**U.
          S. SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
          D.C. 20549**
 
 **FORM
          10-KSB**
 **ANNUAL
          REPORT UNDER SECTION 13 OR 15(D)**
 **OF
          THE SECURITIES EXCHANGE ACT OF 1934**
 **FOR
          THE FISCAL YEAR ENDED DECEMBER 31, 2006**
 
 
 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)
 
 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
  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 contained in this form, and no disclosure will be contained,
          to
          the best of registrant’s knowledge, 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. **[_]**
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act). **Yes
          [_] No [X]**
 
 Revenues
          for the fiscal year ended December 31, 2006 totaled $3,742,751.
 
 As
          of
          April 16, 2007, 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
          $559,000.
 
 At
          April
          16, 2007, the registrant had outstanding 49,788,317 shares of common stock,
          of
          which there is only a single class.
 Transitional
          Small Business Disclosure Format (check one): Yes __ No X
 
 **TABLE
        OF CONTENTS**
  **Page
                    Number****PART
                    I**ITEM
                    1. Description of Business.
                1ITEM
                    2. Description of Property.
                15ITEM
                    3. Legal Proceedings.
                16ITEM
                    4. Submission of Matters to a Vote of Security
                    Holders.
                16**PART
                    II**ITEM
                    5. Market for Common Equity and Related Stockholder
                    Matters.
                17ITEM
                    6. Management’s Discussion and Analysis or Plan of
                    Operation.
                19ITEM
                    7. Financial Statements.
                F-1ITEM
                    8. Changes In and Disagreements With Accountants on
                    Accounting and Financial Disclosure.
                47ITEM
                    8A.Controls and Procedures.
                47ITEM
                    8B. Other Information.
                48**PART
                    III**ITEM
                    9. Directors, Executive Officers, Promoters, Control
                    Persons and Corporate Governance; Compliance With Section 16(a)
                    of the
                    Exchange Act.
                48ITEM
                    10. Executive Compensation.
                51ITEM
                    11. Security Ownership of Certain Beneficial Owners
                    and Management and Related Stockholder Matters.
                53ITEM
                    12. Certain Relationships and Related Transactions,
                    and Director Independence.
                54ITEM
                    13. Exhibits.
                55ITEM
                    14. Principal Accountant Fees and
                    Services.
                57
 
 
 **PART
        I**
 
 **SPECIAL
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 This
        annual report on Form 10-KSB, press releases and certain information provided
        periodically in writing or verbally 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 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. 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, entitled “Management’s Discussion and
        Analysis or Plan of Operation”, and including without limitation the “Risk
        Factors” section contained therein. Except as required by law, we undertake no
        obligation to update any of the forward-looking statements in this annual
        report
        on Form 10-KSB after the date hereof.
 
 **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, Macintosh ® 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-
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            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 as well as to continue
        our
        sales growth across all distribution channels and our market share growth
        in all
        of our current product categories. We plan for the continued broadening of
        our
        product lines through marketing and sales initiatives, 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, among 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 other
        strategic growth opportunities, including, but not limited to, the acquisition
        of new product lines, content licensing, proprietary technology licensing
        or
        acquisitions, asset acquisitions, or acquisitions of other operating businesses,
        provided, however, that any such opportunities fit our corporate growth strategy
        and provide immediate or near term added value and provide a measurable increase
        in our existing customer base or a new, related customer base to which we
        can
        cross-market our products and produce greater revenues and/or earnings.
        Furthermore, we have not ruled out the pursuit of transactional opportunities
        in
        areas outside the faith-based market demographic.
 
 -2-
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            of Contents
  There
        are
        significant risks and complexities associated with any such growth opportunities
        and/or acquisitions including but not limited to due diligence investigation,
        comparative investigation, comparative analysis, financing, operational
        transitions, and growth control or abatement. 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. In connection
        with our pursuit of such opportunities, we are also likely to incur significant
        transition and integration costs, ongoing operations costs, legal and accounting
        costs, 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 Russian Federation and several others of
        which
        are located in the United States and India.
 
 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, and
        we
        also maintain development and technical staff at our Omaha, Nebraska
        headquarters.
 
 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.
 
 -3-
 Table
            of Contents
 The
        manufacturing time and gross margin percentages for each of our products
        can
        vary significantly from platform to platform. For each of our products we
        establish and periodically review an individual product development timeline
        and
        expenditure budget, taking into consideration, among others, the following
        business factors:
 
 ▪
              prior
                  year or season selling rates for existing and competitive products;▪
              known
                  or estimated growth rates for existing and competitive
                  products;▪
              new
                  market opportunities for products, product categories, or product
                  platforms;▪
              competitive
                  products and known competitive strategies;▪
              general
                  consumer market and consumer economic sentiments including past,
                  present,
                  and projected future conditions and/or events;▪
              technological
                  changes, improvements, new platforms, and platform market share
                  shifts;▪
              general
                  distribution channels and customer feedback;▪
              current
                  and perceived corporate cash flow;▪
              availability
                  and limitations related to knowledgeable/expert talent and workforce;
                  and▪
              known
                  or projected risks associate with each of these
                  factors.
 
 Our
        total
        product development costs incurred during the years ended December 31, 2005
        and
        2006, were approximately $1,029,000 and approximately $682,000, respectively,
        of
        which capitalized costs accounted for approximately $812,000 and approximately
        $491,000, respectively and expensed costs accounted for $217,000 and
        approximately $191,000, respectively.
 
 **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 year ended December 31, 2006
        we
        released a total of approximately eleven titles and title versions for PC,
        Macintosh ® and PDA
        platforms. Through the remainder of the fiscal year 2007 we currently plan
        on
        releasing a total of approximately sixteen titles and title versions for
        PC,
        Macintosh ® and PDA
        platforms.
 
 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; and▪
              Language
                  Tutorial Products.
  -4-
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            of Contents
 
  **Bible
        Study**
 
 For
        the
        fiscal year ended December 31, 2006, approximately 65% of our revenues were
        derived from sales of our flagship QuickVerse ® ,
        an
        industry-leading Bible-study software now in its 18 th year and
        11 th version,
        which is available in an array of content package variations ranging in retail
        price from $9.95 to $799.95. 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 enable users to search by word,
        phrase
        or verse across multiple books, offering search options that locate all forms
        of
        a given search word without the need for embedded symbols. For example, a
        search
        for the word “rise”, will yield the words “arise”, “risen”, “rising”, and
“rise”. QuickVerse ® 2007,
        our latest version, is currently available in six CD-Rom editions for PC.
        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 for PC includes:
 
 ▪
              QuickVerse®Bible Suite (which contains 8 Bibles and 40 reference titles, retail
                  price: $39.95);▪
              QuickVerse®Essentials Edition (which includes 10 Bibles and 44 reference titles,
                  retail price: $59.95);▪
              QuickVerse®Standard Edition (which includes 15 Bibles and 63 reference titles,
                  retail
                  price: $129.95);▪
              QuickVerse®Expanded Edition (which includes 17 Bibles and 100 reference titles,
                  retail price: $249.95);▪
              QuickVerse®Deluxe Edition (which includes 23 Bibles and 154 reference titles,
                  retail
                  price: $349.95); and▪
              QuickVerse®Platinum Edition (which includes 25 Bibles and 272 reference titles,
                  retail price: $799.95).
 
 Furthermore,
        for QuickVerse ® 2007 we
        introduced the QuickVerse ® 2007
        Upgrade Download (retail price: $29.95), which is an update to the
        QuickVerse ® engine
        for those with prior QuickVerse ® versions
        (QuickVerse ® 8.0
        Essentials or above). Each QuickVerse ® purchase
        includes access to additional books and content, which can be unlocked or
        downloaded and made accessible for an additional fee.
 
 -5-
 Table
            of Contents
 QuickVerse ® Mobile,
        an industry-leading Mobile Bible-study software, is compatible on both Pocket
        PC ® and
        Palm ® OS
        operating systems, and is currently in its 4 th year and
        4 th version.
        This program provides the same simplified access and many of the personal
        Bible
        study features found in the desktop QuickVerse ® versions. QuickVerse ® 2007
        Mobile is currently available in three editions as a download and in CD-Rom.
        Each edition of QuickVerse ® 2007
        Mobile 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 ® 2007
        Mobile family of products includes:
 
 ▪
              Standard
                  Edition (which includes 3 Bibles and 6 reference titles, retail
                  price:
                  $29.95);▪
              Deluxe
                  Edition (which includes 6 Bibles and 9 reference titles, retail
                  price:
                  $39.95); and▪
              Platinum
                  Edition (which includes 8 Bibles and 13 reference titles, retail
                  price:
                  $69.95).
 
 Each
        edition contains 125 scripture reading plans and provides the user with the
        ability to create their own.
 
 During
        the fiscal year 2005, we introduced QuickVerse ® Macintosh, which is compatible with Macintosh ® OS X
        10.3 or higher operating systems, and is currently in its 2 nd year and
        2 nd version.
        QuickVerse ® 2007
        Macintosh is available in three editions and provides 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 ® 2007
        Macintosh family of products includes:
 
 ▪
              QuickVerse®White Box Edition (which includes 10 Bibles and 45 reference titles,
                  retail price: $59.95);▪
              QuickVerse®Black Box Edition (which includes 15 Bibles and 66 reference titles,
                  retail price: $129.95); and▪
              QuickVerse®Gold Box Edition (which includes 22 Bibles and 158 reference titles,
                  retail price: $349.95).
 
 Each
        QuickVerse ® Macintosh product 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 Vine’s ® Complete
        Collection, the Nelson’s ® Reference Collection, the Warren Wiersbe ® Collection, the John MacArthur ® Collection, the Life Application Bible Commentary ® Collection, the Willmington Guide to the Bible ® Collection, and the Fisherman Study Guide ® Collection. Although our prices are subject to change from time to time,
        these
        titles currently range in retail price from $9.95 to $249.95 per unit.
 
 **Financial/Office
        Management Products for Churches and other Christian Faith-Based
        Ministries**
 
 For
        the
        fiscal year ended December 31, 2006, approximately 27% of our revenues were
        derived from sales of Membership Plus ® ,
        an
        industry-leading church management software now in its 11 th version.
        Membership Plus ® 2007 is
        available in each of a standard and a deluxe package at retail prices of
        $199.95
        and $399.95 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.
 
 -6-
 Table
            of Contents
 Membership
        Plus ® is
        designed to serve the unique needs of 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
“para-church” organizations are Campus Crusade for Christ, Promise
        Keepers ® ,
        and
        Josh McDowell Ministry.
 
 Over
        80,000 churches and faith-based organizations have purchased Membership
        Plus ® since
        its introduction in 1990. Membership Plus ® 2007,
        our latest version, is currently available in two CD-Rom editions: Membership
        Plus ® Standard
        and Membership Plus ® Deluxe.
 
 **Print
        & Graphic Products**
 
 We
        currently sell/distribute ClickArt Christian Publishing ® Suite
        III (retail price: $39.95), 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
        ClickArt Christian Graphics Deluxe ® (retail
        price: $29.95), which contains faith-based and Christian graphical images
        that
        can be used in the production of other content related projects. We also
        distribute several titles produced and distributed by SummitSoft Corporation
        a
        publisher of productivity software for professional and home users, including
        Logo Design Studio ® (retail
        price: $29.95), Essential Office Font Pack ® (retail
        price: $19.99), 2500 True Type Fonts ® (retail
        price: $19.99) and the Wedding Planner ® (retail
        price: $39.95).
 
 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, 2006, approximately 2% 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 (retail price: $69.95), 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 (retail price: $29.95), 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.•
              Today’s
                  Best Sermons®(retail price: $99.95), which is a three volume collection of the
                  best
                  sermons from the*Preaching
                  Today*monthly audiotape series, which users can use to gain spiritual
                  refreshment and strengthen their
                  preaching.
 
 Although
        our prices are subject to change from time to time, our pastoral products
        range
        in price from $29.95 to $99.95 per unit. In the aggregate, and for the fiscal
        year ended December 31, 2006, approximately 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 ® (retail
        price: $5.97), Noah and the Ark ® (retail
        price: $5.97), Daniel in the Lion’s Den ® (retail
        price: $5.97), The Story of Creation ® (retail
        price: $5.97), and American History Explorer ® (retail
        price: $29.95). In addition, we also distribute the DVD video Junior’s
        Giants ® (retail
        price: $12.95) produced by Divine Comedy Productions.
 
 -7-
 Table
            of Contents
 Although
        our prices are subject to change from time to time, our children’s products
        range in price from $5.97 to $39.97 per unit. In the aggregate, and for the
        fiscal year ended December 31, 2006, less than 1% of our revenues were derived
        from sales of these products.
 
