its
                wholly-owned subsidiaries after eliminations.
  **USE
                OF
                ESTIMATES**
  The
                preparation of consolidated financial statements in conformity with
                Generally
                Accepted Accounting Principles requires management to make estimates
                and
                assumptions that affect the amounts reported in the financial statements
                and the
                accompanying notes. Significant estimates used in the consolidated
                financial
                statements include the estimates of (i) doubtful accounts, sales
                returns, price
                protection and rebates, (ii) provision for income taxes and realizability
                of the
                deferred tax assets, (iii) the life and realization of identifiable
                intangible
                assets, and (iv) provisions for obsolete inventory. The amounts we
                will
                ultimately incur or recover could differ materially from current
                estimates.
  F-6
 Table
                    of Contents
  **CONCENTRATIONS**
  Financial
                instruments that potentially subject us to concentrations of credit
                risk consist
                of cash and cash equivalents and accounts receivable. We place our
                cash and cash
                equivalents at well-known, quality financial institutions. We currently
                maintain
                our cash balances in one financial institution located in Omaha,
                Nebraska. The
                balances are insured by the Federal Deposit Insurance Corporation
                up to
                $100,000. At December 31, 2004, our uninsured cash balance totaled
                $268,380.
 We
                    sell a
                    majority of our products to end-users through distributors, Christian
                    bookstores, Internet and direct marketing efforts. Although we
                    attempt to
                    prudently manage and control accounts receivable and perform
                    ongoing credit
                    evaluations in the normal course of business, we generally require
                    no collateral
                    on our product sales. During the years ended December 31, 2004
                    and 2003, we had
                    no major customers that individually accounted for 10% or more
                    of the annual
                    sales.
 
 During
                    the year ended December 31, 2004, we derived 63% of our total
                    revenue from sales
                    of QuickVerse ® ,
                    28%
                    from sales of Membership Plus ® ,
                    and 9%
                    from sales of other software titles.
 
 During
                    the years ended December 31, 2004 and 2003, five vendors provided
                    purchases
                    individually of 10% or more of the total product and material
                    purchases as
                    follows: Vendor A accounted for 29% and 3%, respectively, Vendor
                    B accounted for
                    18% and 14%, respectively, Vendor C accounted for 17% and 10%,
                    respectively,
                    Vendor D accounted for 12% and 39%, respectively, and Vendor
                    E accounted for 7%
                    and 17%, respectively. Accounts payable relating to Vendors A,
                    B, C, D, and E
                    were $40,234 and $20, $18,426 and $14,379, $34,931 and $26,194,
                    $-0- and
                    $39,431, and $2,020 and $-0-, as of December 31, 2004 and 2003
                    respectively.
 **ROYALTY
                AGREEMENTS**
  We
                have
                entered into certain agreements whereby we are obligated to pay royalties
                for
                content of software published. We generally pay royalties based on
                a percentage
                of sales on respective products or on a fee per unit sold basis.
                We expense
                software royalties as product costs during the period in which the
                related
                revenues are recorded.
  **CASH
                AND CASH
                EQUIVALENTS**
  We consider
                all highly liquid investments purchased with an original maturity
                of three
                months or less to be cash equivalents.
  **RESTRICTED
                CASH**
 
 Restricted
                cash represents cash held in reserve by our merchant banker to allow
                for a
                potential increase in credit card chargebacks from increased consumer
                purchases.
                The cash held in reserve by our merchant banker will be unrestricted
                when
                consumer sales and chargeback volumes stabilize.
  **ACCOUNTS
                  RECEIVABLE**
  Accounts
                receivable arise in the normal course of business. It is the policy
                of
                management to review the outstanding accounts receivable quarterly,
                as well as
                the bad debt write-offs experienced in the past, and establish an
                allowance for
                doubtful accounts for uncollectible amounts. Individual accounts
                are charged
                against the allowance when they are deemed uncollectible.
  **INVENTORY**
 
 Inventory,
                including out on consignment, consists primarily of software media,
                manuals and
                related packaging materials and is recorded at the lower of cost
                or market
                value, determined on a first-in, first-out, and adjusted on a per-item,
                basis.
  **PROPERTY
                AND
                EQUIPMENT**
 
 Property
                and equipment are recorded at cost. Furniture, fixtures and computer
                equipment
                are depreciated over five years using the straight-line method. Software
                is
                depreciated over three years using the straight-line method. Expenditures
                for
                maintenance, repairs and other renewals of items are charged to expense
                when
                incurred.
  F-7
 Table
                    of Contents
 ****
 **ACCOUNTING
                FOR LONG-LIVED ASSETS**
  We
                review
                property and equipment and intangible assets for impairment whenever
                events or
                changes in circumstances indicate that the carrying amount of an
                asset may not
                be recoverable. Recoverability is measured by comparison of our carrying
                amount
                to future net cash flows the assets are expected to generate. If
                such assets are
                considered to be impaired, the impairment to be recognized is measured
                by the
                amount by which the carrying amount of the asset exceeds its fair
                market value.
                Property and equipment to be disposed of are reported at the lower
                of the
                carrying amount or fair value less costs to sell.
  **INTANGIBLE
                ASSETS**
  In
                accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,*Goodwill
                and Other Intangible Assets*,
                intangible assets with an indefinite useful life are not amortized.
                Intangible
                assets with a finite useful life are amortized on the straight-line
                method over
                the estimated useful lives. All intangible assets are tested for
                impairment
                annually during the fourth quarter.
  **SOFTWARE
                DEVELOPMENT COSTS**
  In
                accordance with SFAS No. 86,*Accounting
                for the Costs of Computer Software to Be Sold, Leased, or Otherwise
                Marketed*,
                software development costs are expensed as incurred until technological
                feasibility and marketability has been established, generally with
                release of a
                beta version for customer testing. Once the point of technological
                feasibility
                and marketability is reached, direct production costs (including
                labor directly
                associated with the development projects), indirect costs (including
                allocated
                fringe benefits, payroll taxes, facilities costs, and management
                supervision),
                and other direct costs (including costs of outside consultants, purchased
                software to be included in the software product being developed,
                travel
                expenses, material and supplies, and other direct costs) are capitalized
                until
                the product is available for general release to customers. We amortize
                capitalized costs on a product-by-product basis. Amortization for
                each period is
                the greater of the amount computed using (i) the straight-line basis
                over the
                estimated product life (generally from 12 to 18 months), or (ii)
                the ratio of
                current revenues to total projected product revenues. Total cumulative
                capitalized software development costs were $1,748,735 and $1,056,672,
                less
                accumulated amortization of $1,047,446 and $471,966 at December 31,
                2004 and
                2003, respectively.
  Capitalized
                  software development costs are stated at the lower of amortized
                  costs or net
                  realizable value. Recoverability of these capitalized costs is
                  determined at
                  each balance sheet date by comparing the forecasted future revenues
                  from the
                  related products, based on management’s best estimates using appropriate
                  assumptions and projections at the time, to the carrying amount
                  of the
                  capitalized software development costs. If the carrying value is
                  determined not
                  to be recoverable from future revenues, an impairment loss is recognized
                  equal
                  to the amount by which the carrying amount exceeds the future revenues.
                  To date,
                  no capitalized costs have been written down to net realizable
                  value.
 SFAS
                    No.
                    2, *Accounting
                    for Research and Development Costs* ,
                    established accounting and reporting standards for research and
                    development. In
                    accordance with SFAS No. 2, costs we incur to enhance our existing
                    products
                    after general release to the public (bug fixes) are expensed
                    in the period they
                    are incurred and included in research and development costs.
                    Research and
                    development costs incurred prior to determination of technological
                    feasibility
                    and marketability and after general release to the public and
                    charged to expense
                    were $64,653 and $128,159 for the years ended December 31, 2004
                    and 2003,
                    respectively.
 
 We
                    capitalize costs related to the development of computer software
                    developed or
                    obtained for internal use in accordance with the American Institute
                    of Certified
                    Public Accountants Statement of Position (“SOP”) 98-1, *Accounting
                    for the Costs of Computer Software Developed or Obtained for
                    Internal
                    Use* .
                    Software obtained for internal use has generally been enterprise
                    level business
                    and finance software that we customize to meet our specific operational
                    needs.
                    We have not sold, leased, or licensed software developed for
                    internal use to our
                    customers and have no intention of doing so in the future.
 
 F-8
 Table
                        of Contents
  We
                    capitalize costs related to the development and maintenance of
                    our Website in
                    accordance with FASB’s EITF Issue No. 00-2, *Accounting
                    for Website Development Costs* .
                    Under
                    EITF Issue No. 00-2, costs expensed as incurred are as follows:
 •
                          planning
                              the Website,•
                          developing
                              the applications and infrastructure until technological
                              feasibility is
                              established,•
                          developing
                              graphics such as borders, background and text colors,
                              fonts, frames, and
                              buttons, and•
                          operating
                              the site such as training, administration and
                              maintenance.
  Capitalized
                    costs include those incurred to:
  •
                            obtain
                                and register an Internet domain name,•
                            develop
                                or acquire software tools necessary for the development
                                work,•
                            develop
                                or acquire software necessary for general Website
                                operations,•
                            develop
                                or acquire code for web applications,•
                            develop
                                or acquire (and customize) database software and
                                software to integrate
                                applications such as corporate databases and accounting
                                systems into web
                                applications,•
                            develop
                                HTML web pages or templates,•
                            install
                                developed applications on the web server,•
                            create
                                initial hypertext links to other Websites or other
                                locations within the
                                Website, and•
                            test
                                the Website applications.
  We
                    amortize Website development costs on a straight-line basis over
                    the estimated
                    life of the site, generally 36 months. Total cumulative Website
                    development
                    costs, included in other assets on our consolidated balance sheets,
                    were $86,500
                    and $54,662, less accumulated amortization of $18,795 and $2,452
                    at December 31,
                    2004 and 2003, respectively.
 **NET
                REVENUE**
 We
                  derive
                  revenues from the sale of packaged software products, product support
                  and
                  multiple element arrangements that may include any combination
                  of these items.
                  We recognize software revenue for software products and related
                  services in
                  accordance with SOP 97-2,*Software
                  Revenue Recognition*,
                  as
                  modified by SOP 98-9,*Modification of SOP 97-2, With Respect to Certain Transactions*.
                  We
                  recognize revenue when persuasive evidence of an arrangement exists
                  (generally a
                  purchase order), we have delivered the product, the fee is fixed
                  or determinable
                  and collectibility is probable.
 In
                    some
                    situations, we receive advance payments from our customers. We
                    defer revenue
                    associated with these advance payments until we ship the products
                    or offer the
                    support.
 
 In
                    accordance with EITF Issue No. 01-9, *Accounting
                    for Consideration Given by a Vendor to a Customer or a Reseller
                    of the Vendor’s
                    Product* ,
                    we
                    generally account for cash considerations (such as sales incentives
                    - rebates
                    and coupons) that we give to our customers as a reduction of
                    revenue rather than
                    as an operating expense.
 **Product
                  Revenue**
  We
                  typically recognize revenue from the sale of our packaged software
                  products when
                  we ship the product. We sell some of our products on consignment
                  to a limited
                  number of resellers. We recognize revenue for these consignment
                  transactions
                  only when the end-user sale has occurred. Revenue for software
                  distributed
                  electronically via the Internet is recognized when the customer
                  has been
                  provided with the access codes that allow the customer to take
                  immediate
                  possession of the software on its hardware and evidence of the
                  arrangement
                  exists (web order).
 We
                    reduce
                    product revenue for estimated returns and price protections that
                    are based on
                    historical experience and other factors such as the volume and
                    price mix of
                    products in the retail channel, trends in retailer inventory
                    and economic trends
                    that might impact customer demand for our products. We also reduce
                    product
                    revenue for the estimated redemption of end-user rebates on certain
                    current
                    product sales. Our rebate reserves are estimated based on the
                    terms and
                    conditions of the specific promotional rebate program, actual
                    sales during the
                    promotion, the amount of redemptions received and historical
                    redemption trends
                    by product and by type of promotional program. We did not offer
                    any rebate
                    programs to our customers during 2004 or 2003 and maintain a
                    reserve for rebate
                    claims remaining unpaid from 2000.
  F-9
 Table
                        of Contents
  **Service
                  Revenue**
 
 We
                  offer
                  several technical support plans and recognize support revenue over
                  the life of
                  the plans, generally one year.
  **Multiple
                  Element
                  Arrangements**
  We
                  also
                  enter into certain revenue arrangements for which we are obligated
                  to deliver
                  multiple products or products and services (multiple elements).
                  For these
                  arrangements, which include software products, we allocate and
                  defer revenue for
                  the undelivered elements based on their vendor-specific objective
                  evidence
                  (“VSOE”) of fair value. VSOE is generally the price charged when that
                  element is
                  sold separately.
  In
                  situations where VSOE exists for all elements (delivered and undelivered),
                  we
                  allocate the total revenue to be earned under the arrangement among
                  the various
                  elements, based on their relative fair value. For transactions
                  where VSOE exists
                  only for the undelivered elements, we defer the full fair value
                  of the
                  undelivered elements and recognize the difference between the total
                  arrangement
                  fee and the amount deferred for the undelivered items as revenue
                  (residual
                  method). If VSOE does not exist for undelivered items that are
                  services, we
                  recognize the entire arrangement fee ratably over the remaining
                  service period.
                  If VSOE does not exist for undelivered elements that are specified
                  products, we
                  defer revenue until the earlier of the delivery of all elements
                  or the point at
                  which we determine VSOE for these undelivered elements.
 We
                    recognize revenue related to the delivered products or services
                    only if: (i) the
                    above revenue recognition criteria are met; (ii any undelivered
                    products or
                    services are not essential to the functionality of the delivered
                    products and
                    services; (iii) payment for the delivered products or services
                    is not contingent
                    upon delivery of the remaining products or service; and (iv)
                    we have an
                    enforceable claim to receive the amount due in the event that
                    we do not deliver
                    the undelivered products or services.
 **Shipping
                  and Handling
                  Costs**
 
 We
                  record
                  the amounts we charge our customers for the shipping and handling
                  of our
                  software products as product revenue and we record the related
                  costs as cost of
                  sales on our consolidated statements of operations.
  **Customer
                  Service and
                  Technical Support**
  Customer
                  service and technical support costs include the costs associated
                  with performing
                  order processing, answering customer inquiries by telephone and
                  through
                  Websites, e-mail and other electronic means, and providing technical
                  support
                  assistance to our customers. In connection with the sale of certain
                  products, we
                  provide a limited amount of free technical support assistance to
                  customers. We
                  do not defer the recognition of any revenue associated with sales
                  of these
                  products, since the cost of providing this free technical support
                  is
                  insignificant. The technical support is provided within one year
                  after the
                  associated revenue is recognized and free product enhancements
                  (bug fixes) are
                  minimal and infrequent. We accrue the estimated cost of providing
                  this free
                  support upon product shipment and are recorded as cost of
                  sales.
  **ADVERTISING**
  Advertising
                costs, including direct response advertising costs, are charged to
                operations as
                incurred. We have determined that direct response advertising costs
                are
                insignificant. Total advertising costs for the years ended December
                31, 2004 and
                2003 were
                approximately, $448 ,000
                and $240 ,000,
                respectively.
  **STOCK-BASED
                COMPENSATION**
  As
                permitted under SFAS No. 123,*Accounting
                for Stock-based Compensation*,
                and
                amended under SFAS No. 148,*Accounting
                for Stock-based Compensation-Transition and Disclosure*,
                we have
                elected to follow the intrinsic value based method of accounting
                prescribed by
                Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued
                to Employees, in accounting for stock-based awards to employees (see
                Note 13)
                and, accordingly, does not recognize compensation cost when employee
                stock-option grants are made at fair-market value.
  F-10
 Table
                    of Contents
  LEGAL
                  COSTS RELATED TO LOSS CONTINGENCIES
  We
                  accrue
                  legal costs expected to be incurred in connection with a loss contingency
                  as
                  they occur.
  **INCOME
                  TAXES**
  We
                utilize SFAS No. 109,*Accounting
                for Income Taxes*.
                SFAS
                No. 109 requires the use of the asset and liability method of accounting
                for
                income taxes. Under this method, deferred income taxes are provided
                for the
                temporary differences between the financial reporting basis and the
                tax basis of
                our assets and liabilities. Deferred tax assets and liabilities are
                measured
                using enacted tax rates expected to apply to taxable income in the
                years in
                which those temporary differences are expected to be recovered or
                settled.
  **EARNINGS
                PER
                SHARE**
  We
                follow
                SFAS No. 128,*Earnings
                Per Share*,
                to
                calculate and report basic and diluted earnings per share (“EPS”). Basic EPS is
                computed by dividing income available to common stockholders by the
                weighted
                average number of shares of common stock outstanding for the period.
                Diluted EPS
                is computed by giving effect to all dilutive potential shares of
                common stock
                that were outstanding during the period. For us, dilutive potential
                shares of
                common stock consist of the incremental shares of common stock issuable
                upon the
                exercise of stock options and warrants for all periods, convertible
                notes
                payable and the incremental shares of common stock issuable upon
                the conversion
                of convertible preferred stock.
 When
                  discontinued operations, extraordinary items, and/or the cumulative
                  effect of an
                  accounting change are present, income before any of such items
                  on a per share
                  basis represents the “control number” in determining whether potential shares of
                  common stock are dilutive or anti-dilutive. Thus, the same number
                  of potential
                  shares of common stock used in computing diluted EPS for income
                  from continuing
                  operations is used in calculating all other reported diluted EPS
                  amounts. In the
                  case of a net loss, it is assumed that no incremental shares would
                  be issued
                  because they would be anti-dilutive. In addition, certain options
                  and warrants
                  are considered anti-dilutive because the exercise prices were above
                  the average
                  market price during the period. Anti-dilutive shares are not included
                  in the
                  computation of diluted EPS, in accordance with SFAS No. 128.
 **COMPREHENSIVE
                INCOME (LOSS)**
  We
                have
                adopted SFAS No. 130,*Reporting
                Comprehensive Income*.
                SFAS
                No. 130 establishes standards of reporting and displaying comprehensive
                income
                and its components of net income and “other comprehensive income” in a full set
                of general-purpose financial statements. “Other comprehensive income” refers to
                revenues, expenses, gains and losses that are not included in net
                income, but
                rather are recorded directly in stockholders’ equity. The adoption of this
                Statement had no impact on our net income or loss or stockholders’ equity.
  **TRANSFER
                OF
                FINANCIAL ASSETS**
  We
                have
                adopted SFAS No. 140*,
                Accounting for Transfers and Servicing of Financial Assets and Extinguishments
                of Liabilities*.
                SFAS
                No. 140 provides accounting and reporting standards for transfers
                and servicing
                of financial assets and extinguishments of liabilities and provides
                consistent
                standards for distinguishing transfers of financial assets that are
                sales from
                transfers that are secured borrowings. The adoption of this standard
                did not
                have a material effect on our results of operations or financial
                position.
  **FAIR
                  VALUE OF
                  FINANCIAL INSTRUMENTS**
  Unless
                  otherwise indicated, the fair values of all reported assets and
                  liabilities that
                  represent financial instruments (none of which are held for trading
                  purposes)
                  approximate the carrying values of such instruments because of
                  the short
                  maturity of those instruments.
 F-11
 Table
                    of Contents
  **RECLASSIFICATIONS**
  Certain
                accounts in the 2003 financial statements have been reclassified
                for comparative
                purposes to conform with the presentation in the 2004 financial statements.
  **NOTE
                2 - ACCOUNTS RECEIVABLE**
 