 **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, Greek Tutor ® and
        Hebrew Tutor ® (retail
        price: $49.95 each), 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 $69.95 per unit. In the aggregate, and for the fiscal
        year ended December 31, 2006, approximately 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 SummitSoft, Divine Comedy Productions 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 $5.97 to $39.99
        per
        unit. In the aggregate, and for the fiscal year ended December 31, 2006,
        less
        than 1% of our revenues were derived from sales of these products.
 
 **OUR
        MARKET**
 
 According
        to a Gallup poll released in January 2006, 50% of Americans identified
        themselves as Protestant, while 25% identified themselves as Catholic, and
        13%
        identified themselves as “Other Christian”. According to the same survey, 59% of
        Americans say that religion is “very” important to them in their own lives, and
        another 25% say that religion is “fairly” important in their lives.
        Additionally, 41% describe themselves as “born-again” or “evangelical
        Christian”.
 
 According
        to the most recent survey released in July 2006 by the Christian Bookseller’s
        Association (“CBA”), Christian-product sales for the year 2004 were $4.34
        billion. The survey also revealed that $2.3 billion of the $4.34 billion
        total
        was sold through Christian retail, with $1.3 billion sold through general
        retail, and $694 million sold direct-to-consumer, and through ministry sales
        channels. The 2,055-store CBA segment includes several different chains,
        Family
        Christian Stores being the largest with over 300 stores. As faith-based
        retailing increases, secular stores are offering more faith-based products
        as
        evidenced by the $1.3 billion sales figure in 2004 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;▪
              affiliate
                  merchants;▪
              product
                  sampling through demonstration software;▪
              in-store
                  promotions, displays and retailer assisted co-operative
                  advertising;▪
              publicity
                  activities; and▪
              trade
                  shows.
 
 -8-
 Table
            of Contents
 **SALES**
  
 
 **Direct
        Marketing / Online Sales**
 
 Direct
        sales accounted for approximately 53% of our 2006 fiscal year revenue. Over
        the
        past four 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. Furthermore, we are making
        technological advancements to our Website in order to provide more downloadable
        products and/or content. 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 ® .
        Furthermore, in October of 2005 we joined an affiliate network through
        www.shareasale.com and have gained approximately 100 affiliate merchants
        that
        market our products through their Websites. Despite these growing initiatives,
        online sales through any origination points other than our own
        www.quickverse.com Website accounted for less than 1% of our 2006 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 47% of our 2006 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.
 
 -9-
 Table
            of Contents
 In
        the
        secular retail market, which includes chains such as Best BuyTM,
        CompUSA ® ,
        OfficeMaxTM and Apple ® Stores,
        we believe that we continue to be a top seller of Bible study software and
        we
        are developing additional promotions to grow our market share.
 
 **International
        Sales**
 
 International
        sales accounted for approximately 2% of our 2006 fiscal year revenue. We
        currently sell to distributors and retailers in Africa, Australia, Canada,
        Faroe
        Island, Korea, New Zealand, Philippines, Singapore, and the United Kingdom.
        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.
 
 -10-
 Table
            of Contents
 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.
 
 **SIGNIFICANT
        CUSTOMERS AND SUPPLIERS**
 
 During
        the fiscal year ended December 31, 2006, we had one major customer, Lifeway
        Christian Resources, that individually accounted for 10% or more of annual
        sales, whereas during the fiscal year ended December 31, 2005, 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 and increase our
        focus on direct sales, we anticipate our sales to a single customer, as a
        percentage of gross consolidated revenue, will remain below 10%.
 
 Also
        for
        the fiscal years ended December 31, 2006 and 2005, product and material
        purchases from Midlands Packaging Corporation accounted for 20% and 19%,
        respectively, IsoDisc accounted for 19% and 24%, respectively, Frogs Copy
        and
        Graphics accounted for 19% and 23%, respectively, and GP Direct, LLC accounted
        for 17% and 5%, 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 ® family
        of products, we believe we are the market leader in our category. We currently
        compete with the following companies and products, among others, in the PC
        category:
 
 ▪
              Logos
                  Research Systems, Inc. - Logos Bible Software®3▪
              Biblesoft,
                  Inc. - PC Study Bible®Version 5▪
              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.
 
 -11-
 Table
            of Contents
 In
        relation to our QuickVerse ® Mobile
        products, we currently compete with the following companies and products,
        among
        others:
 
 ▪
              Laridian
                  - PocketBible®▪
              Thomas
                  Nelson, Inc. - Nelson eBible®for PDA▪
              Zondervan
                  - NIV Bible Study Suite PDA®▪
              WordSearch
                  Bible Publishers - Life Application Bible Pocket Library®▪
              Olive
                  Tree Bible Publishers - Olive Tree Bible Software®
 
 We
        believe that QuickVerse ® Mobile
        is the market leader in CBA retail and a top performer in overall sales in
        the
        PDA Bible Software market. We believe QuickVerse ® Mobile
        offers a high quality product along with a substantial amount of content
        at an
        affordable price.
 
 Furthermore,
        we currently compete with the following companies and comparable products,
        among
        others, in relation to our QuickVerse ® Macintosh products:
 
 ▪
              Zondervan
                  - Zondervan Bible Study Suite®for Macintosh®▪
              Oak
                  Tree Software, Inc. - Accordance Bible Software®
 
 QuickVerse ® Macintosh was released in June 2005, and we believe that it is the market
        leader
        in CBA retail. QuickVerse ® Macintosh was developed from the ground up to be a truly native OS-X
        application. As with the other QuickVerse ® family
        of products, we believe QuickVerse ® Macintosh tends to be the least expensive product in its category given its
        features and extensive collection of Bibles and Bible reference content.
 
 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 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.
 
 -12-
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            of Contents
 **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 99% of our revenues in 2006, 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 for the year ended December 31, 2006 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.
 
 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 the 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.
 
 -13-
 Table
            of Contents
 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 into this
        annual report on Form 10-KSB for the fiscal year ended December 31, 2006
        as
        Exhibit 10.14.
 
 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
        seven subsequent versions, eight different editions and three new platforms
        of
        QuickVerse ® ,
        five
        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 46 different
        publishers for approximately 770 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.
 
 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.
 
 While
        approximately 82% of our copyrighted software programs are registered with
        the
        U.S. Copyright Office, approximately 18% remains unregistered, including
        all of
        the works included in the enhancements that we have made to titles from which
        we
        originally derived our rights under the 1999 license. In the U.S., works
        afforded the benefit of copyright protection can either be registered with
        the
        U.S. Copyright Office or remain unregistered, and, although registration
        offers
        certain advantages to the holder in being able to assert its rights (including
        a
        rebuttable presumption of ownership and entitlement to statutory damages
        and
        attorneys fees), the fact remains that an original work in the U.S. becomes
        protected by the copyright laws from the moment it is “fixed in a tangible
        medium,” which, as it relates to software, has long been interpreted to mean
        when it is stored on a hard drive or removable disk.
 
 -14-
 Table
            of Contents
 **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, editions and platforms
        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
        April 17, 2007, we had twenty-three full-time employees. Of those twenty-three,
        four were part of the senior-level executive and financial management team,
        four
        were in the product development team, seven were on the sales team, and eight
        were in fulfillment, administration, and related support positions. For the
        fiscal year ended December 31, 2006, our annual employee costs (including
        wages,
        related payroll taxes and benefits) totaled approximately $1,703,000, equivalent
        to 41% 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.
 
 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, historically accounting for less
        than
        30% of annual sales.
 
 **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 $7,563.76 and, as of
        April
        17, 2007, there was approximately one month remaining under the lease. We
        have
        no reason to believe at this time that we will not be able to renew the lease
        for this premises for a term appropriate with our business objectives and
        on
        economic terms that we deem to be reasonably acceptable.
 
 -15-
 Table
            of Contents
 We
        maintain additional leased office space in Naperville, Illinois for certain
        product development activity. We lease this 880 square foot premises under
        a
        three year lease agreement with Transwestern Great Lakes, L.P. Our monthly
        rent
        is $1,356.67 and there are twenty-three months remaining under the
        lease.
 
 Two
        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.**
 
 As
        of the
        date of this annual report on Form 10-KSB for the year fiscal year ended
        December 31, 2006, 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.**
 
 No
        matters were submitted to a vote of our stockholders during the fourth quarter
        of the fiscal year ended December 31, 2006.


















-16-
 Table
              of Contents
 
 **PART
        II**
 
 **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS.**
 
 **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 Yahoo.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****2005**
              
              
              **High**
              
              
              **Low**First
                  Quarter
              
              $
              0.150
              
              $
              0.070Second
                  Quarter
              
              $
              0.150
              
              $
              0.090Third
                  Quarter
              
              $
              0.140
              
              $
              0.070Fourth
                  Quarter
              
              $
              0.170
              
              $
              0.070**2006**
              
              
              **High**
              
              
              **Low**First
                  Quarter
              
              $
              0.150
              
              $
              0.090Second
                  Quarter
              
              $
              0.150
              
              $
              0.040Third
                  Quarter
              
              $
              0.080
              
              $
              0.030Fourth
                  Quarter
              
              $
              0.060
              
              $
              0.030
 
 **STOCKHOLDERS**
 
 As
        of
        April 17, 2007, 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**
 
 Since
        inception, 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
              
              
              855,000
              
              $
              0.11
              
              
              645,000Equity
                  compensation plans not approved by security holders
              
              
              3,800,000
              
              $
              0.097
              
              
              ---Total
              
              
              4,655,000
              
              $
              0.099
              
              
              645,000
 
 -17-
 Table
            of Contents
 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.
 
 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, which is based on the last available closing price of our common
        stock
        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 upon payment of the corresponding exercise price.
 
 **RECENT
        SALES OF UNREGISTERED SECURITIES**
 
 There
        were no previously unreported sales of unregistered securities during the
        fiscal
        years ended December 31, 2005 or 2006.
         
 
 -18-
 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, 2006 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, and (iii) the life and realization of identifiable
        intangible assets. 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 continuously review the outstanding accounts receivable, 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.
 
 -19-
 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 Website 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.
 
 -20-
 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.
 
 **Stock-Based
        Compensation**
 
 In
        accordance with SFAS No. 123(R), *Share-Based
        Payment,* we
        measure the cost of employee services received in exchange for an award for
        equity instruments based on the grant-date fair value and recognize the cost
        over the requisite service period. In addition, any corporate income tax
        benefit
        realized upon exercise or vesting of an award in excess of that previously
        recognized in earnings (referred to as a “windfall tax benefit”) will be
        presented in the Consolidated Statements of Cash Flows as a financing (rather
        than as operating) cash flow. Realized windfall tax benefits are credited
        to
        paid-in capital in the Consolidated Balance Sheets. Realized shortfall tax
        benefits (amounts which are less than that previously recognized in earnings)
        are first offset against the cumulative balance of windfall tax benefits,
        if
        any, and then charged directly to income tax expense.
 
 **Income
        Taxes**
 
 We
        follow
        SFAS No. 109, *Accounting
        for Income Taxes* ,
        which
        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.
 
 **Derivatives**
 
 We
        account for warrants issued with shares of common stock in a private placement
        according to EITF Issue 00-19, *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock* .
        In
        accordance with accounting mandate, the derivative liability associated with
        the
        warrants has been and shall continue to be adjusted to fair value (calculated
        using the Black Scholes method) at each balance sheet date and is accordingly
        reassessed at each such time to determine whether the warrants should be
        classified (or reclassified, as appropriate) as a liability or as equity.
        The
        corresponding fair value adjustment is included in the consolidated statements
        of operations as other expenses as the value of the warrants increases from
        an
        increase in our stock price at the balance sheet date and as other income
        as the
        value of the warrants decreases from a decrease in our stock price.
 
 **MANAGEMENT
        OVERVIEW**
 
 During
        the fourth quarter of 2006 we released an upgrade to our top-selling financial
        and data management software, Membership Plus ® .
        Membership Plus ® 2007 was
        released in time for the holiday season in two editions, Membership
        Plus ® 2007
        Standard and Membership Plus ® 2007
        Deluxe, with a range in retail price from $199.95 and $399.95.
        QuickVerse ® 2007
        Mobile was also released during the fourth quarter of 2006.
        QuickVerse ® 2007
        Mobile is available in three editions, QuickVerse ® 2007
        Mobile Standard, QuickVerse ® 2007
        Mobile Deluxe and QuickVerse ® 2007
        Mobile Platinum, with a range in retail price from $29.95 to $69.95.
        Furthermore, we teamed up with Thomas Nelson Publishers ® and
        released for the first time the Vine’s Complete Collection ® for
        QuickVerse ® (Windows) users. This extensive reference collection has a retail price of
        $59.95.
 