 At December
                31, 2004 and
                2003 ,
                accounts receivable consisted of the following (see Note 1 -
                Concentrations):
 
 **2004**
                      
                      
                      2003Trade
                          receivables
                      
                      **$**
                      **584,819**
                      
                      $
                      384,803Less:
                          Allowance for doubtful accounts
                      
                      
                      **18,000**
                      
                      
                      19,000Accounts
                          receivable, trade
                      
                      **$**
                      **566,819**
                      
                      $
                      365,803
  During
                the years ended December 31, 2004 and 2003, we transferred accounts
                receivable
                totaling $300,966 and $320,533 to Alliance for cash advances of $180,580
                and
                $192,320, respectively. As accounts are paid, the collected funds
                (less the
                amount advanced and appropriate fees) are disbursed to us. The transfer
                agreement includes a repurchase requirement and, accordingly, the
                proceeds were
                accounted for as a secured borrowing. The agreement was terminated
                in July 2004.
                At December 31, 2004 and 2003, the balance of receivables transferred
                and
                included in trade receivables was $-0- and $34,893, respectively.
                The remaining
                secured borrowing balances of $-0- and $20,936 are included in accrued
                expenses
                at December 31, 2004 and 2003, respectively.
  **NOTE
                3 - INVENTORIES**
 
 At December
                31, 2004 and
                2003 ,
                inventories consisted of the following:
 
 **2004**
                      
                      
                      2003Raw
                          materials
                      
                      **$**
                      **111,300**
                      
                      $
                      75,000Finished
                          goods
                      
                      ****
                      **122,700**
                      
                      
                      197,600Inventories
                      
                      **$**
                      **234,000**
                      
                      $
                      272,600
  During
                the years ended December 31, 2004 and 2003, we wrote-off distinctly
                different
                categories of obsolete inventory with a carried cost totaling $32,396
                and
                $60,792, respectively. These have been recognized in cost of sales.
  **NOTE
                  4 - PROPERTY AND EQUIPMENT, NET**
 
 At December
                  31, 2004 and
                  2003 ,
                  property and equipment consisted of the following:
 
 **2004**
                        
                        
                        2003Computer
                            equipment
                        
                        **$**
                        **84,009**
                        
                        $
                        61,905Computer
                            software
                        
                        
                        **62,861**
                        
                        
                        41,297Office
                            equipment
                        
                        
                        **77,947**
                        
                        
                        24,099Office
                            furniture and fixtures
                        
                        
                        **62,594**
                        
                        
                        51,119Warehouse
                            equipment
                        
                        
                        **23,150**
                        
                        
                        23,150**310,561**
                        
                        
                        201,570Less:
                            Accumulated depreciation
                        
                        
                        **179,542**
                        
                        
                        135,967Property
                            and equipment, net
                        
                        **$**
                        **131,019**
                        
                        $
                        65,603
  At
                  December 31, 2004, Office equipment contained telephone equipment
                  under a
                  capital lease obligation with a cost basis of $51,788. See Notes
                  7 and
                  14.
 F-12
 Table
                    of Contents
  ****NOTE
                5 - SOFTWARE LICENSE, net (Restated)****
  In
                July
                1999, we completed an exclusive license agreement with Parsons Technology,
                Inc.,
                a subsidiary of The Learning Company, Inc. (“TLC”), for the perpetual and
                fully-paid up right and license to publish, use, distribute and sublicense
                the
                programs incorporating the trademarks (i.e. QuickVerse, Membership
                Plus)
                throughout the world and also in the licensed media, for sale, resale
                and/or
                license to churches or other places of worship, religious schools
                and companies
                or individuals for which the majority of sales revenue is derived
                from sales of
                religious, Christian or Bible products (the “Church Channel”). In addition, the
                license agreement provided us the non-exclusive, perpetual and fully-paid
                up
                right and license to publish, use, distribute and sublicense the
                programs
                incorporating the trademarks throughout the world and also in the
                licensed
                media, for sale, resale and/or license into all channels other than
                the Church
                Channel. This original license agreement carried a 10 year economic
                life.
 During
                  the year ended December 31, 2002 we reached tentative settlement
                  in a dispute
                  with TLC which called for the extension of the term of the license
                  from 10 years
                  to 50 years.
 
 On
                  October 20, 2003, we reached settlement in a dispute with The Zondervan
                  Corporation and TLC which extended indefinitely the term of the
                  software license
                  agreement.
 
 As
                  required by SFAS No. 142, management periodically evaluates the
                  remaining useful
                  life of the license agreement and revises the amortization period
                  if it is
                  determined that the useful life is longer or shorter than originally
                  estimated.
                  Amortization expense, determined using the straight-line method,
                  has been
                  calculated using the original 10 year economic life. The software
                  license is
                  tested for impairment annually during the fourth quarter.
 
 At
                  December 31, 2004 and 2003, the software license consisted of the
                  following:
 
 **2004**
                        
                        
                        2003Software
                            license cost
                        
                        **$**
                        **5,135,574**
                        
                        $
                        5,135,574Less:
                            Accumulated amortization
                        
                        
                        **2,869,791**
                        
                        
                        2,366,283Software
                            license, net
                        
                        **$**
                        **2,265,783**
                        
                        $
                        2,769,291
 
 Amortization
                  expense related to this intangible asset was $503,508 for both
                  years.
                  Amortization expense for the next five years is expected to be
                  $503,508 each
                  year through 2008 and $251,751 for 2009. See Note 19 - Restatement
                  and
                  Reclassification.
 **NOTE
                6 - NOTES PAYABLE**
 
 At December
                31, 2004 and
                2003 ,
                notes
                payable consisted of the following:
 
 **2004**
                      
                      
                      2003Note
                          payable to a corporation, due May 31, 2003, with interest
                          compounded
                          monthly at 1.5%. Unsecured. Convertible at the option of
                          the holder into
                          666,667 restricted shares of common stock.
                      
                      **$**
                      **---**
                      
                      $
                      33,333Note
                          payable to a corporation, due May 31, 2003, with interest
                          compounded
                          monthly at 1.5%. Unsecured. Convertible at the option of
                          the holder into
                          666,667 restricted shares of common stock.
                      
                      ****
                      **---**
                      
                      
                      33,333Note
                          payable to a corporation, due May 31, 2003, with interest
                          compounded
                          monthly at 1.5%. Unsecured. Convertible at the option of
                          the holder into
                          466,666 restricted shares of common stock. See Notes 15
                          and
                          18.
                      
                      
                      ---
                      
                      
                      23,333Notes
                          payable
                      
                      **$**
                      **---**
                      
                      $
                      89,999
  In
                September 2004, we borrowed a total of $240,000 from two individuals.
                Both notes
                were unsecured, carried an annual interest rate of 7.5%, were due
                August 2005,
                and were convertible at the option of the holder into a total of
                2,000,000
                restricted shares of common stock. Both notes were converted in November
                2004 at
                the election of the respective holder. See Notes 9 and 15.
 During
                  the year ended December 31, 2003, we reclassified as other income
                  (see Note 10)
                  proceeds totaling $650,000, and the corresponding accrued interest
                  payable,
                  received in late 1999 and early 2000 that were previously recorded
                  as an
                  unsecured note payable.
  F-13
 Table
                    of Contents
  **NOTE
                7 - LONG-TERM DEBT**
 At
                  December 31, 2004 and 2003, long-term debt consisted of the
                  following:
 
 **2004**
                        
                        
                        2003Unsecured
                            term note payable to a corporation due October 2004 in
                            monthly
                            installments of $5,285, including interest at 8%.
                        
                        **$**
                        **26,679**
                        
                        $
                        53,975Term
                            note payable to a corporation due December 2005 in monthly
                            installments of
                            $6,833, including interest at 8%. Secured by inventory.
                            See Notes 3 and
                            10.
                        
                        
                        **---**
                        
                        
                        146,664Capital
                            lease obligation payable to a corporation due November
                            2009 in monthly
                            installments of $1,144, including interest at 11.7%.
                            Secured by telephone
                            equipment. See Notes 4 and 14.
                        
                        
                        **51,788**
                        
                        
                        ---**78,467**
                        
                        
                        200,639Less:
                            Current maturities
                        
                        
                        **35,495**
                        
                        
                        126,876Long-term
                            debt
                        
                        **$**
                        **42,972**
                        
                        $
                        73,763
 
 Principal
                  maturities at December 31, 2004 are as follows:
 
 2005
                        
                        $
                        35,4952006
                        
                        
                        9,1862007
                        
                        
                        10,3182008
                        
                        
                        11,5912009
                        
                        
                        11,877Total
                        
                        $
                        78,467
  **NOTE
                  8 - INCOME TAXES (Restated)**
  The
                  provision (benefit) for taxes on income from continuing operations
                  for the years
                  ended December 31, 2004 and 2003 consisted of the following:
 
 **2004**
                        
                        
                        2003**Current:**Federal
                        
                        **$**
                        **---**
                        
                        $
                        ---State
                        
                        
                        **1,484**
                        
                        
                        ---**1,484**
                        
                        
                        ---**Deferred:**Federal
                        
                        
                        **(1,009,939**
                        **)**
                        
                        (185,213
                        )State
                        
                        
                        **(7,404**
                        **)**
                        
                        (41,248
                        )**(1,017,343**
                        **)**
                        
                        (226,461
                        )Total
                            tax provision (benefit)
                        
                        **$**
                        **(1,015,859**
                        **)**
                        $
                        (226,461
                        )
  F-14
 Table
                    of Contents
  The
                  reconciliation of income tax computed at statutory rates of income
                  tax benefits
                  is as follows:
 
 **2004**
                        
                        
                        2003Expense
                            at Federal statutory rate - 34%
                        
                        **$**
                        **123,804**
                        
                        $
                        458,546State
                            tax effects, net of Federal taxes
                        
                        
                        **(3,907**
                        **)**
                        
                        (27,224
                        )Nondeductible
                            expenses
                        
                        
                        **33,636**
                        
                        
                        1,764Taxable
                            temporary differences
                        
                        
                        **(100,005**
                        **)**
                        
                        185,213Deductible
                            temporary differences
                        
                        
                        **18,409**
                        
                        
                        (4,449
                        )Deferred
                            tax asset valuation allowance
                        
                        
                        **(1,087,796**
                        **)**
                        
                        (840,311
                        )Income
                            tax benefit
                        
                        **$**
                        **(1,015,859**
                        **)**
                        $
                        (226,461
                        )
  Deferred
                  income taxes reflect the net tax effects of temporary differences
                  between the
                  carrying amounts of assets and liabilities for financial reporting
                  purposes and
                  the amounts used for income tax purposes. Our total and net deferred
                  tax assets,
                  deferred tax asset valuation allowances and deferred tax liabilities
                  at December
                  31, 2004 and 2003 are as follows:
   **For
                            the year ended December 31, 2004**
                        
                        
                        **Federal**
                        
                        
                        **State**
                        
                        
                        **Total**Current
                            Deferred Income TaxesReserve
                            for sales returns
                        
                        $
                        34,061
                        
                        $
                        8,014
                        
                        $
                        42,075Reserve
                            for technical support costs
                        
                        
                        13,362
                        
                        
                        3,144
                        
                        
                        16,506Accrued
                            compensation costs
                        
                        
                        50,734
                        
                        
                        11,937
                        
                        
                        62,671Deferred
                            revenue
                        
                        
                        14,807
                        
                        
                        3,484
                        
                        
                        18,291Reserve
                            for bad debts
                        
                        
                        6,120
                        
                        
                        1,440
                        
                        
                        7,560Operating
                            loss carryforwards
                        
                        
                        285,600
                        
                        
                        1,054
                        
                        
                        286,654404,684
                        
                        
                        29,073
                        
                        
                        433,757Less:
                            Valuation allowance
                        
                        
                        129,005
                        
                        
                        4,561
                        
                        
                        133,566Deferred
                            income tax asset, net
                        
                        $
                        275,679
                        
                        $
                        24,512
                        
                        $
                        300,191Non-current
                            Deferred Income TaxesProperty
                            and equipment, net
                        
                        $
                        2,312
                        
                        $
                        544
                        
                        $
                        2,856Reorganization
                            costs
                        
                        
                        1,700
                        
                        
                        400
                        
                        
                        2,100State
                            deferred tax liabilities
                        
                        
                        53,665
                        
                        
                        ---
                        
                        
                        53,665Operating
                            loss carryforwards
                        
                        
                        2,555,351
                        
                        
                        3,957
                        
                        
                        2,559,3082,613,028
                        
                        
                        4,901
                        
                        
                        2,617,929Less:
                            Valuation allowance
                        
                        
                        1,774,631
                        
                        
                        4,901
                        
                        
                        1,779,532Deferred
                            income tax asset, net
                        
                        
                        838,397
                        
                        
                        ---
                        
                        $
                        838,397Software
                            development costs
                        
                        
                        (238,438
                        )
                        
                        (56,103
                        )
                        $
                        (294,541
                        )Website
                            costs
                        
                        
                        (23,020
                        )
                        
                        (5,416
                        )
                        
                        (28,436
                        )Software
                            license fees
                        
                        
                        (409,360
                        )
                        
                        (96,321
                        )
                        
                        (505,681
                        )State
                            deferred tax assets
                        
                        
                        (9,739
                        )
                        
                        ---
                        
                        
                        (9,739
                        )Deferred
                            income tax liability
                        
                        
                        (680,557
                        )
                        
                        (157,840
                        )
                        $
                        (838,397
                        )Deferred
                            income tax asset, net
                        
                        $
                        157,840Deferred
                            income tax liability, net
                        
                        
                        
                        
                        $
                        (157,840
                        )
  F-15
 Table
                      of Contents
 **For
                                the year ended December 31, 2003**
                            
                            
                            **Federal**
                            ****
                            ****
                            **State**
                            ****
                            ****
                            **Total**Current
                                Deferred Income TaxesReserve
                                for sales returns
                            
                            $
                            19,574
                            
                            $
                            4,606
                            
                            $
                            24,180Reserve
                                for technical support costs
                            
                            
                            12,580
                            
                            
                            2,960
                            
                            
                            15,540Accrued
                                compensation costs
                            
                            
                            60,781
                            
                            
                            14,301
                            
                            
                            75,082Reserve
                                for bad debts
                            
                            
                            6,460
                            
                            
                            1,520
                            
                            
                            7,980Operating
                                loss carryforwards
                            
                            
                            102,000
                            
                            
                            24,000
                            
                            
                            126,000201,395
                            
                            
                            47,387
                            
                            
                            248,782Less:
                                Valuation allowance
                            
                            
                            201,395
                            
                            
                            47,387
                            
                            
                            248,782Deferred
                                income tax asset, net
                            
                            $
                            ---
                            
                            $
                            ---
                            
                            $
                            ---Non-current
                                Deferred Income TaxesProperty
                                and equipment, net
                            
                            $
                            614
                            
                            $
                            144
                            
                            $
                            758Reorganization
                                costs
                            
                            
                            11,900
                            
                            
                            2,800
                            
                            
                            14,700State
                                deferred tax liabilities
                            
                            
                            46,444
                            
                            
                            ---
                            
                            
                            46,444Operating
                                loss carryforwards
                            
                            
                            2,435,074
                            
                            
                            684,932
                            
                            
                            3,120,0062,494,032
                            
                            
                            687,876
                            
                            
                            3,181,908Less:
                                Valuation allowance
                            
                            
                            2,494,032
                            
                            
                            687,876
                            
                            
                            3,181,908Deferred
                                income tax asset, net
                            
                            $
                            ---
                            
                            $
                            ---
                            
                            
                            ---Software
                                license fees
                            
                            $
                            (580,551
                            )
                            $
                            (136,600
                            )
                            
                            (717,151
                            )Deferred
                                income tax liability
                            
                            $
                            (580,551
                            )
                            $
                            (136,600
                            )
                            
                            (717,151
                            )Deferred
                                income tax liability, net
                            
                            
                            
                            
                            
                            
                            
                            $
                            (717,151
                            )
  A
                      valuation allowance has been recorded primarily related to
                      tax benefits
                      associated with income tax operating loss carryforwards. Adjustments
                      to the
                      valuation allowance will be made if there is a change in management’s assessment
                      of the amount of the deferred tax asset that is realizable.
                      At December 31,
                      2001, in accordance with SFAS No. 109, Accounting for Income
                      Taxes, management
                      established the valuation allowance equal to the total deferred
                      tax assets due
                      to the uncertainty about our ability to continue as a going
                      concern. At December
                      31, 2004, management adjusted the amount of valuation allowance
                      based on the
                      assessment that we will continue as a going concern and will
                      produce sufficient
                      income in the future to realize our net deferred tax asset.
                      The valuation
                      allowance for deferred tax assets was decreased by $1,602,090
                      during the year
                      ended December 31, 2004 and decreased by $231,911 during the
                      year ended December
                      31, 2003.
 
 At
                      December 31, 2004, we had available net operating loss carryforwards
                      of
                      approximately $7,648,000 for federal income tax purposes that
                      expire in 2021.
                      The federal carryforwards resulted from losses generated in
                      1996 through 2002.
                      We also had net operating loss carryforwards available from
                      various state
                      jurisdictions ranging from approximately $39,000 to approximately
                      $841,000 that
                      expire in 2021.
 
 See
                      Note
                      19 - Restatement and Reclassification.
 **NOTE
                    9 - STOCKHOLDERS’ EQUITY (Restated)**
 **COMMON
                STOCK**
  In
                July
                2003, we issued 250,000 shares of common stock to an employee as
                settlement of a
                2002 signing bonus. These shares were valued at $0.04 per share,
                the value on
                the date the settlement was accepted by the employee.
 In
                  July
                  2003, we issued a total of 600,000 shares of common stock to the
                  external board
                  of directors in lieu of cash and meeting fees for the period April
                  2002 through
                  June 2003. These shares were valued at $0.045 per share.
  In
                  July
                  2003, we issued a total of 150,000 shares of common stock to three
                  independent
                  contractors as a bonus for their performance on our software development
                  projects. These shares were valued at $0.045 per share.
 In
                    July
                    2003, we issued a total of 200,000 shares of common stock to
                    an independent
                    contractor for past and future performance on preparing written
                    corporate
                    materials. These shares were valued at $0.045 per share.
 In
                      April
                      2004, we issued a total of 1,519,349 restricted shares of common
                      stock to the
                      executive management team as payment of the 2003 accrued performance
                      bonus.
                      These shares were valued at $0.022 per share.
  In
                      April
                      2004, we resolved to issue 637,500 restricted shares of common
                      stock to the
                      non-executive employees as additional compensation pursuant
                      to an incentive and
                      retention bonus program. In July, 2004, we removed 2,500 restricted
                      shares of
                      common stock from the resolution due to voluntary separation
                      from service by a
                      part-time employee. These shares were valued at $0.022 per
                      share.
 F-16
 Table
                    of Contents
  In
                June
                2004, we issued 324,074 restricted shares of common stock to the
                outside board
                of directors in lieu of cash and meeting fees for the period from
                July 2003
                through August 2004. These shares were valued at $0.081 per share.
 In
                  July
                  2004, the holders of 11,400 shares of Series A Preferred Stock
                  and the holders
                  of 40,000 shares of Series B Preferred Stock elected to convert
                  such shares into
                  218,000 shares of common stock and 266,667 shares of common stock,
                  respectively.
                  In addition, the holders converted $4,125 unpaid accumulated Series
                  A Preferred
                  Stock dividends into 56,353 shares of common stock.
  In
                  July
                  2004, we issued 295,692 non-restricted shares of common stock in
                  settlement of
                  an agreement with an institutional private equity investor. These
                  shares were
                  valued at $0.10 per share. A warrant dated March 26, 2001 to purchase
                  510,000
                  shares of common stock exercisable at $0.23 per share was cancelled
                  in the
                  settlement. See Note 10.
  In
                  July
                  2004, we issued 21,875,000 restricted shares of common stock for
                  proceeds of
                  $1,750,000 through a private placement with a New York based private
                  investment
                  partnership. In connection with this issuance, we incurred $51,047
                  in legal and
                  other direct costs. These costs have been recorded as a reduction
                  to additional
                  paid-in capital. In addition, according to the terms of the agreement,
                  the
                  investor received two warrants to purchase shares of common stock.
                  The first
                  warrant entitles the holder to purchase up to 10,937,500 shares
                  of common stock
                  at a price of $0.18 per share, and the second warrant entitles
                  the holder to
                  purchase up to 10,937,500 additional shares of common stock at
                  a price of $0.60
                  per share;
                  each
                  warrant is subject to standard adjustment provisions.
 
 In
                  July
                  2004, we removed 48,387 previously resolved but un-issued shares
                  of common stock
                  associated with an unexecuted 2001 stock subscription agreement.
  In
                  October 2004, we increased the number of our authorized shares
                  of common stock
                  from 50,000,000 to 120,000,000.
  In
                  November 2004, we issued 2,000,000 restricted shares of common
                  stock to holders
                  of convertible promissory notes who exercised their options to
                  convert. See Note
                  6.
 **COMMON
                  STOCK
                  OPTIONS**
  In
                  June
                  2003, we granted an employee 500,000, fully vested stock options
                  with an
                  exercise price of $0.05 per share. These options expire in June
                  2013. In
                  addition, 667 unvested stock options with an exercise price of
                  $1.00 and 6,250
                  unvested stock options with an exercise price of $0.11 were forfeited
                  upon
                  termination and 16,250 vested stock options with an exercise price
                  of $1.00 and
                  30,000 vested stock options with an exercise price of $0.11 expired
                  after
                  termination. There was no effect on the financial statements resulting
                  from
                  these transactions. See Note 13.
 In
                  July
                  2004, we cancelled 190,200 vested stock options with an exercise
                  price of $1.00
                  per share and 525,000 vested stock options with an exercise price
                  of $1.03 per
                  share. In addition, 100,000 vested stock options with an exercise
                  price of $0.11
                  were voluntarily forfeited by management and 1,333 vested stock
                  options with an
                  exercise price of $1.00 and 38,750 vested stock options with an
                  exercise price
                  of $0.11 expired after termination. We apply APB Opinion No. 25
                  and related
                  interpretations in accounting for our stock options. Accordingly,
                  no
                  compensation cost has been recognized for these stock options and
                  therefore,
                  there was no effect on the financial statements resulting from
                  these
                  cancellations. See Note 13. We did not grant any options or other
                  stock-based
                  awards to any of the individuals for which the options were canceled,
                  during the
                  six months prior to and after the option cancellation.
 **COMMON
                STOCK
                WARRANTS**
  In
                April
                2004, we issued a warrant for 150,000 shares of common stock with
                an exercise
                price of $0.022 per share to our corporate counsel as payment for
                $3,300 of
                accrued legal services.
 In
                  May
                  2004, we issued a warrant for 600,000 shares of common stock with
                  an exercise
                  price of $0.15 per share to a consultant for corporate business
                  planning,
                  financing, and merger and acquisition assistance. This warrant
                  was valued at
                  $63,215 using the Black-Scholes method and recorded as an expense.
 
 F-17
 Table
                      of Contents
  In
                  July
                  2004, we cancelled a warrant for 510,000 shares of common stock
                  with an exercise
                  price of $0.23 per share with an institutional private equity investor
                  in
                  connection with a settlement in which 295,692 non-restricted shares
                  of common
                  stock were issued. See Note 10.
 
 In
                  November 2004, we issued two warrants to purchase shares of common
                  stock in
                  connection with a private placement with a New York based private
                  investment
                  partnership. The first warrant entitles the holder to purchase
                  up to 10,937,500
                  shares of common stock at a price of $0.18 per share, and the second
                  warrant
                  entitles the holder to purchase up to 10,937,500 additional shares
                  of common
                  stock at a price of $0.60 per share;
                  each
                  warrant is subject to standard adjustment provisions. These warrants are
                  accounted for as stock rights and have been valued at $576,042
                  each ($1,152,084
                  total) using the Black-Scholes valuation method and allocated based
                  on paragraph
                  16 of APB No. 14, *Accounting
                  for Convertible Debt and Debt Issued with Stock Purchase
                  Warrants* .
                  These
                  warrants are accounted for as rights and were issued on November
                  10, 2004. The
                  fair value of each warrant was estimated on the date of grant with
                  the following
                  assumptions:
 **Warrant
                              A**
                          ****
                          ****
                          **Warrant
                              B**Expected
                              term - years
                          
                          
                          3
                          
                          
                          5Expected
                              dividend yield
                          
                          
                          0
                          %
                          
                          0
                          %Expected
                              stock price volatility
                          
                          
                          490
                          %
                          
                          490
                          %Risk-free
                              interest rate
                          
                          
                          3.80
                          %
                          
                          3.80
                          %
  See
                  Note
                  19 - Restatement and Reclassification.
  **SERIES
                  A
                  CONVERTIBLE PREFERRED STOCK**
  The
                  rights, preferences and privileges of our Series A Preferred Stock,
                  none of
                  which currently remain outstanding, were as follows:
 ****
 **Dividends**
  Holders
                    of Series A Preferred Stock were entitled to receive common stock
                    dividends of
                    $0.50 per share per annum, in preference to any payment of cash
                    dividends
                    declared or paid on shares of common stock. Dividends on Series
                    A Preferred
                    Stock were fully cumulative and was payable as determined by
                    our board of
                    directors. As of December 31, 2004, no dividends had been declared.
                    Series A
                    Preferred Stock dividends, however, were paid to a stockholder as
                    a
                    conversion incentive.
 ****
 **Liquidation**
  Holders
                    of Series A Preferred Stock were entitled to liquidation preferences
                    over common
                    stockholders to the extent of $10.00 per Series A Preferred share,
                    plus all
                    declared but unpaid dividends. If funds were sufficient to make
                    a complete
                    distribution to the preferred stockholders, such stockholders
                    would have shared
                    in the distribution of our assets on a pro rata basis in proportion
                    to the
                    aggregate preferential amounts owed each stockholder. After payment
                    would have
                    been made to the preferred stockholders, any remaining assets
                    and funds would
                    have been distributed equally among the holders of our common
                    stock based upon
                    the number of shares of common stock held by each.
  **Conversion**
  Each
                share of Series A Preferred Stock would have been convertible into
                shares of
                common stock at the rate of 10 shares of common stock for each share
                of Series A
                Preferred Stock, subject to adjustment.
 During
                    the year ended December 31, 2004, all shares of Series A Preferred
                    Stock were
                    converted into shares of common stock.
  F-18
 Table
                        of Contents
 ****
 **Redemption**
  At
                the
                election of our board of directors, we were able to redeem all or
                part of the
                shares of the Series A Preferred Stock at any time (pro rata based
                upon the
                total number of shares of the Preferred Stock held by each holder)
                by paying in
                cash a sum per share equal to $10.00 plus accrued and unpaid dividends
                per
                annum.
   **Voting
                Rights**
  The
                holder of each share of Series A Preferred Stock was not entitled
                to vote except
                as required by law.
   **SERIES
                B
                CONVERTIBLE PREFERRED STOCK**
  The
                  rights, preferences and privileges of our Series B Preferred Stock,
                  none of
                  which currently remains outstanding, were as follows:
  **Dividends**
  The
                holders of Series B Preferred Stock were entitled to receive cumulative
                cash
                dividends at the rate of $1.60 per annum per share. As of December
                31, 2004, no
                dividends had been declared.
  **Liquidation**
 The
                  Series B Preferred stockholders were entitled to a liquidation
                  preference in an
                  amount equal to the dividends accrued and unpaid, whether or not
                  declared,
                  without interest, and a sum equal to $20.00 per share before any
                  payment was to
                  be made or any assets distributed to the holders of our common
                  stock or any
                  other class or series of our capital stock ranking junior as to
                  liquidation
                  rights to the Series B Preferred Stock.
 ******Conversion**
  Each
                    share of Series B Preferred Stock had been convertible into shares
                    of common
                    stock at the rate of 1 share of common stock for each share of
                    Series B
                    Preferred Stock, subject to adjustment.
 During
                        the year ended December 31, 2004, all shares of Series B
                        Preferred Stock were
                        converted into shares of common stock.
 
  **Redemption**
  Subject
                to restrictions, shares of the Series B Preferred Stock were redeemable
                at our
                option at any time at the redemption price of $20.00 per share plus,
                in each
                case, an amount equal to the dividends accrued and unpaid thereon
                to the
                redemption date. We did not have the right to redeem any shares of
                Series B
                Preferred Stock unless the current market value of our common stock
                immediately
                prior to the redemption date was not less than $18.00 per share.
  ****Voting
                Rights****
 The
                  holder of each share of Series B Preferred Stock was not entitled
                  to vote,
                  except as required by law and as a class. Voting as a class, the
                  holders were
                  entitled to elect one director to fill one directorship.
 **NOTE
                  10 - OTHER INCOME AND ADJUSTMENTS (Restated)**
  We
                recorded an adjustment to the balance of accrued royalties for the
                year ended
                December 31, 2003 in the amount of $583,628. This adjustment was
                a result of our
                having reached a settlement with TLC regarding the offset credit
                to which we
                were entitled against the balance due on the 1999 license. The offset
                credit was
                related to sales made to TLC that remained in dispute until verified
                by an
                independent third-party audit of the sales and related royalty calculations.
                The
                royalty liabilities had been accrued based on our sales to TLC as
                originally
                reported and were part of the calculation of the June 30, 2001 bad
                debt
                provision totaling $2,391,000. This has been included in other income.
  F-19
 Table
                    of Contents
 During
                  the year ended December 31, 2003, we reclassified as other income
                  - proceeds
                  totaling $650,000, and the corresponding accrued interest payable
                  totaling
                  $216,516, that were previously recorded as an unsecured note payable.
                  The
                  proceeds were originally recorded as an unsecured note payable
                  based upon an
                  oral understanding with an employee of a third-party consultant
                  in 1999. We had
                  historically accrued interest on the outstanding balance at 9%,
                  the rate deemed
                  reasonable by management at the time of the oral agreement. We
                  continued to
                  accrue interest on the proceeds until we made the determination
                  to reclassify
                  the proceeds and accumulated accrued interest (from December 1999
                  through
                  September 2003). The determination to reclassify the obligation,
                  and related
                  accrued interest, was made on the basis of the combined facts that
                  (i) the
                  obligation exists, if at all, solely pursuant to an oral loan agreement
                  made
                  over three years ago (in 1999) in the State of North Carolina with
                  a
                  representative of the party to whom the obligation was believed
                  to have been
                  owed, (ii) no party has ever made any demand for repayment thereof
                  despite the
                  fact that no payments have ever been made on the obligation, (iii)
                  the party
                  believed to be owed the obligation, upon inquiry, claims no record
                  of any such
                  obligation, and (iv) the State of North Carolina Statute of Limitations
                  applicable to oral agreements, believed to govern the continued
                  enforceability
                  of the obligation, has expired. This transaction has been reflected
                  in the
                  Consolidated Statements of Cash Flows as “Debt forgiveness” and “(Decrease) in
                  other current liabilities”.
 
 During
                  the year ended December 31, 2004, we settled with various vendors
                  and content
                  providers for lump-sum payments ranging from approximately 17%
                  to approximately
                  60% of balances owed. The difference between the balance owed and
                  the settlement
                  amount, totaling $1,002,090, has been treated as gain from extinguishment
                  of
                  debt and included in other income.
 
 During
                  the year ended December 31, 2004, we settled an agreement with
                  Swartz Private
                  Equity, an institutional private equity investor, for early termination
                  of the
                  agreement. We issued 295,692 shares of common stock valued at $0.10
                  per share
                  and paid a cash lump sum of $125,000. A total of $154,569 has been
                  treated as
                  expenses incurred in a withdrawn public offering. See Note 9. This
                  has been
                  included in other adjustments.
 
 See
                  Note
                  19 - Restatement and Reclassification.
  ****NOTE
                  11 - REBATE RESERVE ADJUSTMENT
                  (Restated)****
   During
                the years ended December 31, 2004 and 2003, we recorded adjustments
                to our
                rebates reserve in the amounts of $142,039 and $124,262, respectively;
                $266,301
                in the aggregate. Our reserve balance properly reflects open rebate
                programs and
                the estimated balance of each that management expects to pay. These
                adjustments
                are the result of, among other things, an internal review of the
                amount owed and
                of our ability to reach intended rebate recipients, as properly reflected
                by
                historical response rates. These adjustments to our rebate reserves
                have been
                recognized as an adjustment to revenue in accordance with EITF Issue
                No.
                01-09.
   See
                  Note
                  19 - Restatement and Reclassification.
  **NOTE
                  12 - EARNINGS PER COMMON SHARE (Restated)**
  Earnings
                  per common share are computed by dividing net income by the weighted
                  average
                  number of shares of common stock and common stock equivalents outstanding
                  during
                  the year. Common stock equivalents are the net additional number
                  of shares that
                  would be issuable upon the exercise of the outstanding common stock
                  options (see
                  Note 13), assuming that we reinvested the proceeds to purchase
                  additional shares
                  at market value.
 The
                    following table shows the amounts used in computing earnings
                    per common share
                    and the effect on income and the average number of shares of
                    dilutive potential
                    common stock:
   For
                              the Year Ended December 31
                          
                          
                          **2004**
                          
                          
                          2003Net
                              Income
                          
                          **$**
                          **1,255,725**
                          
                          $
                          1,699,387Common
                              stock dividend on Preferred Series A
                          
                          
                          **(4,125**
                          **)**
                          
                          ---Net
                              income available to common shareholders
                          
                          **$**
                          **1,251,600**
                          
                          $
                          1,699,387Basic
                              weighted average shares outstanding
                          
                          
                          **34,520,754**
                          
                          
                          20,411,438**Dilutive
                              effect of:**Stock
                              options
                          
                          
                          **429,824**
                          
                          
                          ---Convertible
                              notes payable
                          
                          
                          **---**
                          
                          
                          1,800,000Convertible
                              Preferred Series A
                          
                          
                          **---**
                          
                          
                          114,000Convertible
                              Preferred Series B
                          
                          
                          **---**
                          
                          
                          40,000Warrants
                          
                          
                          **245,262**
                          
                          
                          ---Diluted
                              weighted average shares outstanding
                          
                          
                          **35,195,840**
                          
                          
                          22,365,438
   F-20
 Table
                    of Contents
  A
                total
                of 24,315,000 and 4,075,273 dilutive potential securities for the
                years ended
                December 31, 2004 and 2003, respectively, have been excluded from
                the
                computation of diluted earnings per common share, as their inclusion
                would be
                anti-dilutive.
 See
                  Note
                  19 - Restatement and Reclassification.
 **NOTE
                  13 - STOCK-BASED COMPENSATION (Restated)**
 Our
                  1999 Stock Incentive Plan authorizes the issuance of various
                  forms of
                  stock-based awards including incentive and nonqualified stock options,
                  stock
                  appreciation rights attached to stock options, and restricted stock
                  awards to
                  our directors, officers and other key employees. The plan has been
                  approved
                  by our stockholders and as such, provides certain income
                  tax advantages to
                  employees as provided under Sections 421, 422, and 424 of the Internal
                  Revenue
                  Code. Stock options are granted at an exercise price as determined
                  by our
                  board at the time the option is granted and may not be less
                  than the par
                  value of such shares of common stock. None of the options granted
                  under the plan
                  have been granted with an exercise price less than fair value of
                  the common
                  stock on the date of grant. Stock options vest quarterly over three
                  years and
                  have a term of up to ten years. The plan authorizes an aggregate
                  of 1,500,000
                  shares of common stock may be issued. We did not grant any options
                  under the
                  plan during 2004 or 2003.
  In
                  addition, we issue various forms of stock-based awards including
                  nonqualified
                  stock options and restricted stock awards to directors, officers,
                  other key
                  employees and third-party consultants, outside of the plan. Awards
                  granted
                  outside of the plan have been granted pursuant to equity compensation
                  arrangements that have not been approved by our stockholders.
                  These awards
                  are granted at an exercise price as determined by our board
                  at the time of
                  grant and are not less than the par value of such shares of common
                  stock. None
                  of the options granted outside of the plan have been granted with
                  an exercise
                  price less than fair value of the common stock on the date of grant.
                  Stock
                  options granted outside of the plan vest as determined by our
                  board at the
                  time of grant and have a term of up to ten years. Non-employee
                  directors, though
                  treated as employees for financial reporting purposes under FASB
                  Interpretation
                  No. 44, are excluded from the income tax advantages afforded employees
                  by the
                  Internal Revenue Code. We did not grant any options outside of
                  the plan during
                  2004 and granted 500,000 nonqualified, fully vested stock options
                  outside of the
                  plan to an officer during 2003.
  We
                  apply
                  APB Opinion No. 25 and related interpretations in accounting for
                  our stock
                  options. Accordingly, no compensation cost has been recognized
                  for outstanding
                  stock options. Had compensation cost for our outstanding stock
                  options been
                  determined based on the fair value at the grant date (calculated
                  using the
                  Black-Scholes Option-Pricing Model) for those options consistent
                  with SFAS No.
                  123, our net income and primary and diluted earnings per share
                  would have
                  differed as reflected by the pro forma amounts indicated below:
   **2004**
                        