 -21-
 Table
            of Contents
 During
        the third quarter of 2006 we released an upgrade to our flagship product,
        QuickVerse ® ,
        which
        was one month earlier compared to our upgrade release of QuickVerse ® in 2005.
        In addition, this marked the second year in a row that we released an upgrade
        to
        the QuickVerse ® (Windows) product line that would reach the retail stores prior to the holiday
        season beginning. QuickVerse ® 2007 is
        currently available in the following six editions:
 
 ▪
              QuickVerse®2007 Bible Suite,▪
              QuickVerse®2007 Essentials,▪
              QuickVerse®2007 Standard,▪
              QuickVerse®2007 Expanded,▪
              QuickVerse®2007 Deluxe, and▪
              QuickVerse®2007 Platinum.
 
 These
        QuickVerse ® 2007
        editions range in retail price from $39.95 to $799.95. The
        QuickVerse ® 2007 new
        features include web dictionary support, integrated PDF files, integrated
        RSS
        subscriptions and integrated web pages. We believe that the unique features
        of
        the new QuickVerse ® 2007
        editions will provide us with an opportunity to broaden our customer base
        as our
        products appeal not only to those just beginning their journey into Bible
        study
        but also to the scholars who are searching for an in-depth knowledge of the
        Bible.
 
 During
        the second quarter of 2006 we released QuickVerse ® 2006
        Macintosh ® Gold
        Edition, with a suggested retail price of $349.95, which offers more content
        to
        Mac users than ever before. This edition offers 19 Bibles and 144 reference
        titles, a retail value of over $4,000 if sold separately. We also released
        the
        Holman Christian Standard Bible ® ,
        with a
        suggested retail price of $29.95, which is sponsored by Broadman & Holman
        Publishers. This Bible translation provides English-speaking people across
        the
        world with an accurate, readable Bible in contemporary English and equips
        serious Bible students with an accurate translation for personal study, private
        devotions and memorization.
 
 Finally,
        during the first quarter of 2006, we released QuickVerse ® 2006
        Parable Edition, with a suggested retail price of $49.95, and
        QuickVerse ® 2006
        Bible Suite, with a suggested retail price of $29.95. QuickVerse ® 2006
        Bible Suite appeals to those customers seeking their first Bible study software.
        QuickVerse ® 2006
        Parable Edition is sold exclusively at Parable ® retail
        outlets and through Parable ® ’s website,
        at www.parable.com, and unlike other QuickVerse ® editions, QuickVerse ® 2006
        Parable contains exclusive Parable ® content
        such as *Books
        That Change Lives* and *Standing
        Firm Devotional* .
 
 Comparatively,
        during the fourth quarter of 2005, we released QuickVerse ® 2006
        Mobile in four editions. During the third quarter of 2005, we released
        QuickVerse ® 2006
        three months earlier than our upgrade release of QuickVerse ® in 2004.
        During the second quarter of 2005, and for
        the
        first time in our operating history ,
        we introduced QuickVerse ® to the
        Macintosh Operating System in two editions, QuickVerse ® Macintosh
        Black Box (includes
        12 Bibles and 56 reference titles) ,
        with a
        suggested retail price of $99.95 and QuickVerse ® Macintosh
        White Box (includes
        9 Bibles and 40 reference titles) ,
        with a
        suggested retail price of $49.95. We also released an updated version of
        Bible
        Illustrator ® 3.0
        entitled Sermon Builder ® 4.0,
        with
        a suggested retail price of $69.95. Lastly,
        during the first quarter of 2005, we released an upgrade to our top-selling
        financial and data management software, Membership Plus ® ,
        with a
        suggested retail price of between $149.95 and $349.95, and introduced
        QuickVerse ® 2005
        Essentials, with a suggested retail price of $49.95, and QuickVerse ® 2005
        Platinum, with a suggested retail price of $799.95.
 
 Despite
        our decreased gross revenues during the twelve months ended December 31,
        2006,
        we were able to decrease our total operating expenses by reducing our sales
        and
        marketing costs as well as our general and administrative costs. Although
        there
        can be no assurance, we anticipate that revenues will increase in real terms
        during our 2007 fiscal year based upon our development schedule for the fiscal
        year and the introduction of new titles that will broaden the content made
        available for our QuickVerse ® products.
 
 -22-
 Table
            of Contents
 **RESULTS
        OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 2006 AND DECEMBER 31,
        2005**
 
 **Statement
                  of Operations for Years Ended December 31**
              
              
              **2006**
              
              
              2005
              
              
              Change
              
              
              %Net
                  revenues
              
              **$**
              **3,742,751**
              
              $
              5,337,342
              
              $
              (1,594,591
              )
              
              -30
              %Cost
                  of sales
              
              
              **1,755,400**
              
              
              2,126,164
              
              
              (370,764
              )
              
              -17
              %Gross
                  profit
              
              **$**
              **1,987,351**
              
              $
              3,211,178
              
              $
              (1,223,827
              )
              
              -38
              %Total
                  operating expenses
              
              
              **(3,039,670**
              **)**
              
              (4,273,209
              )
              
              1,233,539
              
              
              -29
              %Loss
                  from operations
              
              **$**
              **(1,052,319**
              **)**
              $
              (1,062,031
              )
              $
              9,712
              
              
              -1
              %Other
                  income
              
              
              **1,065**
              
              
              14,855
              
              
              (13,790
              )
              
              -93
              %Other
                  adjustments
              
              
              **(49,314**
              **)**
              
              (436,686
              )
              
              387,372
              
              
              -89
              %Gain
                  (loss) on fair value adjustment of derivatives
              
              
              **1,535,594**
              
              
              (33,797
              )
              
              1,569,391
              
              
              -4,644
              %Gain
                  (loss) on disposition of assets
              
              
              **3,173**
              
              
              (1,869
              )
              
              5,042
              
              
              -270
              %Other
                  expenses
              
              
              **(77,097**
              **)**
              
              (11,029
              )
              
              (66,068
              )
              
              599
              %Income
                  (loss) before income taxes
              
              **$**
              **361,102**
              
              $
              (1,530,557
              )
              $
              1,891,659
              
              
              -124
              %Provision
                  for income taxes
              
              
              **292,598**
              
              
              (50,709
              )
              
              343,307
              
              
              -677
              %Net
                  income (loss)
              
              **$**
              **653,700**
              
              $
              (1,581,266
              )
              $
              2,234,966
              
              
              -141
              %
 
 For
        the
        year ended December 31, 2006 we had net income of approximately $654,000
        compared to a net loss of approximately $1,581,000 for the year ended December
        31, 2005. However, our gross profit decreased approximately $1,224,000 from
        a
        gross profit of approximately $3,211,000 for the year ended December 31,
        2005 to
        a gross profit of approximately $1,987,000 for the year ended December 31,
        2006
        (a reduction of approximately 7%). Although we decreased our total operating
        expenses approximately $1,234,000 from approximately $4,273,000 for the year
        ended December 31, 2005 to approximately $3,039,000 for the year ended December
        31, 2006, our loss from operations only decreased approximately $10,000 from
        approximately $1,062,000 for the year ended December 31, 2005 to approximately
        $1,052,000. These negative results of operations are primarily attributable
        to
        the following:
 
 ▪
              our
                  gross revenues decreased approximately $2,163,000 to approximately
                  $
                  4,146,000 for the year ended December 31, 2006 from approximately
                  $6,309,000 for the year ended December 31, 2005. This decrease
                  is
                  primarily attributable to the following:▪
              an
                  overall net decrease in unit sales of our QuickVerse®product line due to a reduction in the perceived value on the part
                  of
                  customers of certain upgrades based on the relative frequency
                  thereof;▪
              the
                  lack of product releases during the year ended December 31, 2006
                  as
                  compared to the year ended December 31, 2005, specifically our
                  annual
                  release of Membership Plus®;
                  and▪
              the
                  decreased suggested retail price in those products that were released
                  during the year ended December 31, 2006 compared to those released
                  during
                  the year ended December 31, 2005;▪
              our
                  cost of sales decreased approximately $371,000 for the year ended
                  December
                  31, 2006; however, as a percentage of gross revenues our costs
                  of sales
                  increased from approximately 34% of gross revenues for the year
                  ended
                  December 31, 2005 to 42% of gross revenues for the year ended December
                  31,
                  2006 due to the increased percentage of gross revenues related
                  to
                  amortization of software development costs, direct costs, and royalties;▪
              we
                  incurred liquidated damage penalties of approximately $49,000 in
                  connection with our failure to meet certain contractual registration
                  obligations; and▪
              our
                  interest expense increased approximately $66,000 for the year ended
                  December 31, 2006 due to a loan agreement that was entered into
                  in order
                  to fund our working capital
                  deficit.
 
 -23-
 Table
            of Contents
 Our
        net
        income increased approximately $2,235,000 from a net loss of approximately
        $1,581,000 for the year ended December 31, 2005 to a net income of approximately
        $654,000 for the year ended December 31, 2006. This increase is mainly
        attributed to the non-cash valuation gain of approximately $1,536,000 we
        recognized from the fair value adjustment of our derivative liabilities during
        the year ended December 31, 2006. Under applicable accounting mandate, a
        decrease in our stock price results in a decrease in the fair value of the
        derivative liability and a valuation gain to be recognized in our income
        statement whereas an increase in our stock price results in an increase in
        the
        fair value of the derivative liability and a valuation loss to be recognized
        in
        our income statement.
 
 Offsetting
        to some degree the negative results of operations detailed above were two
        positive developments during the year ended December 31, 2006. First, a
        registration statement on Form SB-2, originally filed by us on November 22,
        2004, was declared effective by the SEC on February 1, 2006, thereby halting
        any
        further accrual of liquidated damages in relation to previously granted
        registration rights. Second, we released our annual upgrade of our
        QuickVerse ® (Windows) product line in time for the retail stores to receive their orders
        prior to the commencement of the holiday season.
 
 **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 arrangement
        exists. For revenue arrangements involving multiple products or product and
        service packages, we allocate and defer revenue for the undelivered products
        or
        product and service packages based on their vendor-specific objective evidence
        of fair value, which is generally the price charged when that product or
        product
        and service package 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 53% of our 2006 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
        years ended December 31, 2005 and 2006, respectively.
  Trends
        that our returns typically follow include (i) the seasonality of sales, and
        (ii)
        the fact that, generally, relatively higher return rates occur in connection
        with recently released title or title versions. 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 in order to move channel
        inventory.
 
 -24-
 Table
            of Contents
 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
        provided for in the contract between us and the corresponding
        distributor/retailer. Under certain circumstances, including for example
        the
        expiration of a given contract or the discovery that a given product is
        defective, distributors and bookstores may be eligible to receive a cash
        refund
        if returns exceed amounts owed. Returns from sales made directly to consumers
        are accepted within 45 days of purchase and involve 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.
 
 In
        general, price protection programs insure retail customers a refund of a
        portion
        of their purchase price to the extent the product they have purchased drops
        in
        price within a given time frame following their purchase. In general, price
        protection reduces customers’ anxieties in connection with a purchase decision
        associated with a concern that they might obtain a better price if they were
        to
        wait than if they were to act immediately. Although we have historically
        employed price protection programs in connection with many of our product
        promotions, and although we released QuickVerse ® 2007 in
        late August 2006 to the Christian Booksellers Association retail channel,
        we did
        not implement a price protection program on our QuickVerse ® 2006
        titles. Furthermore, we do not anticipate implementing a price protection
        program in the near future.
 
 Software
        products are sold separately, without an obligation of future performance
        such
        as upgrades, enhancements or additional software products, and are sold with
        postcontract 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.
 
 Shipping
        and handling costs in connection with our software products are expensed
        as
        incurred and included in cost of sales.
 
 **Revenues
                  for Years Ended December 31**
              
              
              **2006**
              
              
              **%
                  to Sales**
              
              
              2005
              
              
              %
                  to Sales
              
              
              Change
              
              
              %Gross
                  revenues
              
              **$**
              **4,146,086**
              
              
              **100**
              **%**
              $
              6,309,017
              
              
              100
              %
              $
              (2,162,931
              )
              
              -34
              %Add
                  rebate reserve adjustment
              
              
              **1,240**
              
              
              **0**
              **%**
              
              19,640
              
              
              0
              %
              
              (18,400
              )
              
              -94
              %Less
                  reserve for sales returns and allowances
              
              
              **(404,575**
              **)**
              
              **10**
              **%**
              
              (991,315
              )
              
              16
              %
              
              586,740
              
              
              -59
              %Net
                  revenues
              
              **$**
              **3,742,751**
              
              
              **90**
              **%**
              $
              5,337,342
              
              
              84
              %
              $
              (1,594,591
              )
              
              -30
              %
 
 Gross
        revenues decreased approximately $2,163,000 from approximately $6,309,000
        for
        the year ended December 31, 2005 to approximately $4,146,000 for the year
        ended
        December 31, 2006. We believe that this decrease was primarily attributable
        to
        the lack of product releases during the year ended December 31, 2006 as compared
        to the year ended December 31, 2005, and most notably the prolonged delay
        in our
        annual release of Membership Plus ® .
        During
        2005 and 2006, the following products were released throughout the years,
        respectively:
 
 -25-
 Table
            of Contents
 First
        Quarter 2005
 
 ▪
              an
                  enhanced version of our top financial and data management product,
                  Membership Plus®,
                  including Membership Plus®2005 Standard Edition, with a suggested retail price of $149.95,
                  and
                  Membership Plus®2005 Deluxe Edition, with a suggested retail price of
                  $349.95;▪
              an
                  enhanced version of QuickVerse®2005 Essentials, with a suggested retail price of $49.95; and▪
              QuickVerse®2005 Platinum Edition, with a suggested retail price of
                  $799.95.
 