                        
                        2003Net
                            income, as reported
                        
                        **$**
                        **1,255,725**
                        
                        $
                        1,699,387Pro
                            Forma compensation charge under SFAS No. 123
                        
                        
                        **---**
                        
                        
                        (59,722
                        )Pro
                            Forma net income
                        
                        **$**
                        **1,255,725**
                        
                        $
                        1,639,665**Earnings
                            per share:**Basic
                            - as reported
                        
                        **$**
                        **0.04**
                        
                        $
                        0.08Basic
                            - pro forma
                        
                        **$**
                        **0.04**
                        
                        $
                        0.08Diluted
                            - as reported
                        
                        **$**
                        **0.04**
                        
                        $
                        0.08Diluted
                            - pro forma
                        
                        **$**
                        **0.04**
                        
                        $
                        0.07
   F-21
 Table
                    of Contents
 The
                  fair
                  value of each option grant was estimated on the date of grant using
                  the
                  Black-Scholes option-pricing model with the following assumptions:
 
 Expected
                            dividend yield
                        
                        
                        0
                        %Expected
                            stock price volatility
                        
                        
                        490
                        %Risk-free
                            interest rate
                        
                        
                        3.80
                        %
 
 Activity
                  under our stock option plans is summarized as follows:
 **Outstanding
                              Options**
                          ********
                          ****
                          **Number
                              of Shares**
                          ****
                          **Weighted-Average
                              Exercise Price**Balance
                              at December 31, 2002
                          
                          
                          2,843,450
                          
                          $
                          0.33Granted
                          
                          
                          500,000
                          
                          $
                          0.05Exercised
                          
                          
                          ---
                          
                          
                          ---Expired
                              or forfeited
                          
                          
                          (53,167
                          )
                          $
                          0.39Canceled
                          
                          
                          ---
                          
                          
                          ---Balance
                              at December 31, 2003
                          
                          
                          3,290,283
                          
                          $
                          0.29Granted
                          
                          
                          ---
                          
                          
                          ---Exercised
                          
                          
                          ---
                          
                          
                          ---Expired
                              or forfeited
                          
                          
                          (140,083
                          )
                          $
                          0.12Canceled
                          
                          
                          (715,200
                          )
                          $
                          1.02Balance
                              at December 31, 2004
                          
                          
                          2,435,000
                          
                          $
                          0.09
 
 No
                    stock
                    options, or any other form of stock-based awards, were granted
                    to the
                    individuals for whom the options were cancelled, during the six
                    months prior to
                    and after the cancellation.
 The
                  following table summarizes information about stock options outstanding
                  at
                  December 31, 2004:
 
 **Outstanding
                            Options**
                        **Exercisable
                            Options****Range
                            of Exercise Prices**
                        ****
                        ****
                        **Outstanding
                            at December 31, 2004**
                        ****
                        ****
                        **Weighted-Average
                            Remaining Contractual Life (Years)**
                        
                        ****
                        **Weighted-Average
                            Exercise Price**
                        ****
                        ****
                        **Exercisable
                            at December 31, 2004**
                        ****
                        ****
                        **Weighted-Average
                            Exercise Price**$0.00
                            to $0.11
                        
                        
                        2,435,000
                        
                        
                        7.1
                        
                        $
                        0.0854
                        
                        
                        2,435,000
                        
                        $
                        0.0854
 
 The
                  following table summarizes other equity instruments issued during
                  2004 to
                  acquire goods and services (see Note 9):
 
 **Number
                            of Shares**
                        ****
                        **Weighted-Average
                            Exercise Price**Common
                            stock
                        
                        
                        2,774,115
                        
                        $
                        0.0372Common
                            stock warrants
                        
                        
                        750,000
                        
                        $
                        0.1244
 
 See
                  Note
                  19 - Restatement and Reclassification.
 F-22
 Table
                    of Contents
  ****NOTE
                14 - RENTAL AND LEASE INFORMATION****
  **OPERATING
                LEASES**
  We
                lease
                office space/warehouse facilities in Omaha, Nebraska under an operating
                lease
                with a third-party with terms extending through 2007. We are responsible
                for all
                taxes, insurance and utility expenses associated with this lease.
                There is no
                lease renewal option contained in the lease.
 We
                  lease
                  office space in Naperville, Illinois under an operating lease with
                  a third-party
                  with terms extending through September 2005. We are responsible
                  for all
                  insurance expenses associated with this lease.
 
 Rental
                  expense for the years ended December 31, 2004 and 2003 amounted
                  to $75,555 and
                  $51,039, respectively. Rental expenses are included in capitalized
                  software
                  development costs. See Note 1 - Software Development Costs.
 
 At
                  December 31, 2004, the future minimum rental payments required
                  under these
                  leases are as follows:
 2005
                        
                        $
                        77,2612006
                        
                        
                        65,4912007
                        
                        
                        27,288Total
                            future minimum rental payments
                        
                        $
                        170,040
  **CAPITAL
                  LEASES**
  We
                  lease
                  telephone equipment under a capital lease expiring in November
                  2009. The asset
                  and liability under the capital lease are recorded at the present
                  value of the
                  minimum lease payments. The asset is depreciated over a 5 year
                  life.
                  Depreciation of the asset under the capital lease is included in
                  depreciation
                  expense for 2004.
 The
                following table summarizes property held under capital leases at December
                31, 2004 :
 
 Office
                          equipment
                      
                      $
                      51,788Less:
                          Accumulated depreciation
                      
                      
                      1,726Net
                          property and equipment under capital lease
                      
                      $
                      50,062
  Minimum
                future lease payments under capital leases as of December
                31, 2004 for each
                of the next five years and in the aggregate, are:
 
 2005
                      
                      $
                      14,8702006
                      
                      
                      13,7262007
                      
                      
                      13,7262008
                      
                      
                      13,7262009
                      
                      
                      12,582Total
                          minimum lease payments
                      
                      
                      68,630Less:
                          Amount representing interest
                      
                      
                      16,842Total
                          obligations under capital lease
                      
                      
                      51,788Less:
                          Current installments of obligations under capital lease
                      
                      
                      8,816Long-term
                          obligation under capital lease
                      
                      $
                      42,972
 
 **NOTE
                  15 - SUPPLEMENTAL CASH FLOW INFORMATION (Restated)**
  We
                  incurred the following non-cash investing and financing activities
                  during the
                  years ended December 31, 2004 and 2003, respectively:
 
 **2004**
                        
                        
                        2003Property
                            and equipment acquired under capital lease
                        
                        **$**
                        **51,788**
                        
                        $
                        ---Conversion
                            of notes payable into common stock. See Note 6.
                        
                        **$**
                        **263,334**
                        
                        $
                        ---Common
                            stock dividend on Preferred Series A
                        
                        **$**
                        **4,125**
                        
                        $
                        ---Preferred
                            stock converted into common stock
                        
                        **$**
                        **470**
                        
                        $
                        ---Common
                            stock and warrants issued for services
                        
                        **$**
                        **178,929**
                        
                        $
                        52,750
 
 See
                  Note
                  19 - Restatement and Reclassification.
 F-23
 Table
                    of Contents
  ****NOTE
                16 - COMMITMENTS AND CONTINGENCIES
                (Restated)****
   We
                are
                subject to legal proceedings and claims that arise in the ordinary
                course of our
                business. In the opinion of management, the amount of ultimate liability
                with
                respect to these actions will not materially affect our financial
                statements
                taken as a whole.
  We
                    entered into a license agreement in June 1999 with Parsons Technology,
                    Inc., a
                    copy of which has since been assigned to Riverdeep, Inc., the
                    latest
                    licensor-assignee in a succession of assignments that have occurred
                    since the
                    original agreement. The license, as we acquired it in 1999, provided
                    us with the
                    right, for a term of ten years, to publish, use, distribute,
                    sublicense and
                    sell, exclusively worldwide in non-secular channels and non-exclusively
                    in
                    secular channels, a collection of top-selling Christian-related
                    software titles
                    and content owned by Parsons Technology, including certain intellectual
                    properties owned by The Zondervan Corporation.
 
 In
                    October 2001, due to a shortage in working capital, we fell in
                    arrears with
                    certain royalty payments due under the Parsons Agreements. Thereafter
                    we became
                    party with, among others, Zondervan, Parsons and Riverdeep, to
                    a court
                    supervised mediation arising out of a content royalty claim.
                    A multi-party
                    settlement was reached on October 20, 2003, providing for our
                    payment to
                    Zondervan of $500,000 plus 5% simple interest in installments
                    over a period of
                    nine months from November 2003 to July 2004, as well as for the
                    destruction of
                    all inventory containing Zondervan-owned content. We have fully
                    complied with
                    the terms of the agreement and, upon satisfaction, received a
                    covenant in
                    perpetuity with respect to our rights under the Parsons Agreement,
                    effectively
                    extending the agreement indefinitely.
  We
                    were
                    in arrears with the Internal Revenue Service for back payroll
                    taxes and had been
                    paying the payroll taxes in monthly installments previously approved
                    by the
                    Internal Revenue Service. In July of 2004, we paid all back payroll
                    taxes that
                    were due to the Internal Revenue Service and remain current with
                    all payroll tax
                    deposits and filings.
 Our
                  employment agreements with our management team each contain a provision
                  for an
                  annual bonus equal to 1% of our net income (3% total). We accrue
                  this bonus on a
                  quarterly basis. Our
                  management team consists of our Chief Executive Officer (with a
                  base annual
                  salary of $150,000), our Chief Financial Officer (with a base annual
                  salary of
                  $110,000), and our Chief Technology Officer (with a base annual
                  salary of
                  $150,000). In addition to the bonus provisions and annual base
                  salary, each
                  employment agreement provides for payment of all accrued base salaries,
                  bonuses
                  ($66,575 included in Other current liabilities at December 31,
                  2004), and any
                  vested deferred compensation ($30,349 included in Other current
                  liabilities at
                  December 31, 2004) for termination by reason of disability. The
                  agreements also
                  provide for severance compensation equal to the then base salary
                  until the later
                  of (i) the expiration of the term of the agreement as set forth
                  therein or
                  (ii) one year, when the termination is other than for cause (including
                  termination by reason of disability). There is no severance compensation
                  in the
                  event of voluntary termination or termination for cause.
  
  In
                  2003
                  and 2004, we reduced our reserve for rebates payable based, in
                  part, on our
                  ability to meet the financial obligation of claims carried forward
                  from our last
                  rebate program in 2001. As such, we may have a legal obligation
                  to pay rebates
                  in excess of the liability recorded.
  
 On
                  July
                  19, 2004, we entered into a certain Stock Purchase Agreement pursuant
                  to which
                  we agreed to issue and sell 21,875,000 restricted shares of our
                  common stock to
                  Barron Partners, LP, a New York based institutional investor, at
                  a price of
                  $0.08 per share. Under the terms of transaction, Barron received
                  two of our
                  common stock purchase warrants. The first warrant entitles the
                  holder, for a
                  period of up to five years, to purchase up to 10,937,500 common
                  shares at a
                  price of $0.18 per share,
                  subject
                  to standard adjustment provisions.  The second warrant entitles the
                  holder, also for a period of up to five years, to purchase up to
                  10,937,500
                  additional common shares at a price of $0.60 per share,
                  subject
                  to standard adjustment provisions.
 
 F-24
 Table
                      of Contents
   As
                  part
                  of the financing transaction, we also entered into a certain Registration
                  Rights
                  Agreement with Barron pursuant to which we became committed to
                  registering all
                  of the shares issued as part of such transaction, including those
                  issuable under
                  the warrants. On November 22, 2004, we filed a registration
                  statement on
                  Form SB-2 covering the shares issued to Barron, as well as the
                  shares underlying
                  the warrants issued to Barron. Under the terms of the Registration
                  Rights
                  Agreement, as amended, we had until April 22, 2005 to cause such
                  registration
                  statement to be declared effective by the SEC. In accordance with
                  the terms of
                  the Registration Rights Agreement, any delays in meeting this obligation
                  subjected us to liability to Barron in an amount equal to
                  $1,726 per day
                  for the duration of any such delay. We
                  continue to accrue $1,726 ($630,000 per year/365 days) per day
                  in penalties
                  until the registration statement is declared effective. If we are
                  unable to
                  cause the registration statement to be declared effective by December
                  31, 2005,
                  we will incur total penalties of approximately $437,000 (April
                  23, 2005 through
                  December 31, 2005) which will directly decrease our net income
                  and possibly
                  cause a net loss for the December 31, 2005 year then
                  ending.
   See
                  Note
                  19 - Restatement and Reclassification.
  ****NOTE
                  17 - RISKS AND UNCERTAINTIES****
 Our
                future operating results may be affected by a number of factors.
                We are
                dependent upon a number of major inventory and intellectual property
                suppliers.
                If a critical supplier had operational problems or ceased making
                material
                available to us, operations could be adversely affected.
  ****NOTE
                18 - SUBSEQUENT EVENTS****
  Subsequent
                to December 31, 2004 we restored a stale check (outstanding more
                than six
                months) in the amount of $23,333 to unrestricted cash. The stale
                check was
                issued to a corporation as payment in full of a note payable (see
                Note 6).
                Communication with the payee resulted in conversion of the note into
                466,666
                shares of common stock. The transaction has been reflected in unrestricted
                cash,
                common stock and paid-in capital at December 31, 2004. We have stopped
                payment
                on the check.
  As
                of the
                date of this filing, the registration statement filed on November
                22, 2004 had
                not yet been declared effective. Pursuant to an agreement reached
                with the New
                York based private investment partnership in relation to the associated
                accruing
                penalties, we have agreed to pay the New York based private investment
                partnership an amount in cash equal to $100,000 in two equal installments
                of
                $50,000 between April 22, 2005 and May 22, 2005, with no additional
                penalty
                obligations accruing for at least 60 days from April 22, 2005. Although
                there
                can be no assurance, management believes that the prospects of our
                being able to
                cause the registration statement to be declared effective by June
                21, 2005 are
                good. If we are unsuccessful in causing the registration statement
                to be
                declared effective by the SEC by June 21, 2005, however, and depending
                on how
                long any such delay in causing effectiveness to be declared by the
                SEC continues
                thereafter, it is likely to have a very material adverse effect on
                our business,
                our financial condition, including liquidity and profitability, and
                our
                results of operations.
  **NOTE
                19 - RESTATEMENT AND RECLASSIFICATION**
  We
                have
                restated our financial statements for the year ended December 31,
                2004 to
                reflect issues identified during a regulatory review of our financial
                statements
                associated with a certain registration statement filed with the SEC
                on November
                22, 2004 on Form SB-2. Management and the board of directors concluded
                these
                restatements were necessary to reflect the changes described below.
  Revisions
                  affecting the consolidated statements of operations:
   •
                        During
                            the quarter ended June 30, 2002, we reached a tentative
                            settlement
                            agreement in our arbitration with TLC. The tentative
                            settlement agreement
                            forgave the final, unpaid installment due on a certain
                            software
                            license we originally acquired in July 1999 and
                            extended
                            the 1999 license term from 10 years to
                            50 years. We originally
                            recorded the final, unpaid installment of $1,051,785
                            under the 1999
                            license as an offset against the recorded historical
                            cost of
                            that 1999 license and recalculated the amortization
                            based on this
                            reduced amount and the extension of the useful life to
                            50 years. Although
                            paragraph 6 of SFAS No. 141,*Business
                            Combinations*,
                            which guides the recognition and measurement of intangible
                            assets,
                            provides that the measurement of assets in which the
                            consideration given
                            is cash are measured by the amount of cash paid, management
                            has concluded
                            that too much time had passed between the date of the
                            agreement (June
                            1999) and the date of the tentative settlement (May 2002)
                            for such an
                            offset to be proper. Therefore, we recognized the extinguishment
                            of the
                            liability owed to TLC as income ($1,051,785) in the statement
                            of
                            operations for the year ended December 31, 2002. This
                            adjustment reduced
                            the retained deficit by $856,685, net of additional amortization
                            and
                            related income taxes, at December 31, 2003 and 2004 from
                            that originally
                            reported and had no effect on the consolidated statements
                            of operations or
                            consolidated statements of cash flows for the years then
                            ended.
  F-25
 Table
                      of Contents
  •
                        During
                            the quarter ended December 31, 2003, we reached a final
                            settlement
                            agreement in our dispute with Zondervan and TLC. This
                            final settlement
                            extended the life of the 1999 license, and the trademarks
                            included
                            therein, indefinitely. We originally reassessed the useful
                            life of
                            the 1999 license to be indefinite, based
                            on the guidelines
                            provided by paragraphs 53 and 11 of SFAS No. 142,*Goodwill
                            and Other Intangible Assets*.
                            Management has now concluded a 10 year life is appropriate
                            based on our
                            going concern opinion for 2002 and 2003. Therefore, we
                            restored the
                            estimated economic useful life to the original 10 years
                            and have
                            recalculated annual amortization accordingly. This adjustment
                            increased
                            the retained deficit at December 31, 2003 (for the prior
                            years’
                            amortization and related income tax effects) and decreased
                            net income by
                            $856,685, net of additional amortization and related
                            income taxes, for the
                            year ended December 31, 2004. There was no net effect
                            on the consolidated
                            statements of cash flows for the years ended December
                            31, 2003 and 2004,
                            respectively.
  Revisions
                  resulting in reclassifications or clarification with no net effect
                  on the
                  consolidated statements of operations:
 
 •
                        During
                            the year ended December 31, 2003, we made the decision
                            to no longer
                            provide support for certain of our products and destroyed
                            all remaining
                            inventory of those products. We originally recorded this
                            as a
                            non-recurring item in the “Other income (expense)” section of the
                            consolidated statements of operations. We revised the
                            consolidated
                            statement of operations for the year ended December 31,
                            2003 to reflect
                            this obsolete inventory ($60,792) in cost of
                            sales.
 
 •
                        During
                            the year ended December 31, 2003, we reached a final
                            settlement agreement
                            in our dispute with Zondervan and TLC. As part of the
                            settlement process,
                            we conducted an internal audit (verified by an independent
                            auditor
                            provided by TLC) of the accrued royalties owed Zondervan.
                            The audit
                            provided that accrued royalties were overstated due to
                            the 2001 bad debt
                            recognition of the trade accounts receivable balance
                            of TLC, which had
                            been accumulated since July 1999. The amount overstated
                            had remained part
                            of the dispute with Zondervan and remained in our liabilities
                            until the
                            final settlement was reached in 2003 due to the uncertainty
                            of the settled
                            amount. We originally reported the adjustment of $583,628
                            as a
                            non-recurring item in the “Other income (expense)” section of the
                            consolidated statement of operations. The revised consolidated
                            statement
                            of operations for the year ended December 31, 2003 reflects
                            the adjustment
                            as “Other income” in the “Other income (expense)” section.
 
 •
                        During
                            the year ended December 31, 2003, we reclassified loan
                            proceeds, and the
                            corresponding accrued interest payable, that were previously
                            recorded as
                            an unsecured note payable. The proceeds were initially
                            recorded as an
                            unsecured note payable based on an oral understanding
                            with an employee of
                            a third-party consultant in 1999. We had historically
                            accrued interest on
                            the outstanding balance at 9%, the rate deemed reasonable
                            by management at
                            the time of the oral agreement. We continued to accrue
                            interest on the
                            proceeds until we made the determination to reclassify
                            the proceeds and
                            accumulated accrued interest. The determination to reclassify
                            the
                            obligation, and related accrued interest, was made on
                            the basis of the
                            combined facts that (i) the obligation exists, if at
                            all, solely pursuant
                            to an oral loan agreement made in 1999 in the State of
                            North Carolina with
                            a representative of the party to whom the obligation
                            was believed to have
                            been owed, (ii) no party has ever made any demand for
                            repayment thereof
                            despite the fact that no payments have ever been made
                            on the obligation,
                            (iii) the party believed to be owed the obligation, upon
                            inquiry, claims
                            no record of any such obligation, and (iv) the State
                            of North Carolina
                            Statute of Limitations applicable to oral agreements,
                            believed to govern
                            the continued enforceability of the obligation, had expired.
                            We originally
                            reported the reclassification as a non-recurring item
                            of $866,516 in the
                            “Other income (expense)” section of the consolidated statement of
                            operations. The revised consolidated statement of operations
                            for the year
                            ended December 31, 2003 reflects the adjustment as “Other income” in the
                            “Other income (expense)” section.
  F-26
 Table
                      of Contents
  •
                        During
                            the three months ended March 31, 2004, and as a direct
                            result of the
                            settlement with Zondervan and TLC, we wrote-off inventory
                            containing
                            content from Zondervan. Though not technologically obsolete,
                            we were
                            unable to sell the inventory under the terms of the settlement.
                            We
                            originally recorded the $32,396 as a non-recurring
                            item in the “Other
                            income (expense)” section of the consolidated statement of operations.
                            The
                            revised condensed consolidated statement of operations
                            for the year ended
                            December 31, 2004 reflects this inventory adjustment
                            in cost of sales.
 
 •
                        During
                            the three months ended September 30, 2004, we settled
                            an agreement with
                            Swartz Private Equity for early termination. In connection
                            therewith, we
                            issued 295,692 shares of common stock valued at $0.10
                            per share and paid a
                            cash lump sum of $125,000. We originally recorded this
                            transaction as
                            expenses incurred in a withdrawn public offering and
                            reflected it as a
                            non-recurring item of $154,569 in the consolidated statement
                            of
                            operations. The revised condensed consolidated statement
                            of operations for
                            the year ended December 31, 2004 reflects this transaction
                            as “Other
                            expenses” in the “Other income (expense)” section.
  •
                        During
                            the three months ended September 30, 2004, we negotiated
                            settlement with
                            several of our creditors. The debt extinguishment ($1,002,090
                            total) was
                            originally reported as an extraordinary item, net of
                            income tax effects
                            ($601,216), on the consolidated statement of operations.
                            The revised
                            condensed consolidated statement of operations for the
                            year ended December
                            31, 2004 includes this transaction in “Other
                            income”.
 
 •
                        We
                            erroneously treated the 2004 rebates reserve adjustment
                            of $266,301 as an
                            expense recovery in operating expenses. The correct presentation
                            is as an
                            adjustment to revenue, as provided by EITF Issue No.
                            01-09,*Accounting
                            for Consideration Given by a Vendor to a Customer (Including
                            a Reseller of
                            the Vendor’s Products)*. In
                            addition, we reassessed the adequacy of our
                            rebates reserve at
                            December 31, 2003 and allocated $124,262 of the total
                            adjustment to fiscal
                            year 2003 with the remaining $142,039 allocated
                            to fiscal year
                            2004.  See Note 11 - Rebate Reserve
                            Adjustment.
  We
                  also
                  expanded footnote disclosures for stockholders’ equity (major assumptions used
                  in valuation of the warrants using the Black-Scholes valuation
                  method),
                  supplemental cash flow information (property and equipment acquired
                  under
                  capital lease) and commitments and contingencies (employment agreements
                  and
                  potential additional rebate liability).
        F-27
 Table
                      of Contents
  A
                  summary of the effects of these changes is as
                  follows:
  **Findex.com,
                              Inc.****CONSOLIDATED
                              BALANCE SHEETS****December
                              31, 2004****As
                              Previously Reported**
                          
                          
                          **As
                              Restated**
                          
                          
                          **Change****Assets**Current
                              assets:Cash
                              and cash equivalents
                          
                          
                          
                          
                          $
                          341,359
                          
                          $
                          341,359
                          
                          $
                          ---Accounts
                              receivable, trade
                          
                          
                          
                          
                          
                          566,819
                          
                          
                          566,819
                          
                          
                          ---Inventories
                          
                          
                          
                          
                          
                          234,000
                          
                          
                          234,000
                          
                          
                          ---Deferred
                              income taxes, net
                          
                          
                          
                          
                          
                          300,191
                          
                          
                          300,191
                          
                          
                          ---Other
                              current assets
                          
                          
                          
                          
                          
                          109,078
                          
                          
                          109,078
                          
                          
                          ---Total
                              current assets
                          
                          
                          
                          
                          
                          1,551,447
                          
                          
                          1,551,447
                          
                          
                          ---Property
                              and equipment, net
                          
                          131,019
                          
                          
                          131,019
                          
                          
                          ---Software
                              license, net
                          
                          2,513,158
                          
                          
                          2,265,783
                          
                          
                          (247,375
                          )
                          (a)Capitalized
                              software development costs, net
                          
                          701,289
                          
                          
                          701,289
                          
                          
                          ---Deferred
                              income taxes, net
                          
                          253,968
                          
                          
                          157,840
                          
                          
                          (96,128
                          )
                          (b)Restricted
                              cash
                          
                          50,354
                          
                          
                          50,354
                          
                          
                          ---Other
                              assets
                          
                          94,101
                          
                          
                          94,101
                          
                          
                          ---Total
                              assets
                          
                          
                          
                          
                          $
                          5,295,336
                          
                          $
                          4,951,833
                          
                          $
                          (343,503
                          )**Liabilities
                              and stockholders’ equity**Current
                              liabilities:Current
                              maturities of long-term debt
                          
                          
                          
                          
                          $
                          35,495
                          
                          $
                          35,495
                          
                          $
                          ---Accrued
                              royalties
                          
                          
                          
                          
                          
                          287,514
                          
                          
                          287,514
                          
                          
                          ---Accounts
                              payable, trade
                          
                          
                          
                          
                          
                          621,804
                          
                          
                          621,804
                          
                          
                          ---Accrued
                              payroll
                          
                          
                          
                          
                          
                          209,984
                          
                          
                          209,984
                          
                          
                          ---Reserve
                              for sales returns
                          
                          
                          
                          
                          
                          100,180
                          
                          
                          100,180
                          
                          
                          ---Rebates
                              payable
                          
                          
                          
                          
                          
                          29,561
                          
                          
                          29,561
                          
                          
                          ---Payroll
                              taxes payable
                          
                          
                          
                          
                          
                          8,235
                          
                          
                          8,235
                          
                          
                          ---Other
                              current liabilities
                          
                          
                          
                          
                          
                          90,373
                          
                          
                          90,370
                          
                          
                          (3
                          )
                          (c)Total
                              current liabilities
                          
                          
                          
                          
                          
                          1,383,146
                          
                          
                          1,383,143
                          
                          
                          (3
                          )Long-term
                              debt
                          
                          42,972
                          
                          
                          42,972
                          
                          
                          ---Deferred
                              income taxes, net
                          
                          253,968
                          
                          
                          157,840
                          
                          
                          (96,128
                          )
                          (b)Stockholders’
                              equity (Note 9):Common
                              stock
                          
                          
                          
                          
                          
                          48,620
                          
                          
                          48,620
                          
                          
                          ---Paid-in
                              capital
                          
                          
                          
                          
                          
                          9,198,417
                          
                          
                          9,198,417
                          
                          
                          ---Retained
                              (deficit)
                          
                          
                          
                          
                          
                          (5,631,787
                          )
                          
                          (5,879,159
                          )
                          
                          (247,372
                          )
                          (a)Total
                              stockholders’ equity
                          
                          
                          
                          
                          
                          3,615,250
                          
                          
                          3,367,878
                          
                          
                          (247,372
                          )Total
                              liabilities and stockholders’ equity
                          
                          
                          
                          
                          $
                          5,295,336
                          
                          $
                          4,951,833
                          
                          $
                          (343,503
                          )(a)
                              Decrease
                              from reclassification of 2002 debt forgiveness and
                              additional accumulated
                              amortization.(b)
                              Decrease
                              from effects of recognizing additional
                              amortization.(c)
                              Rounding
                              difference.
  F-28
 Table
                      of Contents
 **Findex.com,
                            Inc.****CONSOLIDATED
                            BALANCE SHEETS****December
                            31, 2003****As
                            Previously Reported**
                        
                        
                        **As
                            Restated**
                        
                        
                        **Change****Assets**Current
                            assets:Cash
                            and cash equivalents
                        
                        
                        
                        
                        $
                        36,339
                        
                        $
                        41,668
                        
                        $
                        5,329
                        
                        (a)Accounts
                            receivable, trade
                        
                        
                        
                        
                        
                        365,803
                        
                        
                        365,803
                        
                        
                        ---Inventories
                        
                        
                        
                        
                        
                        272,600
                        
                        
                        272,600
                        
                        
                        ---Other
                            current assets
                        
                        
                        
                        
                        
                        21,920
                        
                        
                        21,920
                        
                        
                        ---Total
                            current assets
                        
                        
                        
                        
                        
                        696,662
                        
                        
                        701,991
                        
                        
                        5,329Property
                            and equipment, net
                        
                        65,603
                        
                        
                        65,603
                        
                        
                        ---Software
                            license, net
                        
                        2,513,158
                        
                        
                        2,769,291
                        
                        
                        256,133
                        
                        (b)Capitalized
                            software development costs, net
                        
                        584,706
                        
                        
                        584,706
                        
                        
                        ---Restricted
                            cash
                        
                        105,683
                        
                        
                        100,354
                        
                        
                        (5,329
                        )
                        (a)Other
                            assets
                        
                        63,818
                        
                        
                        63,818
                        
                        
                        ---Total
                            assets
                        
                        
                        
                        
                        $
                        4,029,630
                        
                        $
                        4,285,763
                        
                        $
                        256,133**Liabilities
                            and stockholders’ equity**Current
                            liabilities:Notes
                            payable (Note 6)
                        
                        
                        
                        
                        $
                        89,999
                        
                        $
                        89,999
                        
                        $
                        ---Current
                            maturities of long-term debt
                        
                        
                        
                        
                        
                        126,876
                        
                        
                        126,876
                        
                        
                        ---Accrued
                            royalties
                        
                        
                        
                        
                        
                        1,499,006
                        
                        
                        1,499,006
                        
                        
                        ---Accounts
                            payable, trade
                        
                        
                        
                        
                        
                        989,354
                        
                        
                        989,354
                        
                        
                        ---Accrued
                            payroll
                        
                        
                        
                        
                        
                        216,767
                        
                        
                        216,767
                        
                        
                        ---Reserve
                            for sales returns
                        
                        
                        
                        
                        
                        57,572
                        
                        
                        57,572
                        
                        
                        ---Reserve
                            for rebates payable
                        
                        
                        
                        
                        
                        357,451
                        
                        
                        233,189
                        
                        
                        (124,262
                        )
                        (e)Payroll
                            taxes payable
                        
                        
                        
                        
                        
                        221,600
                        
                        
                        221,600
                        
                        
                        ---Other
                            current liabilities
                        
                        
                        
                        
                        
                        89,554
                        
                        
                        89,554
                        
                        
                        ---Total
                            current liabilities
                        
                        
                        
                        
                        
                        3,648,179
                        
                        
                        3,523,917
                        
                        
                        (124,262
                        )Long-term
                            debt (Note 7)
                        
                        73,764
                        
                        
                        73,763
                        
                        
                        (1
                        )
                        (c)Deferred
                            income taxes, net (Note 8)
                        
                        1,051,327
                        
                        
                        717,151
                        
                        
                        (334,176
                        )
                        (d)Commitments
                            and contingencies (Note 18)Stockholders’
                            equity (Note 9):Preferred
                            stock
                        
                        
                        
                        
                        
                        51
                        
                        
                        51
                        
                        
                        ---Common
                            stock
                        
                        
                        
                        
                        
                        21,011
                        
                        
                        21,011
                        
                        
                        ---Paid-in
                            capital
                        
                        
                        
                        
                        
                        7,080,629
                        
                        
                        7,080,629
                        
                        
                        ---Retained
                            (deficit)
                        
                        
                        
                        
                        
                        (7,845,331
                        )
                        
                        (7,130,759
                        )
                        
                        714,572Total
                            stockholders’ equity
                        
                        
                        
                        
                        
                        (743,640
                        )
                        
                        (29,068
                        )
                        
                        714,572Total
                            liabilities and stockholders’ equity
                        
                        
                        
                        
                        $
                        4,029,630
                        
                        $
                        4,285,763
                        
                        $
                        256,133(a)
                            Reclassify
                            cash held for repurchase of invoices assigned to factor
                            as corresponding
                            liability classified
                            as current liability.(b)
                            Decrease
                            from reclassification of 2002 debt forgiveness and additional
                            accumulated
                            amortization.(c)
                            Rounding
                            difference.(d)
                            Decrease
                            from effects of recognizing additional
                            amortization.(e) Decrease
                          from reassessment of reserve
                          balance.
  F-29
 Table
                    of Contents
 **Findex.com,
                            Inc.****CONSOLIDATED
                            STATEMENTS OF OPERATIONS****Year
                            Ended December 31, 2004****As
                            Previously Reported**
                        
                        
                        **As
                            Restated**
                        
                        
                        **Change**Revenues,
                            net of reserves and allowances
                        $
                        5,218,784
                        
                        $
                        5,422,097
                        
                        $
                        203,313
                        
                        (a)Cost
                            of sales
                        
                        1,745,664
                        
                        
                        1,820,553
                        
                        
                        74,889
                        
                        (b)Gross
                            profit
                        
                        
                        
                        
                        
                        3,473,120
                        
                        
                        3,601,544
                        
                        
                        128,424Operating
                            expenses:Sales
                            and marketing
                        
                        
                        
                        
                        
                        1,294,377
                        
                        
                        1,280,761
                        
                        
                        (13,616
                        )
                        (c)General
                            and administrative
                        
                        
                        
                        
                        
                        2,309,837
                        
                        
                        2,309,838
                        
                        
                        1
                        
                        (d)Rebate
                            reserve adjustment
                        
                        
                        
                        
                        
                        (266,301
                        )
                        
                        ---
                        
                        
                        266,301
                        
                        (a)Bad
                            debt expense
                        
                        
                        
                        
                        
                        22,778
                        
                        
                        22,778
                        
                        
                        ---Amortization
                            expense
                        
                        
                        
                        
                        
                        16,343
                        
                        
                        519,850
                        
                        
                        503,507
                        
                        (e)Depreciation
                            expense
                        
                        
                        
                        
                        
                        44,478
                        
                        
                        44,478
                        
                        
                        ---Total
                            operating expenses
                        
                        
                        
                        
                        
                        3,421,512
                        
                        
                        4,177,705
                        
                        
                        756,193Earnings
                            (loss) from operations
                        
                        51,608
                        
                        
                        (576,161
                        )
                        
                        (627,769
                        )Interest
                            income
                        
                        1,378
                        
                        
                        1,378
                        
                        
                        ---Other
                            income
                        
                        9,276
                        
                        
                        1,011,366
                        
                        
                        1,002,090
                        
                        (f)Nonrecurring
                            items
                        
                        (154,569
                        )
                        
                        ---
                        
                        
                        154,569
                        
                        (g)Other
                            adjustments
                        
                        ---
                        
                        
                        (154,569
                        )
                        
                        (154,569
                        )
                        (g)Loss
                            on disposition of assets
                        
                        (141
                        )
                        
                        (141
                        )
                        
                        ---Interest
                            expense
                        
                        (42,007
                        )
                        
                        (42,007
                        )
                        
                        ---Income
                            (Loss) before income taxes
                        
                        
                        
                        
                        
                        (134,455
                        )
                        
                        239,866
                        
                        
                        374,321Provision
                            for income taxes
                        
                        1,750,908
                        
                        
                        1,015,859
                        
                        
                        (735,049
                        )
                        (h)Income
                            before extraordinary item
                        
                        
                        
                        
                        
                        1,616,453
                        
                        
                        1,255,725
                        
                        
                        (360,728
                        )Extraordinary
                            item, net of applicable taxes
                        
                        601,216
                        
                        
                        ---
                        
                        
                        (601,216
                        )
                        (i)Net
                            income
                        
                        
                        
                        
                        $
                        2,217,669
                        
                        $
                        1,255,725
                        
                        $
                        (961,944
                        )Basic
                            earnings per share:Basic
                        
                        
                        
                        
                        $
                        0.06
                        
                        $
                        0.04
                        
                        $
                        (0.02
                        )
                        (j)Diluted
                        
                        
                        
                        
                        $
                        0.06
                        
                        $
                        0.04
                        
                        $
                        (0.02
                        )
                        (j)Weighted
                            average shares outstanding:Basic
                        
                        
                        
                        
                        
                        34,520,754
                        
                        
                        34,520,754
                        
                        
                        ---Diluted
                        
                        
                        
                        
                        
                        35,195,840
                        
                        
                        35,195,840
                        
                        
                        ---(a)
                            Reclassification
                            of adjustment to reserve for rebates from sales and marketing
                            and other
                            operating expenses.(b)
                            Reclassification
                            of fulfillment expenses from sales and marketing
                            expenses.(c)
                            Reclassification
                            of fulfillment expenses and rebates expense to sales
                            and cost of
                            sales.(d)
                            Rounding
                            difference.(e)
                            Increase
                            from changing software license agreement from indefinite
                            life to 10 year
                            life.(f)
                            Increase
                            from reclassification of debt forgiveness from Extraordinary
                            item.(g)
                            Reclassification
                            of Non-recurring items as Other adjustments.(h)
                            Deferred
                            tax effects of changes to software license
                            agreement.(i)
                            Reclassification
                            of debt forgiveness as other income and the related income
                            tax
                            effects.(j)
                            Reduction
                            in EPS from net effect of above
                            revisions.
  F-30
 Table
                    of Contents
  **Findex.com,
                            Inc.****CONSOLIDATED
                            STATEMENTS OF OPERATIONS****Year
                            Ended December 31, 2003****As
                            Previously Reported**
                        