 Second
        Quarter 2005
 
 ▪
              QuickVerse®2006 Macintosh, including QuickVerse®2006 Macintosh Black Box Edition, with a suggested retail price
                  of $99.95,
                  and QuickVerse®2006 Macintosh White Box Edition, with a suggested retail price
                  of $49.95;
                  and▪
              an
                  enhanced version ofBible
                  Illustrator®3.0
                  entitled Sermon Builder®4.0,
                  with a suggested retail price of
                  $69.95.
 
 Third
        Quarter 2005
 
 ▪
              an
                  enhanced version of our flagship product, QuickVerse®,
                  including QuickVerse®2006 Starter, with a suggested retail price of $9.95,
                  QuickVerse®2006 Parable®Edition, with a suggested retail price of $49.95, QuickVerse®2006 Bible Suite, with a suggested retail price of $29.95,
                  QuickVerse®2006 Essentials, with a suggested retail price of $49.95,
                  QuickVerse®2006 Standard, with a suggested retail price of $99.95,
                  QuickVerse®2006 Expanded, with a suggested retail price of $199.95,
                  QuickVerse®2006 Deluxe, with a suggested retail price of $299.95 and
                  QuickVerse®2006 Platinum, with a suggested retail price of
                  $799.95.
 
 Fourth
        Quarter 2005
 
 ▪
              an
                  upgrade to our four editions of QuickVerse®2006 Mobile, including Standard, with a suggested retail price
                  of $29.95,
                  Deluxe, with a suggested retail price of $39.95, Platinum Edition,
                  with a
                  suggested retail price of $69.95, and Life Application Study Bible,
                  with a
                  suggested retail price of $39.95.
 
 First
        Quarter 2006
 
 ▪
              QuickVerse®2006 Parable Edition, with a suggested retail price of $49.95;
                  and▪
              QuickVerse®2006 Bible Suite, with a suggested retail price of
                  $29.95.
 
 Second
        Quarter 2006
 
 ▪
              QuickVerse®2006 Macintosh Gold Box Edition, with a suggested retail price
                  of $349.95;
                  and▪
              Holman
                  Christian Standard Bible®,
                  with a suggested retail price of
                  $29.95.
 
 Third
        Quarter 2006
 
 ▪
              an
                  enhanced version of our flagship product, QuickVerse®,
                  including QuickVerse®2007 Bible Suite, with a suggested retail price of $39.95,
                  QuickVerse®2007 Essentials, with a suggested retail price of $59.95,
                  QuickVerse®2007 Standard, with a suggested retail price of $129.95,
                  QuickVerse®2007 Expanded, with a suggested retail price of $249.95,
                  QuickVerse®2007 Deluxe, with a suggested retail price of $349.95 and
                  QuickVerse®2007 Platinum, with a suggested retail price of $799.95.
 
 -26-
 Table
            of Contents
 Fourth
        Quarter 2006
 
 ▪
              an
                  enhanced version of our top-selling financial and data management
                  software, Membership Plus®,
                  including Membership Plus®2007 Standard, with a suggested retail price of $199.95, and Membership
                  Plus®2007 Deluxe, with a suggested retail price of $399.95;▪
              an
                  upgrade to our QuickVerse®Mobile products, including QuickVerse®2007 Mobile Standard, with a suggested retail price of $29.95,
                  QuickVerse®2007 Mobile Deluxe, with a suggested retail price of $39.95, and
                  QuickVerse®2007 Mobile Platinum, with a suggested retail price of $69.95;
                  and▪
              the
                  Vine’s Complete Collection®for QuickVerse®(Windows) users, an extensive reference collection from Thomas
                  Nelson
                  Publishers®,
                  with a suggested retail price of
                  $59.95.
 
 Of
        note,
        and generally, the retail price points for our products released during the
        year
        ended December 31, 2006 were significantly less than those released during
        the
        year ended December 31, 2005. Furthermore, due to the unexpected loss of
        our
        primary developer for Membership Plus ® in May
        2005, we experienced an eight month delay in our annual release of Membership
        Plus ® ,
        which
        typically is released in the month of February. As it turned out, Membership
        Plus ® 2007 was
        released in October 2006. Finally, we believe we have experienced a decrease
        in
        gross revenues due to the technological advancements and improved product
        stability in our QuickVerse ® product
        line, as well as the increased frequency of product upgrades thereof, which
        in
        turn has led to an overall decrease in our percentage of QuickVerse ® upgrade
        sales to our existing QuickVerse ® user
        base. QuickVerse ® 2007
        Windows was released in August 2006, eleven months following our 2005
        QuickVerse ® upgrade
        release and QuickVerse ® 2006
        Windows was released in September 2005, nine months following our 2004
        QuickVerse ® upgrade
        release. In the past, we have experienced greater sales within the first
        and
        second quarter of the fiscal year due to the then recent upgrade releases
        of our
        two main product lines, QuickVerse ® and
        Membership Plus ® .
 
 During
        each of the years ended December 31, 2005 and 2006, our sales efforts were
        focused on directly targeting end-users through telemarketing and Internet
        sales. However, as noted above, due to the consistency in our development
        schedule and the annual releases of our flagship product, QuickVerse ® ,
        upgrade
        sales are not increasing at a rapid rate. However, we anticipate that revenues
        will increase in the future as we continue to expand the content available
        for
        our QuickVerse ® products, develop new products for multiple platforms, and offer our products
        at
        a range of price points intended to appeal to various market sub-segments.
 
 Sales
        returns and allowances decreased approximately $586,000 from approximately
        $991,000 for the year ended December 31, 2005 to approximately $405,000 for
        the
        year ended December 31, 2006. As a percentage of gross revenues, sales returns
        and allowances also decreased from approximately 16% for the year ended December
        31, 2005 to approximately 10% for the year ended December 31, 2006. While
        this
        decrease in real terms is mainly attributable to our relative lack of product
        releases during the year ended December 31, 2006, we believe the percentage
        decline is mainly attributable to the timing of our product releases. Typically,
        sales returns and allowances trend upward after a new product is released
        as
        distributors and retail stores will return old product in exchange for the
        new
        product release. For the fourth quarter of 2005, we experienced a greater
        increase in sales returns and allowances due to QuickVerse ® 2006
        Windows shipping in September 2005 as compared to QuickVerse ® 2005
        Windows shipping in December 2004, just nine months earlier. Furthermore,
        sales
        returns and allowance for the year ended December 31, 2005 reflect the release
        of Membership Plus ® 2005
        (released in the first quarter 2005) as compared to a late release of Membership
        Plus ® 2007
        (released in the fourth quarter 2006). Due to the extended time-line between
        the
        releases of the Membership Plus ® product
        line, we have experienced fewer returns from retail stores as there was a
        significant lapse in time in the availability of a new product to exchange
        the
        old product with. During the year ended December 31, 2005 the following items
        contributed to the sales returns and allowances:
 
 ▪
              price
                  protections afforded to retailers who had purchased prior versions
                  of
                  Membership Plus®and
                  QuickVerse®within
                  one year or less of our release of upgraded versions of each of
                  Membership
                  Plus®,
                  in February 2005, and QuickVerse®,
                  in September 2005. Historically, our product upgrades have extended
                  over
                  two to three years and therefore, price protections were not issued;▪
              increased
                  price points associated with products introduced; and▪
              higher
                  actual returns on the Membership Plus®2005 product line due to some then unresolved maintenance issues
                  and the
                  loss of our primary developer of Membership Plus®.
 
 -27-
 Table
            of Contents
 Overall,
        we expect to release enhanced versions of our biggest-selling products on
        an
        annual basis generally going forward, and anticipate sales returns and
        allowances as a percentage of gross revenues to decrease over time as a result
        of increased stability in the functionality of our products, decreasing reliance
        on retail sales and increasing reliance on direct sales, which have historically
        resulted in fewer returns, and improved planning in the timing of new product
        version releases.
 
 **Cost
        of Sales**
 
 **Cost
                  of Sales for Years Ended December 31**
              
              
              **2006**
              
              
              **%
                  to Sales**
              
              
              2005
              
              
              %
                  to Sales
              
              
              Change
              
              
              %Direct
                  costs
              
              **$**
              **522,358**
              
              
              **13**
              **%**
              $
              674,846
              
              
              11
              %
              $
              (152,488
              )
              
              -23
              %Less
                  reserve for sales returns and allowances
              
              
              **(59,925**
              **)**
              
              **-1**
              **%**
              
              (148,245
              )
              
              -2
              %
              
              88,320
              
              
              -60
              %Amortization
                  of software development costs
              
              
              **706,445**
              
              
              **17**
              **%**
              
              806,531
              
              
              13
              %
              
              (100,086
              )
              
              -12
              %Royalties
              
              
              **354,464**
              
              
              **9**
              **%**
              
              471,651
              
              
              7
              %
              
              (117,187
              )
              
              -25
              %Freight-out
              
              
              **120,291**
              
              
              **3**
              **%**
              
              171,904
              
              
              3
              %
              
              (51,613
              )
              
              -30
              %Fulfillment
              
              
              **111,767**
              
              
              **3**
              **%**
              
              149,477
              
              
              2
              %
              
              (37,710
              )
              
              -25
              %Cost
                  of sales
              
              **$**
              **1,755,400**
              
              
              **42**
              **%**
              $
              2,126,164
              
              
              34
              %
              $
              (370,764
              )
              
              -17
              %
 
 Cost
        of
        sales consists primarily of direct costs, amortized software development
        costs,
        non-capitalized technical support wages, royalties paid to third party providers
        of intellectual property and the costs associated with reproducing, packaging,
        fulfilling and shipping our products. Exclusive of third-party royalties
        paid,
        our cost of sales decreased approximately $254,000 from approximately $1,655,000
        for the year ended December 31, 2005 to approximately $1,401,000 for the
        year
        ended December 31, 2006, and increased as a percentage of gross revenues
        approximately 8% for the year ended December 31, 2006. The overall percentage
        increase is predominantly attributable to increased amortization of software
        development costs, which, as a percentage of gross revenues, increased
        approximately 4% from 13% for the year ended December 31, 2005 to approximately
        17% for the year ended December 31, 2006. The amortization recognized during
        the
        year ended December 31, 2006 resulted from several new software releases
        in 2005
        and 2006 including:
 
 ▪
              Membership
                  Plus®2005
                  (released February 2005),▪
              QuickVerse®2006 Macintosh (released June 2005),▪
              Sermon
                  Builder®4.0 (released June 2005),▪
              QuickVerse®2006 Windows (released September 2005),▪
              QuickVerse®2006 Mobile (released October 2005),▪
              QuickVerse®2006 Bible Suite (released March 2006),▪
              QuickVerse®2006 Macintosh Gold Edition (released June 2006),▪
              Holman
                  Christian Standard Bible®(released April 2006),▪
              QuickVerse
                  2007®Windows (released August 2006) and▪
              Membership
                  Plus®2007 (released October 2006).
 
 The
        shorter timeframes between our product upgrades along with the increased
        amount
        of product releases during the fiscal year 2005 led to the increased amount
        of
        amortization as a percentage of gross revenues recognized for the year ended
        December 31, 2006.
 
 -28-
 Table
            of Contents
 Comparatively,
        during the year ended December 31, 2005, the amortization recognized resulted
        from:
 
 ▪
              QuickVerse®2005 Windows (released December 2004),▪
              Membership
                  Plus®2005 (released February 2005),▪
              QuickVerse®2006 Macintosh (released June 2005),▪
              Sermon
                  Builder®4.0 (released June 2005),▪
              QuickVerse®2006 Windows (released September 2005),▪
              QuickVerse®2006 Mobile (released October 2005),▪
              QuickVerse®8.0 (released December 2003), and▪
              Membership
                  Plus®8.0 (released January 2004).
 
 The
        direct costs and manufacturing overhead percentage are expected to continue
        at
        these levels as more development projects are implemented in a shortened
        timeframe.
 
 Fulfillment
        costs decreased approximately $38,000 from approximately $150,000 for the
        year
        ended December 31, 2005 to approximately $112,000 for the year ended December
        31, 2006. This decrease is a direct result of decreased sales volume coupled
        with continued improvements in efficiency at our fulfillment
        center.
 