                        
                        **As
                            Restated**
                        
                        
                        **Change**Revenues,
                            net of reserves and allowances
                        $
                        4,390,757
                        
                        $
                        4,560,911
                        
                        $
                        170,154
                        
                        (a)Cost
                            of sales
                        
                        1,284,608
                        
                        
                        1,327,983
                        
                        
                        43,375
                        
                        (b)Gross
                            profit
                        
                        
                        
                        
                        
                        3,106,149
                        
                        
                        3,232,928
                        
                        
                        126,779Operating
                            expenses:Sales
                            and marketing
                        
                        
                        
                        
                        
                        813,438
                        
                        
                        815,954
                        
                        
                        2,516
                        
                        (c)General
                            and administrative
                        
                        
                        
                        
                        
                        1,751,235
                        
                        
                        1,751,234
                        
                        
                        (1
                        )
                        (d)Nonrecurring
                            items
                        
                        
                        
                        
                        
                        (583,628
                        )
                        
                        ---
                        
                        
                        583,628
                        
                        (e)Bad
                            debt expense
                        
                        
                        
                        
                        
                        23,208
                        
                        
                        23,208
                        
                        
                        ---Amortization
                            expense
                        
                        
                        
                        
                        
                        45,157
                        
                        
                        504,427
                        
                        
                        459,270
                        
                        (f)Depreciation
                            expense
                        
                        
                        
                        
                        
                        43,224
                        
                        
                        43,224
                        
                        
                        ---Total
                            operating expenses
                        
                        
                        
                        
                        
                        2,092,634
                        
                        
                        3,138,047
                        
                        
                        1,045,413Earnings
                            from operations
                        
                        1,013,515
                        
                        
                        94,881
                        
                        
                        (918,634
                        )Interest
                            income
                        
                        9,727
                        
                        
                        9,727
                        
                        
                        ---Other
                            income
                        
                        7,977
                        
                        
                        1,458,121
                        
                        
                        1,450,144
                        
                        (e)Nonrecurring
                            items
                        
                        866,516
                        
                        
                        ---
                        
                        
                        (866,516
                        )
                        (e)Loss
                            on disposition of assets
                        
                        (2,659
                        )
                        
                        (2,659
                        )
                        
                        ---Interest
                            expense
                        
                        (87,144
                        )
                        
                        (87,144
                        )
                        
                        ---Income
                            before income taxes
                        
                        
                        
                        
                        
                        1,807,932
                        
                        
                        1,472,926
                        
                        
                        (335,006
                        )Provision
                            for income taxes
                        
                        33,567
                        
                        
                        226,461
                        
                        
                        192,894
                        
                        (g)Net
                            income
                        
                        
                        
                        
                        $
                        1,841,499
                        
                        $
                        1,699,387
                        
                        $
                        (142,112
                        )Basic
                            earnings per share:Basic
                        
                        
                        
                        
                        $
                        0.09
                        
                        $
                        0.08
                        
                        $
                        (0.01
                        )
                        (h)Diluted
                        
                        
                        
                        
                        $
                        0.08
                        
                        $
                        0.08
                        
                        $
                        ---Weighted
                            average shares outstanding:Basic
                        
                        
                        
                        
                        
                        20,411,438
                        
                        
                        20,411,438
                        
                        
                        ---Diluted
                        
                        
                        
                        
                        
                        22,365,438
                        
                        
                        22,365,438
                        
                        
                        ---(a)
                            Reclassification
                            of adjustment to reserve for rebates from sales and marketing
                            expenses.(b)
                            Reclassification
                            of fulfillment expense from sales and marketing
                            expenses.(c)
                            Reclassification
                            of adjustment to reserve for rebates to revenues and
                            fulfillment expense
                            to cost of sales.(d)
                            Rounding
                            difference.(e)
                            Reclassification
                            of Nonrecurring items as Other income.(f)
                            Increase
                            from changing software license agreement from indefinite
                            life to 10 year
                            life.(g)
                            Deferred
                            tax effects of changes to software license
                            agreement.(h)
                            Reduction
                            in EPS from net effect of above
                            revisions.
  F-31
 Table
                    of Contents
 **Findex.com,
                            Inc.****CONSOLIDATED
                            STATEMENTS OF CASH FLOWS****Year
                            Ended December 31, 2004****As
                            Previously Reported**
                        
                        
                        **As
                            Restated**
                        
                        
                        **Change**Cash
                            flows from operating activities:Cash
                            received from customers
                        
                        
                        
                        
                        $
                        5,062,396
                        
                        $
                        5,062,396
                        
                        $
                        ---Cash
                            paid to suppliers and employees
                        
                        
                        
                        
                        
                        (5,673,088
                        )
                        
                        (5,673,088
                        )
                        
                        ---Other
                            operating receipts
                        
                        
                        
                        
                        
                        9,276
                        
                        
                        9,276
                        
                        
                        ---Interest
                            paid
                        
                        
                        
                        
                        
                        (37,928
                        )
                        
                        (37,928
                        )
                        
                        ---Interest
                            received
                        
                        
                        
                        
                        
                        1,378
                        
                        
                        1,378
                        
                        
                        ---Income
                            taxes (paid) refunded
                        
                        
                        
                        
                        
                        (5,702
                        )
                        
                        (5,702
                        )
                        
                        ---Net
                            cash (used) by operating activities
                        
                        
                        
                        
                        
                        (643,668
                        )
                        
                        (643,668
                        )
                        
                        ---Cash
                            flows from investing activities:Acquisition
                            of property, plant and equipment
                        
                        
                        
                        
                        
                        (58,247
                        )
                        
                        (58,247
                        )
                        
                        ---Software
                            development costs
                        
                        
                        
                        
                        
                        (692,063
                        )
                        
                        (692,063
                        )
                        
                        ---Website
                            development costs
                        
                        
                        
                        
                        
                        (31,838
                        )
                        
                        (31,838
                        )
                        
                        ---Deposits
                            refunded
                        
                        
                        
                        
                        
                        40,545
                        
                        
                        35,216
                        
                        
                        (5,329
                        )
                        (a)Net
                            cash (used) by investing activities
                        
                        
                        
                        
                        
                        (741,603
                        )
                        
                        (746,932
                        )
                        
                        (5,329
                        )Cash
                            flows from financing activities:Payments
                            made on line of credit, net
                        
                        
                        
                        
                        
                        (20,935
                        )
                        
                        (20,935
                        )
                        
                        ---Payments
                            made on long-term notes payable
                        
                        
                        
                        
                        
                        (227,727
                        )
                        
                        (227,727
                        )
                        
                        ---Proceeds
                            from convertible notes payable
                        
                        
                        
                        
                        
                        240,000
                        
                        
                        240,000
                        
                        
                        ---Proceeds
                            from issuance of stock and warrants
                        
                        
                        
                        
                        
                        1,750,000
                        
                        
                        1,750,000
                        
                        
                        ---Stock
                            offering costs paid
                        
                        
                        
                        
                        
                        (51,047
                        )
                        
                        (51,047
                        )
                        
                        ---Net
                            cash provided by financing activities
                        
                        
                        
                        
                        
                        1,690,291
                        
                        
                        1,690,291
                        
                        
                        ---Net
                            increase in cash and cash equivalents
                        
                        305,020
                        
                        
                        299,691
                        
                        
                        (5,329
                        )Cash
                            and cash equivalents, beginning of year
                        
                        36,339
                        
                        
                        41,668
                        
                        
                        5,329
                        
                        (a)Cash
                            and cash equivalents, end of year
                        
                        
                        
                        
                        $
                        341,359
                        
                        $
                        341,359
                        
                        $
                        ---Reconciliation
                            of net income to cash flows from operating activities:Net
                            income
                        
                        
                        
                        
                        $
                        2,217,669
                        
                        $
                        1,255,725
                        
                        $
                        (961,944
                        )
                        (b)Adjustments
                            to reconcile net income to net cash(used)
                            by operating activities:Software
                            development costs amortized
                        
                        
                        
                        
                        
                        575,481
                        
                        
                        575,481
                        
                        
                        ---Stock
                            and warrants issued for services
                        
                        
                        
                        
                        
                        178,929
                        
                        
                        178,929
                        
                        
                        ---Rebate
                            reserve adjustment
                        
                        
                        
                        
                        
                        266,301
                        
                        
                        (142,039
                        )
                        
                        (408,340
                        )
                        (c)Provision
                            for bad debts
                        
                        
                        
                        
                        
                        22,778
                        
                        
                        22,778
                        
                        
                        ---Depreciation
                            & amortization
                        
                        
                        
                        
                        
                        60,821
                        
                        
                        564,328
                        
                        
                        503,507
                        
                        (d)Loss
                            on disposal of property, plant and equipment
                        
                        
                        
                        
                        
                        141
                        
                        
                        141
                        
                        
                        ---Debt
                            forgiveness
                        
                        
                        
                        
                        
                        ---
                        
                        
                        (1,002,090
                        )
                        
                        (1,002,090
                        )
                        (e)Extraordinary
                            item
                        
                        
                        
                        
                        
                        (1,002,090
                        )
                        
                        ---
                        
                        
                        1,002,090
                        
                        (e)Change
                            in assets and liabilities:(Increase)
                            in accounts receivable
                        
                        
                        
                        
                        
                        (223,794
                        )
                        
                        (223,794
                        )
                        
                        ---Decrease
                            in inventories
                        
                        
                        
                        
                        
                        38,600
                        
                        
                        38,600
                        
                        
                        ---(Increase)
                            in refundable income taxes
                        
                        
                        
                        
                        
                        (2,948
                        )
                        
                        (2,948
                        )
                        
                        ---(Increase)
                            in prepaid expenses
                        
                        
                        
                        
                        
                        (84,211
                        )
                        
                        (84,211
                        )
                        
                        ---(Decrease)
                            in accrued royalties
                        
                        
                        
                        
                        
                        (324,360
                        )
                        
                        (324,360
                        )
                        
                        ---(Decrease)
                            increase in accounts payable
                        
                        
                        
                        
                        
                        (271,198
                        )
                        
                        (271,198
                        )
                        
                        ---(Decrease)
                            in income taxes payable
                        
                        
                        
                        
                        
                        (1,270
                        )
                        
                        (1,270
                        )
                        
                        ---(Decrease)
                            in deferred taxes
                        
                        
                        
                        
                        
                        (1,351,518
                        )
                        
                        (1,017,343
                        )
                        
                        334,175
                        
                        (f)(Decrease)
                            in other liabilities
                        
                        
                        
                        
                        
                        (742,999
                        )
                        
                        (210,397
                        )
                        
                        532,602
                        
                        (c)Net
                            cash (used) by operating activities
                        
                        
                        
                        
                        $
                        (643,668
                        )
                        $
                        (643,668
                        )
                        $
                        ---(a)
                            Reclassify
                            cash held for repurchase of invoices assigned to factor
                            as corresponding
                            liability classified
                            as current liability.(b)
                            Net
                            changes made to net income.(c)Correction
                            in classification of adjustment to reserve for rebates
                            from adjustment to
                            operating expense to adjustment
                            to revenue.(d)Additional
                            amortization from change to economic life of software
                            license
                            agreement.(e)Reclassification
                            from Extraordinary item to Debt forgiveness.(f)Decrease
                            from tax effects of recognizing additional
                            amortization.
  F-32
 Table
                    of Contents
 **Findex.com,
                            Inc.****CONSOLIDATED
                            STATEMENTS OF CASH FLOWS****Year
                            Ended December 31, 2003****As
                            Previously Reported**
                        
                        
                        **As
                            Restated**
                        
                        
                        **Change**Cash
                            flows from operating activities:Cash
                            received from customers
                        
                        
                        
                        
                        $
                        4,228,649
                        
                        $
                        4,228,649
                        
                        $
                        ---Cash
                            paid to suppliers and employees
                        
                        
                        
                        
                        
                        (3,364,838
                        )
                        
                        (3,364,838
                        )
                        
                        ---Other
                            operating receipts
                        
                        
                        
                        
                        
                        7,977
                        
                        
                        7,977
                        
                        
                        ---Interest
                            paid
                        
                        
                        
                        
                        
                        (43,203
                        )
                        
                        (43,203
                        )
                        
                        ---Interest
                            received
                        
                        
                        
                        
                        
                        9,727
                        
                        
                        9,727
                        
                        
                        ---Income
                            taxes refunded
                        
                        
                        
                        
                        
                        43,909
                        
                        
                        43,909
                        
                        
                        ---Net
                            cash provided by operating activities
                        
                        
                        
                        
                        
                        882,221
                        
                        
                        882,221
                        
                        
                        ---Cash
                            flows from investing activities:Acquisition
                            of property, plant and equipment
                        
                        
                        
                        
                        
                        (18,433
                        )
                        
                        (18,433
                        )
                        
                        ---Software
                            development costs
                        
                        
                        
                        
                        
                        (659,486
                        )
                        
                        (659,486
                        )
                        
                        ---Website
                            development costs
                        
                        
                        
                        
                        
                        (35,684
                        )
                        
                        (35,684
                        )
                        
                        ---Deposits
                            paid
                        
                        
                        
                        
                        
                        (500
                        )
                        
                        (100,854
                        )
                        
                        (100,354
                        )
                        (a)Net
                            cash (used) by investing activities
                        
                        
                        
                        
                        
                        (714,103
                        )
                        
                        (814,457
                        )
                        
                        (100,354
                        )Cash
                            flows from financing activities:Proceeds
                            from line of credit, net
                        
                        
                        
                        
                        
                        14,657
                        
                        
                        14,657
                        
                        
                        ---Payments
                            made on long-term notes payable
                        
                        
                        
                        
                        
                        (79,404
                        )
                        
                        (79,404
                        )
                        
                        ---Net
                            cash (used) by financing activities
                        
                        
                        
                        
                        
                        (64,747
                        )
                        
                        (64,747
                        )
                        
                        ---Net
                            increase in cash and cash equivalents
                        
                        103,371
                        
                        
                        3,017
                        
                        
                        (100,354
                        )
                        (a)Cash
                            and cash equivalents, beginning of year
                        
                        (67,032
                        )
                        
                        38,651
                        
                        
                        105,683
                        
                        (c)Cash
                            and cash equivalents, end of year
                        
                        
                        
                        
                        $
                        36,339
                        
                        $
                        41,668
                        
                        $
                        5,329
                        
                        (b)Reconciliation
                            of net income to cash flows from operating activities:Net
                            income
                        
                        
                        
                        
                        $
                        1,841,499
                        
                        $
                        1,699,387
                        
                        $
                        (142,112
                        )Adjustments
                            to reconcile net income to net cashprovided
                            by operating activities:Software
                            development costs amortized
                        
                        
                        
                        
                        
                        355,282
                        
                        
                        355,282
                        
                        
                        ---Stock
                            and warrants issued for services
                        
                        
                        
                        
                        
                        52,750
                        
                        
                        52,750
                        
                        
                        ---Rebate
                            reserve adjustment
                        
                        
                        
                        
                        
                        ---
                        
                        
                        (124,262
                        )
                        
                        (124,262
                        )
                        (g)Provision
                            for bad debts
                        
                        
                        
                        
                        
                        23,208
                        
                        
                        23,208
                        
                        
                        ---Depreciation
                            & amortization
                        
                        
                        
                        
                        
                        88,381
                        
                        
                        547,651
                        
                        
                        459,270
                        
                        (d)Loss
                            on disposal of property, plant and equipment
                        
                        
                        
                        
                        
                        2,659
                        
                        
                        2,659
                        
                        
                        ---Debt
                            forgiveness
                        
                        
                        
                        
                        
                        ---
                        
                        
                        (650,000
                        )
                        
                        (650,000
                        )
                        (e)Non-cash
                            non-recurring item
                        
                        
                        
                        
                        
                        (650,000
                        )
                        
                        ---
                        
                        
                        650,000
                        
                        (e)Change
                            in assets and liabilities:(Increase)
                            in accounts receivable
                        
                        
                        
                        
                        
                        (160,770
                        )
                        
                        (160,770
                        )
                        
                        ---Decrease
                            in inventories
                        
                        
                        
                        
                        
                        144,100
                        
                        
                        144,100
                        
                        
                        ---Decrease
                            in refundable income taxes
                        
                        
                        
                        
                        
                        43,909
                        
                        
                        43,909
                        
                        
                        ---Decrease
                            in prepaid expenses
                        
                        
                        
                        
                        
                        20,869
                        
                        
                        20,869
                        
                        
                        ---(Decrease)
                            in accrued royalties
                        
                        
                        
                        
                        
                        (631,607
                        )
                        
                        (631,607
                        )
                        
                        ---Increase
                            in accounts payable
                        
                        
                        
                        
                        
                        81,793
                        
                        
                        81,793
                        
                        
                        ---(Decrease)
                            in deferred taxes
                        
                        
                        
                        
                        
                        (33,567
                        )
                        
                        (226,463
                        )
                        
                        (192,896
                        )
                        (f)(Decrease)
                            in other liabilities
                        
                        
                        
                        
                        
                        (296,285
                        )
                        
                        (296,285
                        )
                        
                        ---Net
                            cash provided by operating activities
                        
                        
                        
                        
                        $
                        882,221
                        
                        $
                        882,221
                        
                        $
                        ---(a)Reclassify
                            cash held by merchant banker as a deposit from restricted
                            cash.(b)Reclassify
                            cash held for repurchase of invoices assigned to factor
                            as corresponding
                            liability classified as a current liability.(c)Net
                            cash reclassification.(d)Additional
                            amortization from change to economic life of software
                            license
                            agreement.(e)Reclassification
                            of non-cash non-recurring item as debt forgiveness.(f)Decrease
                            from tax effects of recognizing additional
                            amortization.(g)
                          Adjustment from reassessment of rebate reserve
                          adequacy.
   F-33
 Table
                    of Contents
  **ITEM
            8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE.**
  There
            were no reportable events under this Item 8 during the year ended December
            31,
            2004.
  **ITEM
            8A. CONTROLS AND PROCEDURES.**
  (a)
            Formation
            of Disclosure Controls and Procedures Officer Committee
  Our
                  Disclosure Controls and Procedures Officer Committee (the “Disclosure Policy
                  Committee”) was formed in September 2002 and reports directly to our Chief
                  Executive Officer and Chief Financial Officer. The Disclosure Policy
                  Committee
                  has implemented disclosure controls and procedures that meet the
                  standards
                  established by Rule 13a-15 of the Exchange Act. These controls
                  and procedures
                  have been reviewed and adopted by the audit committee of our board
                  of
                  directors.
  **Disclosure
                  Controls and Procedures**
 
 The
              Disclosure Policy Committee is primarily responsible for establishing
              and
              maintaining disclosure controls and procedures designed to ensure that
              the
              information required to be disclosed in our reports filed or submitted
              under the
              Securities Exchange Act of 1934, as amended, is recorded, processed,
              summarized
              and reported in a timely manner as specified in the rules and forms
              set forth by
              the United States SEC. These controls and procedures are designed to
              ensure that
              the information required to be disclosed in our reports is accumulated
              and
              communicated to our management, including our principal executive and
              principal
              financial officers, or other persons performing similar functions,
              as
              appropriate to allow timely decisions regarding required
              disclosure.
 
 **Internal
              Control over
              Financial Reporting**
 
 The
              Disclosure Policy Committee is also responsible for establishing and
              maintaining
              our internal controls over financial reporting. These controls are
              effectuated
              by our board of directors, management and other company personnel,
              to provide
              reasonable assurance regarding the reliability of our financial reporting
              and
              the preparation of our financial statements for external purposes in
              accordance
              with Generally Accepted Accounting Principles. These internal controls
              and
              procedures pertain to: (i) the maintenance of reasonably detailed records
              that
              accurately and fairly reflect transactions with respect to and the
              disposition
              of our assets; (ii) provide reasonable assurance that transactions
              are recorded
              as necessary so as to permit the preparation of financial statements
              in
              accordance with Generally Accepted Accounting Principles; (iii) provide
              reasonable assurance that receipts and expenditures are being made
              in accordance
              with the authorization of our board of directors and management; and
              (iv)
              provide reasonable assurance regarding the prevention or timely detection
              of the
              unauthorized acquisition, use or disposition of our assets, that could
              have a
              material effect on our financial statements.
  (b)
              Evaluation of Disclosure Controls and Procedures and Annual Report
              on Internal
              Control over Financial Reporting
  The
              Disclosure Policy Committee meets quarterly within one week of the
              last day of
              the period in which a given report is due. Members provide information
              that is
              documented in the Quarterly Control and Procedures Report for the period
              in
              which a quarterly 10-QSB or annual 10-KSB report is due. This report
              contains
              attestations and documentation in regard to the following:
  •
                          The
                                fact that internal controls have been reviewed as
                                of the end of the period covered by a given
                                report;•
                          Any
                                concerns regarding weaknesses in internal
                                control;•
                          Any
                                concerns relating to events that may require
                                disclosure;•
                          Any
                                concerns relating to internal fraud/defalcation;•
                          Potential
                                material losses;•
                          New
                                off-balance sheet arrangements;•
                          Material
                                amounts not reflected on the general
                                ledger.
  -37-
 Table
                      of Contents
  The
              Quarterly Control and Procedures Report is completed, signed and presented
              to
              the CEO and CFO prior to completion of the first draft of each 10-QSB
              and
              10-KSB. Because material issues may occur between regularly scheduled
              quarterly
              meetings, this report is to be generated by the disclosure policy appropriate
              officers at anytime warranted. The CEO and CFO will consult with our
              Disclosure
              Policy Committee to determine any action that is necessary.
 
 Our
              CEO
              and CFO have evaluated the effectiveness of the design and operation
              of our
              disclosure controls and procedures (as defined in Rule 13a-15(e) under
              the Exchange Act) as of the end of the fiscal quarter covered
              by this
              annual report on Form 10-KSB/A. Based on this evaluation, our CEO and
              CFO have
              concluded that these disclosure controls and procedures are effective
              and
              designed to ensure that the information required to be disclosed in
              our reports
              filed or submitted under the Exchange, is recorded, processed,
              summarized
              and reported within the requisite time periods.
 
 Our
              CEO
              and CFO have evaluated the effectiveness of the design and operation
              of our
              internal control over financial reporting (as defined in Rule 13a-15(f)
              under
              the Exchange Act) as of the end of the fiscal year covered by
              this annual
              report on Form 10-KSB/A. Based on this evaluation, our CEO and CFO
              have
              concluded that these internal controls over financial reporting are
              effective
              and provide reasonable assurance regarding the reliability of our financial
              reporting and the preparation of our financial statements for external
              purposes
              in accordance with Generally Accepted Accounting Principles.
 
 During
              the course of their evaluation our CEO and CFO did not discover any
              fraud
              involving management or any other personnel who play a significant
              role in our
              disclosure controls and procedures or internal controls over financial
              reporting. Furthermore, because there were no significant deficiencies
              and/or
              material weaknesses discovered no remedial measures were necessary
              or taken
              during the period covered by this report to correct any such
              deficiencies.
 
 (c) Changes
              in Internal Control over Financial Reporting
 
 No
              changes in our disclosure controls and procedures, internal controls
              over
              financial reporting or other factors have occurred during the fiscal
              quarter
              covered by this report that would materially affect or be reasonably
              likely to
              materially affect our disclosure controls and procedures or internal
              controls
              over financial reporting.
 **ITEM
            8B. OTHER INFORMATION.**
 There
              were no reportable events under this Item 8B during the year ended
              December 31,
              2004.
   **PART
            III**
  **ITEM
            9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
            WITH
            SECTION 16(****a****)
            OF THE EXCHANGE ACT.**
 
 Our
            directors and executive officers and their ages as of June 7, 2005
            were as
            follows:
  Name
                  
                  Age
                  
                  PositionSteven
                      Malone
                  
                  38
                  
                  Director,
                      Chairman of the Board and PresidentHenry
                      M. Washington, Ph.D.
                  
                  61
                  
                  DirectorJohn
                      A. Kuehne, CA
                  
                  48
                  
                  DirectorKirk
                      R. Rowland, CPA
                  
                  45
                  
                  Director
                      and Chief Financial OfficerWilliam
                      Terrill
                  
                  48
                  
                  Chief
                      Technology OfficerBrittian
                      Edwards
                  
                  42
                  
                  Vice
                      President, CBA Sales and LicensingChad
                      Grosse-Rhode
                  
                  35
                  
                  Vice
                      President, Sales and Marketing
  -38-
 Table
                of Contents
 ****
 **Steven
            Malone - Chairman of the Board of Directors, President and Chief
            Executive
            Officer**
 Mr.
              Malone has served as our President and Chief Executive Officer since
              March 2001
              and as a director and Chairman of the Board since February 2002. Between
              July
              2000 and March 2001, Mr. Malone was Senior Vice President and between
              June 1999
              and July 2000 he was a Vice President. Mr. Malone possesses over seventeen
              years
              of experience in the computer industry, with the last eleven focused
              on software
              sales. As a National Account Manager from 1992 to 1996 for Grolier
              Interactive,
              he was responsible for their largest retail and distribution accounts.
              As
              Director of Corporate Sales from 1996 to 1998 for Software Publishing
              Corporation, he was responsible for the on-going sales growth of premiere
              corporate products, such as the award winning Harvard Graphics, as
              well as the
              introduction of several new products to the corporate marketplace.
              As Director
              of Sales from 1998 to 1999 for InfoUSA, he was responsible for sales
              and
              marketing of InfoUSA’s products to retail, distribution, OEM and corporate
              accounts.
  **Henry
              M.
              Washington, Ph.D. - Director**
  Dr.
              Washington has served as one of our directors since December 2000.
              He is also
              presently President of Wren Enterprises Corporation, a position that
              he has held
              since January 2005 .
              Wren
              Enterprises is a private manufacturing solutions company working with
              automotive, non-automotive, agricultural markets, utilities and government
              agencies providing plastic, metal and fabrication. Prior to his position
              with
              Wren, Dr. Washington served as the interim President for Jamestown
              Plastic
              Molders Corporation from January 2001 to April 2004. During the year
              of 2000,
              Dr. Washington served as Managing Director of Rilas & Rogers, LLC, an
              international consulting firm located in Detroit. Dr. Washington has
              held
              short-term assignments with the U.S. Department of Commerce, where
              he was
              Executive Director from 1995 to 1998 of the
              Department’s Minority Business Opportunity Committee. He currently serves on
              several national organizations including the American Association of
              Christian
              Counselors, The Black Caucus International Think Tank, and the International
              Trade and Development Organization dealing with global security issues.
              Dr.
              Washington holds a Bachelor of Management and Metaphysics degree, a
              Masters of
              Metaphysics and Theology degree, and a Doctorate degree in Metaphysical
              Counseling, in each case from the University of Metaphysics, and in
              each case
              which are accredited by The International Metaphysical Ministry for
              use by its
              Ministry and for membership in The American Metaphysical Doctors Association.
 **John
                A.
                Kuehne, CA - Director**
  Mr.
                Kuehne has served as one of our directors since December 2000. He
                is also
                currently a management consultant and the President of SmallCap Corporate
                Partners Inc., ( www.smallcap.ca ),
                a
                corporate finance and investor communications advisory firm for microcap
                public
                companies. He has held this position since August 2003. Prior to
                SmallCap, Mr.
                Kuehne served as a management consultant with Alliance Corporate
                Services Inc.
                from July 2000 through to June 2003. Mr. Kuehne worked in finance
                and accounting
                for Deloitte & Touche for eight years. He also has industry experience,
                including over seven years with Doman Industries Limited (1990 to
                1999), a large
                private Canadian forest products company, where he eventually became
                Chief
                Financial Officer. As the CFO of Doman Industries, Mr. Kuehne gained
                practical
                experience in corporate finance and mergers and acquisitions, completing
                a US
                $125 million senior note issue through Bear Stearns and the $140
                million
                acquisition of Pacific Forest Products. Mr. Kuehne holds a Bachelor
                of Commerce
                degree from the University of Alberta (1984) and a Masters of Management
                from
                the J.L.Kellogg Graduate School of Management at Northwestern University
                (1990).
                From June 2000 to May 2004 he served as a director of Prospector
                Consolidated
                Resources Inc., a Canadian public company. From January 2003 to November
                2004 he
                served as a director of Beau Pre Explorations Ltd., also a Canadian
                public
                company. Mr. Kuehne qualified as a Canadian Chartered Accountant
                in 1983 and as
                an American Certified Public Accountant in 1985.
  **Kirk
                R.
                Rowland, CPA - Chief Financial Officer**
  Mr.
                Rowland has served as our Chief Financial Officer and as one of
                our directors since April 2002. He served as our Vice President
                of Finance
                from March 2001 to April 2002, and as our Director of Finance from
                December 1999
                through March 2001. Mr. Rowland has over seventeen years of experience
                in public
                accounting working in a multitude of industries, including insurance,
                manufacturing, and agriculture. Most recently, and from 1992 to 1999
                he was a
                partner in Manning & Associates, P.C. a local Nebraska accounting firm. From
                1984 to 1988, Mr. Rowland was a Senior Staff Accountant with KMG
                Main Hurdman
                (now KPMG), an international accounting firm, and from 1988 to 1992
                he was an
                Audit Supervisor with Sommer, Magnuson, & Dawson, P.C.
  -39-
 Table
                    of Contents
 ****
 **William
                Terrill - Chief Technology Officer**
  Mr.
                Terrill rejoined us in July 2002 as our Chief Technology Officer
                after having
                been involved with us from July 1999 to July 2000. He has
                over 25 years of
                experience managing software divisions and technology efforts for
                us, The
                Learning Company, Mindscape, and The Software Toolworks. As Vice
                President of
                the Parsons Church Division for The Learning Company, from January
                1999 to July
                1999, Mr. Terrill managed a 30% annual revenue increase and shared
                responsibilities in the transaction that resulted in our acquiring
                that
                division. Mr. Terrill was the Senior Vice President Reference Products
                Division
                for Mindscape from 1989 to 1995 managing revenues exceeding $14 million.
                He has
                extensive experience managing international software development
                teams in China,
                Singapore, United Kingdom, India, and Russia. Mr. Terrill has experience
                with
                joint ventures, spin-offs, mergers, IPOs, and corporate acquisitions.
                In
                addition, Mr. Terrill has lead software product marketing teams and
                content/media acquisition efforts for over ten years. As
                a
                consultant from 1996 to 1998, Mr. Terrill has extensive experience
                leading
                large-scale product development and information technology efforts
                for Navistar,
                Nalco Chemical, American Express, Motorola, and IBM Global Services.
                From July
                2000 to July 2002, Mr. Terrill served as the IT Integration Program
                Manager for
                Blue Diamond Joint Venture between Ford Motor Company and International
                Truck
                and Engine Corporation.
 **Brittian
              Edwards - Vice President of CBA Sales and Licensing**
  Mr.
            Edwards has served as our Vice President of CBA Sales and Licensing since
            July
            2004. Mr. Edwards served as our Vice President of Sales from April 2002
            to July
            2004 and director of Christian Booksellers Association Sales from July
            1999 to
            April 2002. Mr. Edwards has been in the Christian Booksellers
            Association marketplace for more than 17 years. He began his career
            in 1988
            with LifeWay Christian Resources as LifeWay Christian Stores retail manager.
            He
            then worked successfully for Genesis Marketing Group from 1994 to 1995
            as a
            Sales Manager for Texas, Oklahoma, Louisiana and New Mexico. From there
            he
            served as a Product Manager for the largest Christian distributor, Spring
            Arbor,
            which is now owned by Ingram Book Group. He left Spring Arbor as National
            Sales
            Manager in 1988 to become the National Sales Manager for Parsons Technology,
            then owned by Broderbund.
  **Chad
            Grosse-Rhode - Vice President of Sales and Marketing**
  Mr.
            Grosse-Rhode joined us in August 2004 as our Vice President of
            Sales and
            Marketing. Mr. Grosse-Rhode was most recently with Summitsoft Corporation,
            (www.summisoftcorp.com), from July 2003 to July 2004, where he served
            as the
            Vice President of Sales and Marketing. Summitsoft produces a full line
            of small
            business software products, which are available in both PC and
            Macintosh ® platforms and are sold in most major secular retail outlets. Prior to
            Summitsoft, Mr. Grosse-Rhode was General Manager of NewLeadsUSA from
            April 1995
            to June 2003, which is a subsidiary of InfoUSA. In this role, Mr. Grosse-Rhode
            managed the compilation, production, marketing and sales of multiple
            direct
            marketing databases. Mr. Grosse-Rhode has over 10 years of senior management
            experience in both sales and marketing.
  **Board
            of Directors
            Committees**
  There
              are
              currently two standing committees comprised of members of our board
              of
              directors. These include the audit committee and the compensation
              committee.
 
 Since
              December 2000, we have had an audit committee. The current members
              of our audit
              committee include John A. Kuehne and Dr. Henry M. Washington. We currently
              have
              one member, John A. Kuehne, who is a “financial expert” (as defined in
              Regulation 228.401(e)(1)(i)(A) of Regulation S-B) serving on our audit
              committee. Mr. Kuehne and Dr. Washington both qualify as “independent” directors
              under Item 7(d)(3)(iv) of Schedule 14A of the Securities Exchange Act
              of
              1934.
 
 -40-
 Table
                  of Contents
  Since
              July 2003, there have been two members on our board of directors standing
              compensation committee. The current members of our compensation committee
              include Dr. Henry M. Washington and John A. Kuehne.
  The
              fact
              that we currently have four members on our board of directors, and
              two members
              on each of our board of directors’ audit and compensation committees, could
              result in a tie vote on company matters, including those involving
              highly
              material corporate governance issues. We do not currently have any
              duly adopted
              resolution procedures in place that would provide a means for resolving
              any
              stalemate that might occur in this regard, but are currently in the
              process of
              considering potential alternative procedures in order to be prepared
              for having
              to face such a potential situation.
 **Disclosure
                Policy
                Committee**
  Since
              September 2002, we have had a Disclosure Controls and
              Procedure
              Officer Committee (the “Disclosure Policy Committee). The current members of the
              Disclosure Policy Committee include Steven Malone, John A. Kuehne,
              and Kirk R.
              Rowland. The Disclosure Policy Committee has implemented disclosure
              controls and
              procedures that meet the standards established by Rule 13a-15 of the
              Securities
              Exchange Act.
 
 **Code
            of
            Ethics**
  We
            have
            adopted the Code of Ethics attached as Exhibit 14.1 to this Form 10-KSB/A
            for our senior financial officers and the principal executive
            officer.
  **Compliance
            with
            Section 16(a)**
  Section
              16(a) of the Exchange Act requires our directors and executive officers,
              and
              persons who own more than ten percent of a registered class of our
              equity
              securities, to file with the SEC initial reports of ownership and reports
              of
              changes in ownership of our common stock and other equity securities
              of ours.
              Officers, directors and greater than ten percent stockholders are required
              by
              the SEC’s regulations to furnish us with copies of all Section 16(a) forms
              they
              filed.
 The
            following table sets for the compliance reporting under Section 16(a)
            during the
            last fiscal year.
 
 Number
                      of Late
                    Reports
                  
                  Number
                      of
                    Transactions
                      Not
                    Timely
                      Reported
                  
                  Failure
                      to
                    FileHenry
                      M. Washington
                  1
                  
                  1
                  
                  ---William
                      Terrill
                  1
                  
                  1
                  
                  ---Barron
                    Partners, LP
                  ---
                  
                  ---
                  
                  2
  **ITEM
              10. EXECUTIVE COMPENSATION.**
 **SUMMARY
              COMPENSATION TABLE**
  The
              following table sets forth the total compensation paid to each of our
              executive
              officers who earned compensation of $100,000 or more during any such
              year.
              Steven Malone has served as our President and Chief Executive Officer
              since
              March 2001. William Terrill has served as our Chief Technology Officer
              since
              July 2002. Kirk R. Rowland has served as our Chief Financial Officer
              and
              director since April 2002. No other individuals employed by us earned
              a salary
              and bonus in excess of $100,000 during 2004.
 Long
                      Term CompensationAnnual
                      Compensation
                  
                  AwardsRestricted
                  
                  SecuritiesStock
                  
                  UnderlyingName
                      and Principal Position
                  
                  Year
                  
                  Salary
                  
                  Bonus
                  
                  Awards
                  
                  Options/SARs
                      (#)Steven
                      Malone,
                  
                  2004
                  
                  $150,000
                  
                  $22,192
                  
                  -0-
                  
                  -0-President
                      and Chief Executive
                  
                  2003
                  
                  $150,000
                  
                  $18,079
                  
                  -0-
                  
                  -0-Officer
                  
                  2002
                  
                  $150,000
                  
                  $2,203
                  
                  $37,306
                  
                  -0-William
                      Terrill
                  
                  2004
                  
                  $150,000
                  
                  $22,192
                  
                  -0-
                  
                  -0-Chief
                      Technology Officer
                  
                  2003
                  
                  $150,000
                  
                  $18,079
                  
                  $14,536
                  
                  500,0002002
                  
                  $72,115
                  
                  $2,203
                  
                  -0-
                  
                  500,000Kirk
                      R. Rowland
                  
                  2004
                  
                  $108,846
                  
                  $22,192
                  
                  -0-
                  
                  -0-Chief
                      Financial Officer
                  
                  2003
                  
                  $82,306
                  
                  $18,079
                  
                  -0-
                  
                  -0-2002
                  
                  $80,000
                  
                  -0-
                  
                  $31,807
                  
                  -0-
  -41-
 Table
                of Contents
  **INFORMATION
            CONCERNING STOCK OPTIONS**
  Our
              Stock
              Incentive Plan, adopted in 1999, authorizes the issuance of various
              forms of
              stock-based awards including incentive and nonqualified stock options,
              stock
              appreciation rights attached to stock options, and restricted stock
              awards to
              our directors, officers and other key employees. In accordance with
              the terms of
              the Stock Incentive Plan, stock options are granted at an exercise
              price as
              determined by our board of directors at the time any such option is
              granted but
              which may not be less than the par value of our common shares ($0.001).
 