 Freight
        costs decreased approximately $52,000 from approximately $172,000 for the
        year
        ended December 31, 2005 to approximately $120,000 for the year ended December
        31, 2006. As with fulfillment, this decrease resulted from the overall decrease
        we experienced year over year in sales volume.
 
 Royalties
        paid to third party providers of intellectual property decreased approximately
        $117,000 from approximately $472,000 for the year ended December 31, 2005
        to
        approximately $355,000 for the year ended December 31, 2006, and increased
        approximately 2% as a percentage of gross revenues for the year ended December
        31, 2006. The percentage increase reflects the following:
 
 ▪
              sales
                  of QuickVerse®2005 editions to a liquidator in the first and third quarters of
                  2006 and
                  no sales to a liquidator in the first and third quarters of
                  2005;▪
              our
                  increased sales focus on the QuickVerse®product line in connection with which our continuing royalty obligations
                  are relatively high;▪
              an
                  overall increase in retail sales due to the early release of the
                  QuickVerse®2007 product line;▪
              an
                  overall decrease in upgrade sales of QuickVerse®due to the increased frequency of product version upgrades;
                  and▪
              our
                  decreased sales focus for the period on the Membership Plus®product line, in connection with which we have no continuing royalty
                  obligations. We experienced an eight month delay in our annual
                  upgrade
                  release of Membership Plus®2007 and, during the first quarter of 2005, we released an upgrade
                  to
                  Membership Plus®in
                  February 2005.
 
 Our
        royalty payments are expected to increase in the future in real terms as
        sales
        to new users are expected to increase, more development projects are implemented
        for new and/or enhanced products, and as we continue to expand the content
        available for our QuickVerse ® line of
        products. Upgrade sales will remain only subject to royalties on their content
        additions.
 
 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 deemed to constitute development, and, accordingly,
        the costs of the revision and upgrade are capitalized. Capitalized costs
        are
        amortized on a product-by-product basis using the greater of (i) straight-line
        amortization over the estimated life of the product or (ii) 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.
 
 -29-
 Table
            of Contents
 Our
        software development costs for the years ended December 31, 2006 and 2005
        are
        summarized in the table below. These costs, consisting primarily of direct
        and
        indirect labor and related overhead charges, capitalized during the years
        ended
        December 31, 2006 and 2005, were approximately $491,000 and approximately
        $812,000, respectively. Accumulated amortization of these development costs,
        included in cost of sales, totaled approximately $706,000 and approximately
        $807,000 for the years ended December 31, 2006 and 2005, respectively. The
        overall decrease in the amortization, as well as the overall decrease in
        the
        capitalized costs, reflects the decreased amount of product releases for
        the
        year ended December 31, 2006. Furthermore, during the year ended December
        31,
        2005 we were capitalizing the development costs related to our
        QuickVerse ® Macintosh product line which was our first introduction for the Macintosh
        platform.
 
 **Software
                  Development Costs For Years Ended December 31**
              
              
              **2006**
              
              
              2005Beginning
                  balance
              
              **$**
              **707,067**
              
              $
              701,289Capitalized
              
              
              **491,073**
              
              
              812,309Amortized
                  (cost of sales)
              
              
              **706,445**
              
              
              806,531Ending
                  balance
              
              **$**
              **491,695**
              
              $
              707,067Research
                  and development expense (General and administrative)
              
              **$**
              **190,726**
              
              $
              216,397
 
 We
        expect
        our cost of sales to increase over time consistent with anticipated increases
        in
        revenues due to aggressive product development and introduction
        schedules.
 
 **Sales,
        General and Administrative**
 
 **Sales,
                  General and Administrative Costs for Years Ended December
                  31**
              
              
              **2006**
              
              
              **%
                  to Sales**
              
              
              2005
              
              
              %
                  to Sales
              
              
              Change
              
              
              %***Selected
                  expenses:***Commissions
              
              **$**
              **192,812**
              
              
              **5**
              **%**
              $
              695,914
              
              
              11
              %
              $
              (503,102
              )
              
              -72
              %Advertising
                  and direct marketing
              
              
              **253,676**
              
              
              **6**
              **%**
              
              576,754
              
              
              9
              %
              
              (323,079
              )
              
              -56
              %Sales
                  and marketing wages, reclassified
              
              
              **334,295**
              
              
              **8**
              **%**
              
              342,784
              
              
              5
              %
              
              (8,488
              )
              
              -2
              %**Total
                  sales and marketing**
              
              **$**
              **780,783**
              
              
              **19**
              **%**
              $
              1,615,452
              
              
              26
              %
              $
              (834,669
              )
              
              -52
              %Research
                  and development
              
              
              **190,726**
              
              
              **5**
              **%**
              
              216,397
              
              
              3
              %
              
              (25,670
              )
              
              -12
              %Personnel
                  costs
              
              
              **739,822**
              
              
              **18**
              **%**
              
              816,955
              
              
              13
              %
              
              (77,133
              )
              
              -9
              %Legal
              
              
              **91,069**
              
              
              **2**
              **%**
              
              187,499
              
              
              3
              %
              
              (96,430
              )
              
              -51
              %Accounting
              
              
              **66,855**
              
              
              **2**
              **%**
              
              27,735
              
              
              0
              %
              
              39,120
              
              
              141
              %Rent
              
              
              **101,238**
              
              
              **2**
              **%**
              
              82,172
              
              
              1
              %
              
              19,066
              
              
              23
              %Telecommunications
              
              
              **41,554**
              
              
              **1**
              **%**
              
              53,092
              
              
              1
              %
              
              (11,538
              )
              
              -22
              %Corporate
                  services
              
              
              **54,000**
              
              
              **1**
              **%**
              
              73,972
              
              
              1
              %
              
              (19,972
              )
              
              -27
              %Investor
                  services
              
              
              **46,875**
              
              
              **1**
              **%**
              
              ---
              
              
              0
              %
              
              46,875
              
              
              0
              %Other
                  general and administrative costs
              
              
              **350,619**
              
              
              **8**
              **%**
              
              480,404
              
              
              8
              %
              
              (129,785
              )
              
              -27
              %**Total
                  general and administrative**
              
              **$**
              **1,682,758**
              
              
              **41**
              **%**
              $
              1,938,226
              
              
              31
              %
              $
              (255,468
              )
              
              -13
              %
 
 As
        gross
        revenues decreased approximately $2,163,000 from our year ended December
        31,
        2005 to our year ended December 31, 2006, total sales, general and
        administrative costs decreased approximately $1,090,000 from approximately
        $3,554,000 for the year ended December 31, 2005 to approximately $2,464,000
        for
        the year ended December 31, 2006. Of the total sales, general and administrative
        costs, sales and marketing expenses decreased approximately $834,000 from
        approximately $1,615,000 for the year ended December 31, 2005 to approximately
        $781,000 for the year ended December 31, 2006. Included in sales expenses,
        third-party telemarketing commissions decreased approximately $503,000 from
        approximately $696,000 for the year ended December 31, 2005 to approximately
        $193,000 for the year ended December 31, 2006, and decreased as a percentage
        of
        gross revenues from approximately 11% to approximately 5% for the years ended
        December 31, 2005 and 2006, respectively. This decrease is mainly attributed
        to
        the lack of product releases during the year ended December 31, 2006, as
        well as
        the use of our own recently developed in-house direct telemarketing sales
        team,
        an initiative specifically aimed at reducing our reliance on third-party
        telemarketing services.
 
 -30-
 Table
            of Contents
 Advertising
        and direct marketing costs decreased approximately $323,000 from approximately
        $577,000 for the year ended December 31, 2005 to approximately $254,000 for
        the
        year ended December 31, 2006 and decreased as a percentage of gross revenues
        from approximately 9% to approximately 6% for the years ended December 31,
        2005
        and 2006, respectively. The decrease in advertising and direct marketing
        costs
        reflect the fact that there was no upgrade release to the Membership
        Plus ® product
        line during the first nine months of the year ended December 31, 2006 as
        compared to the Membership Plus ® 2005
        release in the early part of the year ended December 31, 2005. In addition,
        there was as an overall decrease in the number of product releases during
        the
        year ended December 31, 2006 compared to that of the year ended December
        31,
        2005. We anticipate advertising and direct marketing costs to increase in
        future
        periods as we continue to enhance our product visibility online, increase
        and
        focus more on our direct marketing efforts, and increase the scope and frequency
        of our print advertising campaigns in order to maximize sales associated
        with
        new products and product enhancements.
 
 Wages
        associated with our sales team and marketing team have been reclassified
        and are
        included in the total sales and marketing costs. The reclassified sales and
        marketing wages decreased approximately $9,000 from approximately $343,000
        for
        the year ended December 31, 2005 to approximately $334,000 for the year ended
        December 31, 2006. This decrease is attributed to the streamlining of our
        CBA
        sales team. We expect the sales and marketing wages to increase in future
        periods as we expand our in-house direct telemarketing sales team as well
        as our
        other marketing and related personnel.
 
 Research
        and development costs include 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). Software development
        costs related to third-party developers and direct labor expensed as research
        and development (see table above) amounted to approximately $216,000 for
        the
        year ended December 31, 2005 compared to approximately $191,000 for the year
        ended December 31, 2006. The decrease in 2006 reflects fewer development
        projects in our pipeline as compared to 2005. Research and development expenses
        are expected to increase in future periods as we continue to expand our internal
        development team, add new products and product versions, and as we continue
        to
        expand the amount of content made available to our QuickVerse ® users.
 
 The
        capitalization of direct and indirect labor and related overhead charges
        as
        software development costs (see “Cost of Sales” above) decreased by
        approximately $113,000 from approximately $396,000 for the year ended December
        31, 2005 to approximately $283,000 for the year ended December 31, 2006.
        This
        decrease reflects the development of our QuickVerse ® Macintosh product line during the year ended December 31, 2005, which was
        our
        first product line for the Macintosh platform. Furthermore, the decrease
        is
        reflective of the decreased amount of development projects for the year ended
        December 31, 2006 as well as the reduction in our development staff. It is
        anticipated that personnel costs will continue to increase in future periods
        as
        operating capital is available and deployed to further fund the staffing
        requirements of our product development, direct sales teams and marketing
        staff.
 
 Total
        net
        personnel costs decreased approximately $77,000, from approximately $817,000
        for
        the year ended December 31, 2005, to approximately $740,000 for the year
        ended
        December 31, 2006. In addition, gross direct salaries and wages, before
        adjustment of capitalized wages and reclassifications (see prior paragraph),
        decreased approximately $129,000, from approximately $1,603,000 to approximately
        $1,474,000, over the same period. The decrease in direct salaries and wages
        was
        a result of losing our main developer for our Membership Plus ® product
        line as well as the loss of our marketing manager. Due to a cost cutting
        initiative, we also lost our Vice President of Sales and Marketing and an
        individual on our product development staff. However, we do anticipate direct
        salaries and wages to in the future given our continued focus on expanding
        our
        direct telemarketing sales team, marketing staff and product development
        staff.
        As a percentage of gross revenues, direct salaries and wages increased
        approximately 11% from approximately 25% for the year ended December 31,
        2005 to
        approximately 36% for the year ended December 31, 2006.
 
 -31-
 Table
            of Contents
 Gross
        direct salaries and wages includes approximately $-0- and $20,000 in expense
        for
        upper management year-end bonus accrual for the years ending December 31,
        2005
        and 2006, respectively. Furthermore, we recognized approximately $18,000
        of
        expense, included in direct salaries and wages, in connection with the grant
        of
        850,000 stock options to non-executive employees for the year ended December
        31,
        2006.
 
 As
        a
        result of having restructured our health benefits plans in October 2005,
        our
        employment-related healthcare costs have decreased approximately $32,000
        from
        approximately $140,000 for the year ended December 31, 2005 to approximately
        $108,000 for the year ended December 31, 2006. In July 2005, we initiated
        a
        Simple IRA retirement plan for our employees and for those who participated
        we
        decided to match up to 3% of the employee’s annual gross pay. Therefore, we
        anticipate that our costs related to this benefit will increase in future
        periods as more employees take advantage of the retirement plan.
 
 Direct
        legal costs decreased approximately $96,000 for the year ended December 31,
        2006
        as a result of our having concluded certain ongoing registration and related
        securities matters early in the year. It is anticipated that legal costs
        will
        increase and decrease in future periods in direct relation to the level of
        our
        capital-raising initiatives, acquisition and/or divestiture-related initiatives,
        and other transactional activity. .
 
 Accounting
        and audit related expenses increased approximately $39,000 for the year ended
        December 31, 2006 as a result of engaging a new principal accounting firm
        for
        our fiscal year end 2005 audit. It is anticipated that accounting costs will
        continue to increase in the future as we expect that our fees payable to
        the new
        principal accounting firm, which we expect to utilize on an ongoing basis,
        will
        generally be higher than those payable to our former accounting
        firm.
 
 Rent
        costs increased approximately $19,000 for the year ended December 31, 2006
        as a
        result of periodic percentage increase provisions in our lease agreements.
        It is
        anticipated that rent cost will continue to increase in the future as our
        lease
        agreement for our office/warehouse facilities in Omaha, Nebraska extends
        through
        May 2007, and therefore, we will need to review our options and enter into
        a new
        lease agreement which will most likely require a higher dollar value per
        square
        foot. We are also exploring the possibility of leasing a warehouse facility
        in
        Omaha, Nebraska that would enable us to cease our dependency on a third-party
        to
        fulfill our retail product sales. Furthermore, our lease agreement for our
        office space in Naperville, Illinois extends through March 2009.
 
 Telecommunications-related
        costs decreased approximately $12,000 for the year ended December 31, 2006
        as a
        result of our having switched our local and long-distance carriers beginning
        in
        February 2005. Our call volume enabled us to change our service to dedicated
        T-1
        lines which in turn reduced our long-distance charges. We also invested in
        internet protocol phones for our remote locations which reduced the overall
        local and long distance charges in our Illinois and Iowa locations. Furthermore,
        we experienced a decrease in call volume in the technical support and customer
        service departments for the year ended December 31, 2006 due to the delayed
        Membership Plus ® upgrade
        release. We anticipate an increase in call volume during the first quarter
        of
        2007 as a result of our October 2006 release of Membership Plus ® 2007. In
        general, we anticipate our telecommunications-related costs to increase in
        the
        future consistent with overall revenue growth.
 
 Corporate
        service fees decreased approximately $20,000 for the year ended December
        31,
        2006 resulting from the expiration of an independent consulting agreement
        and
        the resultant ability on our part to cease carrying the associated expense
        for a
        2004 issuance to such consultant of a warrant to purchase 600,000 shares
        of
        common stock which had been allocated over the term of the agreement. During
        the
        first part of 2006, we engaged the services of an independent consultant
        for
        purposes of business development. We do expect these fees to increase in
        future
        periods as we have engaged the services of another independent consultant
        beginning in March 2007 for purposes of business development.
 
 Finally,
        investor services fees increased approximately $47,000 for the year ended
        December 31, 2006 as we entered into an investor relations service agreement
        in
        April 2006. These fees are related to the hiring of an investor relations
        firm
        and the expense for the issuance of a total of 250,000 restricted shares
        of
        common stock allocated over the term of the investor relations contract.
        We
        anticipate these fees to increase in future periods.
 
 -32-
 Table
            of Contents
 **Registration
        Rights Penalties**
 
 As
        of
        December 31, 2006, and in connection with a July 19, 2004 private placement
        with
        Barron Partners, LP and a certain Registration Rights Agreement, as amended,
        we
        had accrued a total of approximately $490,000 (284 days at $1,726 per day)
        in
        penalties under the terms of the Registration Rights Agreement, of which
        we paid
        $150,000 prior to April 7, 2006. On April 7, 2006, we signed a two-year
        promissory note for $336,000 together with simple interest at the rate of
        8% per
        annum with Barron Partners for the unpaid registration rights penalties.
        The
        note agreement calls for monthly installments for the first twelve months
        of
        $10,000, beginning May 1, 2006 and $20,000 per month thereafter. In the
        aggregate, the accrual of, and the payments made in connection with, the
        registration rights penalties have had a material adverse effect on our
        business, our financial condition, including liquidity and profitability,
        and
        our results of operations, including a decrease in our net income of
        approximately $49,000 for the year ended December 31, 2006.
 
 **Derivatives**
 
 In
        May
        2004, we issued a three-year warrant to purchase up to 600,000 shares of
        our
        common stock to a consultant. This warrant may be exercised on a cashless
        basis
        at the option of the holder at a price per share of $0.15. In November 2004,
        we
        issued two five-year warrants to purchase an aggregate of 21,875,000 shares
        of
        our common stock in connection with a certain Stock Purchase Agreement completed
        with Barron Partners, LP, on July 19, 2004. The first warrant entitles the
        holder to purchase up to 10,937,500 shares of our 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 our common stock at a price of $0.60 per
        share.
        Each warrant is subject to standard adjustment provisions and each provides
        for
        settlement in registered shares of our common stock and may, at the option
        of
        the holder, be settled in a cashless, net-share settlement.
 
 These
        warrants have been accounted for as a liability according to the guidance
        of
        EITF 00-19, *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock* .
        In
        accordance with the accounting mandate, the derivative liability associated
        with
        these warrants has been, and shall continue to be, until each is either fully
        exercised or expires, adjusted to fair value at each balance sheet date and
        is
        accordingly reassessed at each such time to determine whether the warrants
        should be classified (or reclassified, as appropriate) as a liability or
        as
        equity. Under EITF 00-19, a decrease in our stock price results in a decrease
        in
        the fair value of the derivative liability and a valuation gain to be recognized
        in our income statement whereas an increase in our stock price results in
        an
        increase in the fair value of the derivative liability and a valuation loss
        to
        be recognized in our income statement. At December 31, 2006 and 2005, the fair
        value of the derivative liability was approximately $527,000 and $2,062,000,
        respectively, and a fair value adjustment of approximately $1,536,000 has
        been
        included in other income for the year ended December 31, 2006 and a fair
        value
        adjustment of $34,000 has been included in other expenses for the year ended
        December 31, 2005. If our stock price rebounds in the future to a level
        consistent with our stock price at December 2005, the fair value of the
        derivative liability will increase and therefore, we could potentially reflect
        a
        valuation loss.
 
 **Amortization**
 
 Amortization
        expenses remained steady at approximately $532,000 for the years ended December
        31, 2006 and 2005. The software license acquired from TLC in July of 1999
        (the
“1999 license”) is amortized over a 10 year useful life and will have been fully
        amortized by the close of the year ending December 31, 2009. Amortization
        expense for 2006 and 2005 reflect the continual amortization of the software
        license as well as the amortization of our website, www.quickverse.com, which
        we
        launched 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.
 
 -33-
 Table
            of Contents
 We
        have
        recognized a net deferred tax asset whose realization depends on generating
        future taxable income. At December 31, 2006, management adjusted the amount
        of
        valuation allowance based on the assessment that we 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 federal income tax purposes, of approximately
        $9,052,000. These carryforwards are the result of income tax losses generated
        in
        2000 ($2,086,000 expiring in 2020), 2001 ($5,191,000 expiring in 2021), 2002
        ($235,000 expiring in 2022), 2005 ($956,000 expiring in 2025), and 2006
        ($584,000 expiring in 2026). We will need to achieve a minimum annual taxable
        income, before deduction of operating loss carryforwards, of approximately
        $486,000 to fully utilize the current loss carryforwards. Although there
        can be
        no assurance, we expect the deductible temporary differences (reserves) to
        reverse sometime beyond the next fiscal year.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 Our
        primary needs for liquidity and capital resources are the funding of our
        continued operations, which includes the ongoing internal development of
        new
        products, expansion and upgrade of existing products, and marketing and sales.
        Although there can be no assurance, we believe cash generated through our
        continuing operations will be at least minimally sufficient to sustain our
        operations, albeit with very limited growth. However, our pursuit of an
        aggressive growth plan, whether based on internally developed products or
        strategic product line acquisitions and/or licensing opportunities will likely
        require funding from outside sources. Funding from outside sources may include
        but is not limited to the exercise of outstanding warrants and pursuit of
        other
        financing options such as commercial loans, common stock and/or preferred
        stock
        issuances and convertible notes. At this time, we have no legally committed
        funds for future capital expenditures including software development.
 
 **Working
                  Capital at December 31**
              
              
              **2006**
              
              
              2005
              
              
              Change
              
              
              %Current
                  assets
              
              **$**
              **725,178**
              
              $
              867,750
              
              $
              (142,572
              )
              
              -16
              %Current
                  liabilities
              
              **$**
              **2,431,002**
              
              $
              3,893,447
              
              $
              (1,462,445
              )
              
              -38
              %Retained
                  deficit
              
              **$**
              **7,098,397**
              
              $
              7,752,097
              
              $
              (653,700
              )
              
              -8
              %
 
 As
        of
        December 31, 2006, we had $725,178 in current assets, $2,431,002 in current
        liabilities and a retained deficit of $7,098,397. We had income before income
        taxes of $361,102 and a net income after income taxes of $653,700 for the
        year
        ended December 31, 2006. For 2006, we had a gain of approximately $1,536,000
        from the fair value adjustment of derivatives and a non-recurring expense
        totaling approximately $49,000 related to registration rights penalties.
        See
“Results Of Operations” above. By contrast, as of December 31, 2005 we had
        $867,750 in current assets, $3,893,447 in current liabilities and a retained
        deficit of $7,752,097. Non-recurring expenses for 2005 included registration
        rights penalties totaling approximately $437,000 and a loss of approximately
        $34,000 form the fair value adjustment of derivatives.
 
 **Cash
                  Flows for Years Ended December 31**
              
              
              **2006**
              
              
              2005
              
              
              Change
              
              
              %Cash
                  flows provided by operating activities
              
              **$**
              **538,050**
              
              $
              612,345
              
              $
              (74,295
              )
              
              -12
              %Cash
                  flows (used) by investing activities
              
              **$**
              **(516,987**
              **)**
              $
              (801,422
              )
              $
              284,435
              
              
              -35
              %Cash
                  flows (used) by financing activities
              
              **$**
              **(91,951**
              **)**
              $
              (32,722
              )
              $
              (59,229
              )
              
              181
              %
 
 Net
        cash
        provided by operating activities was approximately $538,000 for the year
        ended
        December 31, 2006, and approximately $612,000 for the year ended December
        31,
        2005. The decrease was primarily due to a decrease in the amounts received
        from
        customers resulting from decreased sales, a temporary decrease in payments
        to
        trade vendors and content provides and an increase in interest paid that
        was
        related to a loan agreement. See “Financing” below.
 
 -34-
 Table
            of Contents
 Net
        cash
        used in investing activities was approximately $517,000 for the year ended
        December 31, 2006 and approximately $801,000 for the year ended December
        31,
        2005. The decrease was mainly the result of capitalizing fewer costs associated
        with software development. Further, during the year ended December 31, 2005,
        the
        restriction on the cash held in reserve by our merchant banker was lifted,
        thereby freeing up additional cash not previously accessible by us.
 
 Net
        cash
        used by financing activities was approximately $92,000 for the year ended
        December 31, 2006, and approximately $33,000 for the year ended December
        31,
        2005. The increase was due to an increase in payments made on long-term notes
        payable. Furthermore, net cash used for 2006 reflects proceeds received from
        a
        convertible note payable of $150,000 as well as the repayment of the convertible
        note payable of $150,000. See “Financing” below.
 
 ***Financing***
 
 As
        part
        of the July 19, 2004 financing transaction with Barron Partners, LP, we entered
        into a certain Registration Rights Agreement pursuant to which we became
        committed to registering all of the shares issued as part of such transaction,
        including those issuable under each of two 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. On February 1, 2006, the SEC declared such registration statement
        effective. Due to continued delays in effectiveness of the registration
        statement (due principally to ongoing efforts made necessary by our
        determination to restate certain of our historical financial information),
        and
        in accordance with the Registration Rights Agreement, we accrued a total
        of
        approximately $490,000 (284 days at $1,726 per day) in penalties, of which
        we
        had paid $150,000 prior to April 7, 2006. On April 7, 2006, we signed a two-year
        promissory note for $336,000 together with simple interest at the rate of
        8% per
        annum with Barron Partners for the unpaid registration rights penalties.
        The
        note agreement calls for monthly installments for the first twelve months
        of
        $10,000, beginning May 1, 2006 and $20,000 per month thereafter. The accrual
        and
        payment on the registration rights penalties has had a material adverse effect
        on our business, our financial condition, including liquidity and profitability,
        and our results of operations, including a corresponding $49,000 decrease
        in our
        net income for the year ended December 31, 2006.
 
 On
        July
        20, 2006, we entered into a loan agreement with an individual for the principal
        sum of $150,000, to fund an existing working capital deficit. The loan was
        evidenced by a convertible secured promissory note bearing interest at a
        rate of
        10% per thirty-day period with the principal, together with all accrued
        interest, due on or before September 18, 2006. In further consideration of
        the
        loan, we issued the lender a three-year common stock purchase warrant to
        acquire
        up to an aggregate of 100,000 shares of our common stock at an exercise price
        of
        $0.07 per share. On September 19, 2006, we entered into a Modification and
        Extension Agreement in connection with this note. As of the original maturity
        date and in accordance with the original terms of the loan agreement, we
        repaid
        fifty percent of the original principal ($75,000). This Modification and
        Extension Agreement extended the repayment term of the balance of the
        outstanding principal under the loan agreement ($75,000), as well as the
        interest payable thereon and on the principal previously repaid, until October
        20, 2006. In consideration for the extension of the maturity date, we agreed
        to
        pay an amount equal to one percentage point on the principal that remains
        outstanding ($750). On October 19, 2006, in connection with the above-mentioned
        loan, we repaid in full the remaining principal ($75,000), the interest payable
        on the original principal amount of $150,000 ($35,416.67) and the consideration
        payable for the extension of the maturity date ($750).
 