 We
              did
              not grant stock options during the fiscal year ended December 31, 2004.
              No
              executive exercised any stock options during the fiscal year 2004.
  **Option/SAR
              Grants in Last Fiscal Year**
 
 Name
                  
                  Number
                      of Securities
                    Underlying
                      Options/SARs
                    Granted
                      (#)
                  
                  Percent
                      of Total
                    Options/SARs
                      Granted to
                    Employees
                      in Fiscal Year
                  
                  Exercise
                    or
                      Base
                    Price
                      ($/Sh)
                  
                  Expiration
                    DateSteven
                      Malone
                  
                  -0-
                  
                  -0-
                  
                  -0-
                  
                  N/AWilliam
                      Terrill
                  
                  -0-
                  
                  -0-
                  
                  -0-
                  
                  N/AKirk
                      R. Rowland
                  
                  -0-
                  
                  -0-
                  
                  -0-
                  
                  N/A
 
 The
            following table sets forth the number of stock options/SARs held by the
            executive officers named in the Summary Compensation Table as of December
            31,
            2004 and the value of unexercised “in-the-money” options/SARs held which
            represents the positive difference between the exercise price and the
            market
            price at fiscal year end. No such executive exercised any options/SARs
            during
            the fiscal year 2004.
  **Aggregated
            Option/SAR Exercises in Last Fiscal Year and FY-End
            Option/SAR** **Values**
 
 Name
                  
                  Shares
                    Acquired
                      on
                    Exercise
                      (#)
                  
                  Value
                      Realized
                    ($)
                  
                  Number
                      of Unexercised
                    Options/SARs
                      at
                    Fiscal
                      Year End (#)
                  
                  Value
                      of Unexercised
                    “In-the-Money”
                      Options/
                    SARs
                      at Fiscal Year End ($)Steven
                      Malone
                  
                  -0-
                  
                  -0-
                  
                  250,000
                  
                  -0-William
                      Terrill
                  
                  -0-
                  
                  -0-
                  
                  1,000,000
                  
                  $15,000Kirk
                      R. Rowland
                  
                  -0-
                  
                  -0-
                  
                  150,000
                  
                  -0-
  -42-
 Table
                of Contents
  **DIRECTOR
              COMPENSATION**
 
 Pursuant
            to authority granted under our Article III, Section 13 of our bylaws,
            non-officer directors are entitled to such compensation as our board
            of
            directors shall from time to time determine. On July 25, 2003, we resolved
            to
            issue each of our outside directors 300,000 shares of common stock valued
            at
            $0.045 per share in lieu of cash and meeting fees, for the period April
            1, 2002
            through June 30, 2003. On June 4, 2004, we resolved to issue our outside
            directors a total of 324,074 shares of common stock valued at $0.081
            per share
            in lieu of cash and meeting fees, for the period July 1, 2003 through
            August 31,
            2004. These shares were issued on September 9, 2004. We
            have
            accrued $7,500 for our outside directors’ fees, for the period September 1, 2004
            through December 31, 2004.
  **EMPLOYMENT
              AGREEMENTS**
  Mr.
            Malone is employed pursuant to a three-year employment agreement, which
            commenced on July 25, 2003. The agreement provides for a base annual
            salary
            equal to $150,000 and an annual bonus equal to 1% of our net income.
            In the
            event Mr. Malone is terminated by us, other than for cause, we
            are required to pay him his then base salary until the later of
            (i) the
            expiration of the employment agreement or (ii) one year. Mr. Malone has
            agreed
            to refrain from competing with us for a period of one year following
            the
            termination of his employment.
 
 Mr.
            Terrill is employed pursuant to a three-year employment agreement, which
            commenced on June 7, 2002. The agreement provides for a base annual salary
            equal
            to $150,000, an annual bonus equal to 1% of our net income, 500,000 stock
            options upon his start date at an exercise price of $0.05 per share,
            and an
            additional 500,000 stock options upon the one year anniversary of his
            start date
            based on performance criteria outlined in a separate agreement. The agreement
            also included a signing cash bonus of $10,000, which was converted on
            July 25,
            2003 into 250,000 shares of common stock at the market price of $0.04
            per share,
            the value on the date the settlement was accepted. In the event Mr. Terrill
            is
            terminated by us, other than for cause, we are required
            to pay
            him his then base salary until the later of (i) the expiration of the
            employment
            agreement or (ii) one year. Mr. Terrill has agreed to refrain from competing
            with us for a period of one year following the termination of his
            employment.
 
 Mr.
            Rowland is employed pursuant to a two-year employment agreement, which
            commenced
            on July 25, 2003. The agreement provides for a base annual salary equal
            to
            $110,000 and an annual bonus equal to 1% of our net income. In the event
            Mr.
            Rowland is terminated by us, other than for cause, we are
            required to
            pay him his then base salary until the later of (i) the expiration of
            the
            employment agreement or (ii) one year. Mr. Rowland has agreed to refrain
            from
            competing with us for a period of one year following the termination
            of his
            employment.
  **ITEM
            11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED
            STOCKHOLDER MATTERS****.**
  The
            tables below set forth information regarding the beneficial ownership
            of our
            common stock as of June 7, 2005. The information in these tables
            provides
            the ownership information for:
  •
                          each
                                  person known by us to be the beneficial owner of
                                  more than 5% of our
                                  common stock;•
                          each
                                  of our directors and executive officers;
                                  and•
                          all
                                  of our directors and executive officers as a
                                  group.
  -43-
 Table
                      of Contents
  Beneficial
                  ownership has been determined in accordance with the rules and
                  regulations of
                  the SEC and includes voting or investment power with respect to
                  our common stock
                  and those rights to acquire additional shares within sixty days.
                  Unless
                  otherwise indicated, the persons named in the table below have
                  sole voting and
                  investment power with respect to the number of shares of common
                  stock indicated
                  as beneficially owned by them, except to the extent such power
                  may be shared
                  with a spouse. Common stock beneficially owned and percentage ownership
                  are
                  based on 71,769,855 shares of common stock currently outstanding
                  (reflects a
                  1-for-50 reverse stock-split of our common stock that occurred
                  in 1997 and a
                  1-for-20 reverse stock-split of our common stock that occurred
                  on March 18,
                  1998) and 23,150,000 additional shares potentially acquired within
                  sixty days.
                  The address of each person listed is in care of Findex.com, Inc.,
                  11204
                  Davenport Street, Suite 100, Omaha, Nebraska 68154.
 **Name
                        of Beneficial Owner**
                    
                    **Amount
                        and Nature of Beneficial Owner**
                    
                    **Percent
                        of Class**Barron
                        Partners, LP (1)
                    
                    43,750,000
                    
                    61.0%
 
 (1)
                  Consists
                      of warrants to acquire up to 21,875,000 shares of common stock
                      and
                      21,875,000 shares of common stock directly
                      owned.
  **Name
                      of Beneficial Owner**
                  
                  **Amount
                      and Nature of Beneficial Owner**
                  
                  **Percent
                      of Class**Steven
                      Malone (1)
                  
                  2,143,111
                  
                  3.0%Henry
                      M. Washington (2)
                  
                  1,583,025
                  
                  2.2%John
                      A. Kuehne (3)
                  
                  1,691,849
                  
                  2.4%Kirk
                      R. Rowland (4)
                  
                  1,819,111
                  
                  2.5%William
                      Terrill (5)
                  
                  1,751,127
                  
                  2.4%All
                      officers and directors
                    as
                      a group (5 persons)
                  
                  8,988,223
                  
                  12.5%
 
 (1)
                  Consists
                      of stock options to acquire up to 250,000 shares of common
                      stock, all of
                      which are presently exercisable, 1,719,111 shares of common
                      stock directly
                      owned, and stock options to acquire up to 50,000 shares of
                      common stock
                      all of which are presently exercisable and 124,000 shares of
                      common stock
                      indirectly owned through spouse.
 
 (2)
                  Consists
                      of stock options to acquire up to 175,000 shares of common
                      stock, all of
                      which are presently exercisable and 1,408,025 shares of common
                      stock
                      directly owned.
 
 (3)
                  Consists
                      of stock options to acquire up to 175,000 shares of common
                      stock, all of
                      which are presently exercisable and 1,516,849 shares of common
                      stock
                      directly owned.
 
 (4)
                  Consists
                      of stock options to acquire up to 150,000 shares of common
                      stock, all of
                      which are presently exercisable and 1,669,111 shares of common
                      stock
                      directly owned.
 
 (5)
                  Consists
                      of stock options to acquire up to 1,000,000 shares of common
                      stock, all of
                      which are presently exercisable and 751,127 shares of common
                      stock
                      directly owned.
 **ITEM
              12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**
  On
                  July
                  19, 2004, we entered into a certain Stock Purchase Agreement pursuant
                  to which
                  we agreed to issue and sell 21,875,000 restricted shares of our
                  common stock to
                  Barron Partners, LP, a New York based institutional investor, at
                  a price of
                  $0.08 per share. Under the terms of transaction, Barron Partners,
                  LP received
                  two of our common stock purchase warrants. The first
                  warrant entitles
                  the holder, for a period of up to five years, to purchase up to
                  10,937,500
                  common shares at a price of $0.18 per share,
                  subject
                  to standard adjustment provisions.  The second warrant entitles the
                  holder, also for a period of up to five years, to purchase up to
                  10,937,500
                  additional common shares at a price of $0.60 per share,
                  subject
                  to standard adjustment provisions.
 
 As
                  part
                  of the financing transaction, we also entered into a certain Registration
                  Rights
                  Agreement with Barron Partners, LP pursuant to which we became
                  committed to
                  registering all of the shares issued as part of such transaction,
                  including
                  those issuable under the warrants. On November 22, 2004, we filed a
                  registration statement on Form SB-2 covering the shares issued
                  to Barron
                  Partners, as well as the shares underlying the warrants issued
                  to Barron
                  Partners. Under the terms of the Registration Rights Agreement,
                  as amended, we
                  had until April 22, 2005 to cause such registration statement to
                  be declared
                  effective by the SEC. In accordance with the terms of the Registration
                  Rights
                  Agreement, any delays in meeting this obligation subjected us
                  to liability
                  to Barron Partners, LP in an amount equal to $1,726 per day for
                  the duration of
                  any such delay.  As
                  of the date of this filing, we had accrued a total of $100,000
                  in
                  registration rights penalties for not causing the registration
                  statement to
                  be declared effective by the SEC.
 -44-
 Table
                of Contents
  As
            of the
            date hereof, Barron Partners, LP owns 45.43% of our outstanding common
            stock
            and, subject to the restrictions contained in Article VII, subsection
            B of our
            articles of incorporation, controls the vote associated with such
            shares .
   **ITEM
            13. EXHIBITS.**
  **No.**
                    **Description
                        of Exhibit**2.1
                    Share
                        Exchange Agreement between Findex.com, Inc. and the stockholders
                        of Reagan
                        Holdings, Inc. dated March 7, 2000, incorporated by reference
                        to Exhibit
                        2.1 on Form 8-K filed March 15, 2000.3(i)(1)
                    Articles
                        of Incorporation of Findex.com, Inc., incorporated by reference
                        to Exhibit
                        3.1 on Form 8-K filed March 15, 2000.3(i)(2)
                    Amendment
                        to Articles of Incorporation of Findex.com, Inc. dated November
                        12, 2004
                        incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB
                        filed November
                        12, 2004.
 3(ii)
                          By-Laws
                              of Findex.com, Inc., incorporated by reference to Exhibit
                              3.3 on Form 8-K
                              filed March 15, 2000.10.1
                          Stock
                              Incentive Plan of Findex.com, Inc. dated May 7, 1999,
                              incorporated by
                              reference to Exhibit 10.1 on Form 10-KSB/A filed May
                              13,
                              2004.10.2
                          Share
                              Exchange Agreement between Findex.com, Inc. and the
                              stockholders of Reagan
                              Holdings Inc., dated March 7, 2000, incorporated by
                              reference to Exhibit
                              2.1 on Form 8-K filed March 15, 2000.10.3
                          License
                              Agreement between Findex.com, Inc. and Parsons Technology,
                              Inc. dated June
                              30, 1999, incorporated by reference to Exhibit 10.3
                              on Form 10-KSB/A filed
                              May 13, 2004.
 10.4
                            Employment
                                Agreement between Findex.com, Inc. and Steven Malone
                                dated July 25, 2003,
                                incorporated by reference to Exhibit 10.4 on Form
                                10-KSB/A filed May 13,
                                2004.10.5
                            Employment
                                Agreement between Findex.com, Inc. and Kirk Rowland
                                dated July 25, 2003,
                                incorporated by reference to Exhibit 10.5 on Form
                                10-KSB/A filed May 13,
                                2004.10.6
                            Employment
                                Agreement between Findex.com, Inc. and William Terrill
                                dated June 7, 2002,
                                incorporated by reference to Exhibit 10.6 on Form
                                10-KSB/A filed May 13,
                                2004.10.7
                            Restricted
                                Stock Compensation Agreement between Findex.com,
                                Inc. and John A. Kuehne
                                dated July 25, 2003, incorporated by reference to
                                Exhibit 10.7 on Form
                                10-KSB/A filed May 13, 2004.10.8
                            Restricted
                                Stock Compensation Agreement between Findex.com,
                                Inc. and Henry M.
                                Washington dated July 25, 2003, incorporated by reference
                                to Exhibit 10.8
                                on Form 10-KSB/A filed May 13, 2004.10.9
                            Restricted
                                Stock Compensation Agreement between Findex.com,
                                Inc. and William Terrill
                                dated July 25, 2003, incorporated by reference to
                                Exhibit 10.9 on Form
                                10-KSB/A filed May 13, 2004.10.10
                            Stock
                                Purchase Agreement, including the form of warrant
                                agreement, between
                                Findex.com, Inc. and Barron Partners, LP dated July
                                19, 2004, incorporated
                                by reference to Exhibit 10.1 on Form 8-K filed July
                                28,
                                2004.10.11
                            Amendment
                                No. 1 To Barron Partners, LP Stock Purchase Agreement
                                dated September 30,
                                2004, incorporated by reference to Exhibit 10.3 on
                                Form 8-K filed October
                                6, 2004.10.12
                            Registration
                                Rights Agreement between Findex.com, Inc. and Barron
                                Partners, LP dated
                                July 26, 2004, incorporated by reference to Exhibit
                                10.2 on Form 8-K filed
                                July 28, 2004.
  -45-
 Table
                          of Contents
  10.13
                            Waiver
                              certificate between Findex.com, Inc. and Barron Partners,
                              LP dated
                              September 16, 2004, incorporated by reference to Exhibit
                              10.4 on Form 8-K
                              filed October 6, 2004.10.14
                            Settlement
                                Agreement between Findex.com, Inc., The Zondervan
                                Corporation, Mattel,
                                Inc., TLC Multimedia, Inc., and Riverdeep, Inc. dated
                                October 20, 2003.
                                FILED HEREWITH.14.1
                            Code
                                of Ethics, adopted by Board of Directors October 21,
                                2005. FILED
                                HEREWITH.21.1
                            Share
                                Exchange Agreement between Findex.com, Inc. and the
                                stockholders of Reagan
                                Holdings Inc., dated March 7, 2000, incorporated
                                by reference to Exhibit
                                2.1 on Form 8-K filed March 15, 2000.31.1
                            Certification
                                of Findex.com, Inc. Chief Executive Officer, Steven
                                Malone, required by
                                Rule 13a-14(a) or Rule 15d-14(a), and dated October
                                21, 2005. FILED
                                HEREWITH.31.2
                            Certification
                                of Findex.com, Inc. Chief Financial Officer, Kirk
                                R. Rowland, required by
                                Rule 13a-14(a) or Rule 15d-14(a), and dated October
                                21, 2005. FILED
                                HEREWITH.
 32.1
                      Certification
                          of Findex.com, Inc. Chief Executive Officer, Steven Malone,
                          required by
                          Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
                          63 of Title
                          18 of the United States Code (18 U.S.C. 1350), and dated October
                          21,
                          2005. FILED HEREWITH.32.2
                      Certification
                          of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland,
                          required by
                          Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
                          63 of Title
                          18 of the United States Code (18 U.S.C. 1350), and dated October
                          21,
                          2005. FILED HEREWITH.
   **ITEM
            14.PRINCIPAL
            ACCOUNTANT FEES AND SERVICES** .
 
 Summarized
            below is the aggregate amount of various professional fees billed by
            our
            principal accountants with respect to our last two fiscal years:
 
 **2004**
                  
                  2003Audit
                      fees
                  
                  $14,390
                  
                  $14,237Audit-related
                      fees
                  
                  $---
                  
                  $---Tax
                      fees
                  
                  $---
                  
                  $---All
                      other fees
                  
                  $---
                  
                  $---All
                      other fees, including tax consultation and preparation
                  
                  $---
                  
                  $---
  All
            audit
            fees are approved by our audit committee and board of directors. Chisholm,
            Bierwolf & Nilson, LLC does not
            provide any non-audit services to us.
  **Signatures**
 
 In
            accordance with Section 13 or 15(d) of the Exchange Act, the registrant
            caused
            this report to be signed on its behalf by the undersigned, thereunto
            duly
            authorized.
 
 **FINDEX.COM,
                      INC.**By:
                      /s/ Steven MaloneSteven
                      MalonePresident
                      and Chief Executive Officer
   Date: October
            21, 2005
 
 -46-
 Table
                of Contents
  Pursuant
            to the requirements of the Securities and Exchange Act of 1934, this
            report has
            been signed below by the following persons on behalf of the registrant
            and in
            the capacities and on the dates indicated.
  **Signature**
                  
                  **Title**
                  
                  **Date**/s/
                      Steven Malone
                  
                  Chairman
                      of the Board, President and Chief
                  
                  October 21,
                      2005Steven
                      Malone
                  
                  Executive
                      Officer (principal executive officer)/s/
                      John A. Kuehne
                  
                  Director
                  
                  October 21,
                      2005John
                      A. Kuehne/s/
                      Henry M. Washington
                  
                  Director
                  
                  October 21,
                      2005Henry
                      M. Washington/s/
                      Kirk R. Rowland
                  
                  Director
                      and Chief Financial Officer
                  
                  October 21,
                      2005Kirk
                      R. Rowland
                  
                  (principal
                      financial and accounting officer)
           -47-
 Table
                of Contents