 We
        have
        been unsuccessful in previous attempts to secure bank financing due to our
        internal financial ratios and negative working capital position and do not
        expect that we will be successful in securing any such financing unless and
        until our ratios in this regard improve. Although we have, in the past, secured
        financing on our open accounts receivable, we were unable to pursue that
        option
        because of a lien placed upon our accounts receivable, together with all
        of our
        other assets, in connection with the security interest granted to the lender
        for
        the July 20, 2006 loan. As of October 19, 2006, however, this loan was retired
        in full and financings secured against our open accounts receivable may once
        again, therefore, be a possible option for us in satisfying our future financing
        needs.
 
 -35-
 Table
            of Contents
 **Contractual
        Liabilities**
 
 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 March 2009. We are responsible for all insurance
        expenses associated with this lease.
 
 At
        December 31, 2006, the future minimum rental payments required under these
        leases are as follows:
 
 2007
              
              $
              43,4582008
              
              
              16,2802009
              
              
              4,070Total
                  future minimum rental payments
              
              $
              63,808
 
 We
        lease
        telephone equipment under a capital lease due to expire 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.
        Minimum
        future lease payments under capital leases as of December 31, 2006 for each
        of
        the next five years and in the aggregate are:
 
 2007
              
              $
              13,7262008
              
              
              13,7262009
              
              
              12,5822010
              
              
              ---2011
              
              
              ---Total
                  minimum lease payments
              
              
              40,034Less:
                  Amount representing interest
              
              
              6,248Total
                  obligations under capital lease
              
              
              33,786Less:
                  Current installments of obligations under capital lease
              
              
              10,318Long-term
                  obligation under capital lease
              
              $
              23,468
 
 **The
        Potential Impact of Known Facts, Commitments, Events and Uncertainties on
        Future
        Operating Results or Future Liquidity Requirements**
 
 **New
        Accounting Pronouncements**
 
 In
        the
        past, we have applied Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
        for Stock Issued to Employees,* and
        related interpretations in accounting as allowed by SFAS No 123, *Accounting
        for Stock Based Compensation* ,
        for
        various forms of share-based awards including incentive and nonqualified
        stock
        options and stock appreciation rights attached to stock options; and therefore,
        no compensation cost had been recognized. However, in December 2004, the
        FASB
        issued SFAS No 123 (R), *Share-Based
        Payment* ,
        which
        replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123 (R)
        requires compensation costs related to share-based payment transactions to
        be
        recognized in the financial statements. With limited exceptions, the amount
        of
        compensation cost will be measured based on the fair value on the grant date
        of
        the equity or liability instruments issued. Compensation cost will be recognized
        over the period that the service is provided for that award. Effective
        January 1, 2006, we adopted SFAS No. 123(R). We do not believe the adoption
        of
        SFAS No. 123 (R) to have a material impact on our business, our financial
        condition, including liquidity and profitability, or our results of
        operations.
 
 In
        February 2006, the FASB issued Statement No. 155, *Accounting
        for Certain Hybrid Financial Instruments - an amendment of FASB Statements
        No.
        133 and 140* .
        The
        Statement permits fair value remeasurement for any hybrid financial instrument
        that contains an embedded derivative that otherwise would require bifurcation.
        The new Statement also requires companies to identify interests in securitized
        financial assets that are freestanding derivatives or contain embedded
        derivatives that would have to be accounted for separately. This new Statement
        is effective for fiscal years beginning after September 15, 2006 with early
        adoption permitted. We do not believe the adoption of SFAS No. 155 to have
        a
        material impact on our business, our financial condition, including liquidity
        and profitability, or our results of operations.
 
 -36-
 Table
            of Contents
 In
        March
        2006, the FASB issued Statement No. 156, *Accounting
        for Servicing of Financial Assets, an amendment of Statement No.
        14* .
        SFAS
        No. 156 requires all separately recognized servicing assets and servicing
        liabilities to be initially measured at fair value, if practicable, and permits
        an entity to subsequently measure those servicing assets and servicing
        liabilities at fair value. SFAS No. 156 is effective for fiscal years beginning
        after September 15, 2006. We do not believe the adoption of SFAS No. 156
        to have
        a material impact on our business, our financial condition, including liquidity
        and profitability, or our results of operations.
 
 In
        April
        2006, the FASB issued Staff Position FIN 46(R)-6, *Determining
        Variability to be Considered in Applying FIN 46(R)* .
        FIN
        46(R)-6 states that the variability to be considered in applying FIN 46(R)
        shall
        be based on an analysis of the design of the entity following a two-step
        process. The first step is to analyze the nature of the risks in the entity.
        The
        second step would be to determine the purpose(s) for which the entity was
        created and determine the variability (created by the risks identified in
        Step
        1) the entity is designed to create and pass along to its interest holders.
        The
        guidance in this FASB Staff Position is effective prospectively beginning
        July
        1, 2006, although companies have until December 31, 2006 to elect retrospective
        applications. We do not believe the adoption of FIN 46(R)-6 to have a material
        impact on our business, our financial condition, including liquidity and
        profitability, or our results of operations.
 
 In
        July
        2006, the FASB released FIN 48, *Accounting
        for Uncertainty in Income Taxes - an interpretation of SFAS No.
        109* .
        This
        interpretation clarifies the accounting for uncertainty in income taxes
        recognized in accordance with SFAS No. 109. This interpretation prescribes
        a
        recognition threshold and measurement attribute for financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return. It also provides guidance on derecognition, classification, interest
        and penalties, interim periods and disclosure. FIN 48 is effective for fiscal
        years beginning after December 15, 2006. We have adopted FIN 48 as of January
        1,
        2007, and we do not believe the adoption to have a material impact on our
        business, our financial condition, including liquidity and profitability,
        or our
        results of operations.
 
 In
        September 2006, the FASB issued Statement No. 157, *Fair
        Value Measurements,* which
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles, and expands disclosures about fair
        value measurements. This Statement applies under other accounting pronouncements
        that require or permit fair value measurements, but does not require any
        new
        fair value measurements. SFAS No. 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007. We are currently
        assessing the potential impact that adoption of SFAS No. 157 will have on
        our
        financial statements.
 
 In
        September 2006, the FASB issued Statement No. 158, *Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans—an
        amendment of FASB Statements No. 87, 88, 106, and 132(R).* This
        Statement requires an employer to recognize the overfunded or underfunded
        status
        of a defined benefit postretirement plan (other than a multiemployer plan)
        as an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not-for-profit organization. This Statement also requires an employer
        to
        measure the funded status of a plan as of the date of its year-end statement
        of
        financial position, with limited exceptions. SFAS 158 is effective for financial
        statements issued for fiscal years ending after December 15, 2006. We do
        not
        believe the adoption of SFAS No. 158 to have a material impact on our business,
        our financial condition, including liquidity and profitability, or our results
        of operations.
 
 In
        February 2007, the FASB issued SFAS Statement No. 159, The *Fair
        Value Option for Financial Assets and Financial Liabilities* .
        This
        Statement provides companies with an option to report selected financial
        assets
        and liabilities at fair value. The standard’s objective is to reduce both
        complexity in accounting for financial instruments and the volatility in
        earnings caused by measuring related assets and liabilities differently.
        The
        standard requires companies to provide additional information that will help
        investors and other users of financial statements to more easily understand
        the
        effect of the company’s choice to use fair value on its earnings. It also
        requires companies to display the fair value of those assets and liabilities
        for
        which the company has chosen to use fair value on the face of the balance
        sheet.
        The new standard does not eliminate disclosure requirements included in other
        accounting standards, including requirements for disclosures about fair value
        measurements included in SFAS No. 157 and SFAS No. 107, *Disclosures
        about Fair Value of Financial Instruments* .
        SFAS
        No. 159 is effective as of the start of fiscal years beginning after November
        15, 2007. Early adoption is permitted. We are currently assessing the potential
        impact that adoption of SFAS No. 159 will have on our financial
        statements.
 
 -37-
 Table
            of Contents
 **RISK
        FACTORS**
 
 Several
        of the matters discussed in this annual report on Form 10-KSB for the fiscal
        year ended December 31, 2006 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 annual 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. Although we believe that our
        existing working capital, together with cash flow from operations, will be
        adequate to meet our minimum anticipated liquidity requirements over the
        next
        twelve months, given our initiative toward rapid revenue growth and due to
        our
        need to service certain long-term liabilities, it is likely to become necessary
        for us to raise additional capital to support growth and/or otherwise finance
        potential acquisitions. Furthermore, there can be no assurance that our
        operations or access to external sources of financing will continue to provide
        resources sufficient to satisfy our liabilities arising in the ordinary course
        of business, and while it may be possible to borrow funds as required, any
        such
        additional capital is likely to require that we sell and issue additional
        equity
        and/or convertible securities, including shares issuable upon exercise of
        currently outstanding warrants, any of which issuances would have a dilutive
        effect on holdings of existing shareholders. See “Management’s Discussion and
        Analysis of Financial Condition and Results of Operations - Liquidity and
        Capital Resources”.
 
 ***There
        is uncertainty as to our ability to continue as a going concern.***
 
 Our
        audited financial statements for the period ending December 31, 2006, including
        the footnotes thereto, call into question our ability to continue as a going
        concern. This conclusion was drawn from the fact that, as of the date of
        those
        financial statements, we had a negative current ratio and total liabilities
        in
        excess of total assets. Those factors, as well as ambiguities associated
        with
        our ability to secure additional financing for continued operations, if
        necessary, created, at the time, an uncertainty regarding our ability to
        continue as a going concern, and, furthermore, there can be no assurance
        that we
        have mitigated against this risk, and that our financial statements, going
        forward, will not also call into question our ability to continue as a going
        concern. See Note 19 in the Notes to the Consolidated Financial Statements
        for
        the year ended December 31, 2006.
 
 ***Our
        accumulated deficit makes it harder for us to borrow
        funds.***
 
 As
        of
        December 31, 2006, and as a result of historical losses in prior years, our
        accumulated deficit was $7,098,397. 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. See “Management’s Discussion and Analysis of
        Financial Condition and Results of Operations - Liquidity and Capital
        Resources”.
 
 -38-
 Table
            of Contents
 **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.
        See
“Description of Business - Competition”.
 
 ***We
        depend on only two titles for the overwhelming majority of our
        revenue.***
 
 In
        fiscal
        year 2006, approximately 92% of our total revenue was derived from two software
        titles; QuickVerse ® ,
        comprising approximately 65% of total revenue, and Membership Plus ® ,
        comprising approximately 27% of total revenue. We expect that these two 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. See “Description of Business - Our Products”.
 
 ***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 among 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 Macintosh ® OS X and
        Windows ® Mobile)
        has resulted in longer development cycles, higher development expenditures
        and
        the need to more carefully monitor and plan development processes associated
        with these products.
 
 -39-
 Table
            of Contents
 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. Furthermore, we experienced a delay in our annual release
        of
        Membership Plus ® 2007,
        which had been scheduled to commence shipping in February 2006 but which,
        due to
        delays associated with the loss of one of our key developers, commenced shipping
        in October 2006. It is likely in the future that delays will continue to
        occur
        and that some new titles or title versions will not be released in accordance
        with our internal development schedule, having a negative impact on our
        business, our financial condition, including liquidity and profitability,
        and
        our results of operations in that period. See “Management’s Discussion and
        Analysis of Financial Condition and Results of Operations -
        Revenues”.
 
 ***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, making our revenue and operating
        results difficult to predict and susceptible to substantial fluctuations
        from
        quarter to quarter. While there can be no assurance, we expect, based on
        historical experience, that a majority of sales for a new title or title
        version
        will occur within the first thirty to one hundred twenty days following its
        release, and that net revenue associated with the initial introduction will
        generally account for a disproportionately large percentage of total net
        revenue
        over the life of the title or title version. For example, our
        QuickVerse ® 2006
        began shipping in September 2005, nine months following the release of
        QuickVerse ® 2005 and
        three months following the release of QuickVerse ® 2005
        Platinum, resulting, we believe, in a product market overlap that ultimately
        led
        to fewer customer upgrades upon our initial release of QuickVerse ® 2006.
        Furthermore, 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 for that period are likely to
        be
        negatively affected, as has repeatedly occurred in the past.
 
 ***Product
        returns, price protections or price 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.
 
 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. See “Management’s Discussion and Analysis of Financial Condition and
        Results of Operations - Revenues”.
 
 ***Errors
        or defects in our software products may cause a loss of market acceptance
        and
        result in fewer sales and/or greater returns 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 following
        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. Although to date, we have not discovered any material errors,
        future
        errors and defects could result in adverse product reviews and a loss of,
        or
        delay in, market acceptance of our products.
 
 -40-
 Table
            of Contents
 ***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
        costs
        for product development for the fiscal year ended December 31, 2006 were
        lower
        than the fiscal year ended December 31, 2005; however, we anticipate our
        product
        development costs will 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 these executives or attract and
        retain
        additional key executives. 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. See
        “Management - Directors and Executive Officers”.
 
 ***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. See “Description of Business -
        Intellectual Property”.
 
 -41-
 Table
            of Contents
 ***Our
        exclusive rights to publish and sell our largest-selling titles are limited
        to
        non-secular channels.***
 
 Approximately
        99% of our revenues in 2006, including those generated from sales of
        QuickVerse ® and
        Membership Plus ® ,
        by far
        our two largest selling software titles, were derived from the publication
        and
        sale of software titles to which we have only the exclusive license to publish
        and sell into non-secular channels. Although, as of the date hereof, we do
        not
        believe that any third parties have been granted rights in addition to our
        own
        to publish or sell these titles into secular channels, and we 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 adversely impact our sales and revenues.
        See
“Description of Business - Intellectual Property”.
 
 ***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.
 
 ***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, typically generating less than
        30% 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.
 
 -42-
 Table
            of Contents
 **RISKS
        ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK**
 
 ***We
        may incur derivative liabilities in an as yet unknown amount in connection
        with
        our prior issuance of common stock warrants.***
 
 In
        November 2004, in connection with a certain Stock Purchase Agreement, we
        issued
        two warrants to purchase an aggregate of 21,875,000 shares of our common
        stock
        to Barron Partners, LP. Subject to standard adjustment provisions, each warrant
        provides for settlement in registered shares of our common stock and each,
        for
        the duration of any period in which there is not an effective registration
        statement covering the shares underlying the warrants, may be settled in
        a
        cashless, net-share settlement. In accordance with applicable accounting
        mandate, until each
        of
        the warrants issued to Barron Partners are either fully exercised or
        expire, the
        derivative liability associated with these warrants must continuously be adjusted
        to fair value at each balance sheet date and accordingly reassessed at each
        such
        time to determine whether the warrants should be classified (or reclassified,
        as
        appropriate) as a liability or as equity. The fair value of each warrant
        was
        initially assessed at $2,187,500 using
        the Black-Scholes valuation method , with  such
        fair
        value directly
        relat ing and
        fluctuat ing in
        response to the share price of our common stock. At December
        31, 2006 ,
        the
        fair value of the derivative liability was approximately $ 527,000 ,
        and a
        fair value adjustment of approximately $ 1,536,000  has be en included
        in other income for the
        period then ended . In the
        event that the fair value of the derivative liability exceeds the amount
        of any
        cashless, net-share settlement under the warrants, we may find it necessary
        to
        compensate the holder through cash payments, which would have a material
        adverse
        effect on our business, our financial condition, including liquidity and
        profitability, and our results of operations, including a corresponding
        reduction in our net income and the likelihood of a net loss for the year.
        See
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations—Derivatives”.
 
 ***Up
        to 47,341,666 shares of our common stock are eligible for public resale as
        a
        result of a registration statement filing which is likely to depress our
        stock
        price.***
 
 As
        of the
        date of the filing of this annual report on Form 10-KSB for the fiscal year
        ended December 31, 2006, we also have on file with the SEC a registration
        statement on Form SB-2, originally declared effective on February 1, 2006,
        which
        registration statement caused to be eligible for immediate resale on the
        public
        market 24,341,666 shares of our common stock and an additional 23,000,000
        shares
        of our common stock underlying warrants to the extent exercised. As a percentage
        of our total outstanding common stock, this represents 64.8%. 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 are freely
        transferable 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.
 
 ***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.
 
 ***Unless
        and until we garner analyst research coverage, we are unlikely to create
        long-term market value in our common stock.***
 
 Although
        we are a reporting company and our common shares are listed on the OTC Bulletin
        Board, we are unaware of any investment banking firms, large or small, that
        currently provide analyst research coverage on our company and, given our
        relatively small size within the public securities markets, it is unlikely
        that
        any investment banks will begin doing so in the near future. Without continuing
        research coverage by reputable investment banks or similar firms, it is
        considerably more difficult, and unlikely, to attract the interest of most
        institutional investors, which are generally considered to be very important
        in
        achieving a desirable balance in shareholder composition and long-term market
        value in a stock. While we intend to continue to aggressively pursue investor
        relations initiatives designed to create visibility for our company and common
        stock, and hope to garner analyst coverage in the future, there can be no
        assurance that we will succeed in this regard and any inability on our part
        to
        develop such coverage is likely to materially impede the realization of
        long-term market value in our common stock.
 
 -43-
 Table
            of Contents
 ***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. 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 Global Select 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 Global Select 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.
 
 ***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.
 
 -44-
 Table
            of Contents
 The
        volatility of our common stock is illustrated by reference to the fact that,
        during fiscal year 2006, our trading price fluctuated from a low of $0.03
        to a
        high of $0.15 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.***
 
 Our
        officers and directors are not contractually obligated to refrain from selling
        any of their shares; therefore, our officers and directors may sell any shares
        owned by them which are registered under the Securities Act, or which otherwise
        may be sold without registration to the extent permitted by Rule 144 or other
        exemptions. 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 even 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.
 
 -45-
 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.***
 
 We
        are
        not currently subject to the listing requirements of any national securities
        exchange. The listing standards of the national securities exchanges 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 two members, both of whom are independent.
        Similarly, the compensation and nominating committees of company boards of
        directors must also consist of independent directors. As of March 31, 2006,
        only
        two of our directors, who were the only members of our audit committee, met
        the
        definition of an “independent” director as defined by the Sarbanes-Oxley Act of
        2002 and as defined by listing standards. Currently, we have, only a single
        director who meets the definition of an “independent” director as defined by the
        Sarbanes-Oxley Act of 2002 and the listing standards of the national securities
        exchanges. Despite our efforts to do so, we have not yet identified qualified
        and willing individuals to serve as additional independent directors. Two
        of our
        three directors are currently serving as our executive officers and thereby
        do
        not qualify as independent. There is no guarantee that we will be able to
        appoint an additional director who will satisfy these independence requirements.
        For so long as we remain unable to appoint an additional independent director
        to
        our board, we will be unqualified to list any of our capital stock on a national
        securities exchange.
 
 ***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 certain warrants to Michael M. Membrado, our
        corporate and securities counsel, all of which currently remain outstanding
        and
        unexercised. 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.
 
          
 -46-
 Table
              of Contents
 
 **ITEM
        7. FINANCIAL STATEMENTS.**
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 Board
          of
          Directors
 FindEx.com
          Inc.
 
 We
          have
          audited the accompanying consolidated balance sheets of FindEx.com Inc.
          and
          subsidiaries as of December 31, 2006 & 2005, and the related consolidated
          statements of operations, changes in shareholders’ 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
          financial statements based on our audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          consolidated financial statements are free of material misstatement. An
          audit
          includes examining, on a test basis, evidence supporting the amounts and
          disclosures in the 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 audit provides a reasonable basis for our opinion.
 
 The
          Company 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.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of FindEx.com Inc. and subsidiaries
          as
          of December 31, 2006 & 2005 and the results of operations and cash flows for
          the years ended December 31, 2006 & 2005 in conformity with accounting
          principles generally accepted in the United States of America.
 
 
 **/s/
          BRIMMER, BUREK & KEELAN LLP**
 Brimmer,
          Burek & Keelan LLP
 
 Tampa,
          Florida
 April
          17,
          2007
 
 F-1
 Table
              of Contents
  **Findex.com,
                  Inc.****CONSOLIDATED
                  BALANCE SHEETS****December
                  31, 2006 and 2005****2006**
              
              
              2005**Assets**Current
                  assets:Cash
                  and cash equivalents
              
              **$**
              **48,672**
              
              $
              119,560Accounts
                  receivable, trade, net
              
              
              **318,000**
              
              
              405,380Inventories
              
              
              **145,344**
              
              
              214,604Deferred
                  income taxes, net
              
              
              **98,800**
              
              
              85,392Other
                  current assets
              
              
              **114,362**
              
              
              42,814Total
                  current assets
              
              
              **725,178**
              
              
              867,750Property
                  and equipment, net
              
              
              **86,638**
              
              
              114,191Software
                  license, net
              
              
              **1,258,769**
              
              
              1,762,276Capitalized
                  software development costs, net
              
              
              **491,695**
              
              
              707,067Deferred
                  income taxes, net
              
              
              **443,600**
              
              
              183,195Other
                  assets
              
              
              **49,965**
              
              
              69,806Total
                  assets
              
              **$**
              **3,055,845**
              
              $
              3,704,285**Liabilities
                  and stockholders’ equity**Current
                  liabilities:Current
                  maturities of long-term debt
              
              **$**
              **210,318**
              
              $
              11,955Accrued
                  royalties
              
              
              **649,763**
              
              
              472,548Accounts
                  payable, trade
              
              
              **693,260**
              
              
              556,042Accrued
                  registration rights penalties
              
              
              **-**
              
              
              336,686Accrued
                  payroll
              
              
              **174,257**
              
              
              206,988Reserve
                  for sales returns
              
              
              **97,603**
              
              
              125,492Derivatives
              
              
              **526,868**
              
              
              2,062,462Other
                  current liabilities
              
              
              **78,933**
              
              
              121,274Total
                  current liabilities
              
              
              **2,431,002**
              
              
              3,893,447Long-term
                  debt
              
              
              **79,468**
              
              
              33,786Deferred
                  income taxes, net
              
              
              **1,100**
              
              
              19,105Commitments
                  and contingencies (Note 16)Stockholders’
                  equity:Preferred
                  stock, $.001 par value5,000,000
                  shares authorized-0-
                  and -0- shares issued and outstanding, respectively
              
              
              **---**
              
              
              ---Common
                  stock, $.001 par value120,000,000
                  shares authorized,49,788,317
                  and 48,619,855 shares issued and outstanding, respectively
              
              
              **49,788**
              
              
              48,620Paid-in
                  capital
              
              
              **7,592,884**
              
              
              7,461,424Retained
                  (deficit)
              
              
              **(7,098,397**
              **)**
              
              (7,752,097
              )Total
                  stockholders’ equity
              
              
              **544,275**
              
              
              (242,053
              )Total
                  liabilities and stockholders’ equity
              
              **$**
              **3,055,845**
              
              $
              3,704,285*See
                  accompanying notes.*


F-2
 Table
            of Contents




**Findex.com,
                Inc.****CONSOLIDATED
                STATEMENTS OF OPERATIONS****Year
                Ended December 31**
            
            
            **2006**
            
            
            2005Revenues,
                net of reserves and allowances
            
            **$**
            **3,742,751**
            
            $
            5,337,342Cost
                of sales
            
            
            **1,755,400**
            
            
            2,126,164Gross
                profit
            
            
            **1,987,351**
            
            
            3,211,178Operating
                expenses:Sales
                and marketing
            
            
            **780,783**
            
            
            1,615,452General
                and administrative
            
            
            **1,682,758**
            
            
            1,938,226Bad
                debt (recovery) expense
            
            
            **(3,858**
            **)**
            
            137,303Amortization
                expense
            
            
            **531,719**
            
            
            531,524Depreciation
                expense
            
            
            **48,268**
            
            
            50,704Total
                operating expenses
            
            
            **3,039,670**
            
            
            4,273,209Loss
                from operations
            
            
            **(1,052,319**
            **)**
            
            (1,062,031
            )Interest
                income
            
            
            **791**
            
            
            1,059Other
                income
            
            
            **274**
            
            
            13,796Other
                adjustments
            
            
            **(49,314**
            **)**
            
            (436,686
            )Gain
                (loss) on fair value adjustment of derivatives
            
            
            **1,535,594**
            
            
            (33,797
            )Gain
                (loss) on disposition of assets
            
            
            **3,173**
            
            
            (1,869
            )Interest
                expense
            
            
            **(77,097**
            **)**
            
            (11,029
            )Income
                (loss) before income taxes
            
            
            **361,102**
            
            
            (1,530,557
            )Provision
                for income taxes
            
            
            **292,598**
            
            
            (50,709
            )Net
                income (loss)
            
            **$**
            **653,700**
            
            $
            (1,581,266
            )Earnings
                (loss) per share:Basic
            
            **$**
            **0.01**
            
            $
            (0.03
            )Diluted
            
            **$**
            **0.01**
            
            $
            (0.03
            )Weighted
                average shares outstanding:Basic
            
            
            **49,223,299**
            
            
            48,619,855Diluted
            
            
            **50,023,319**
            
            
            48,619,855*See
                accompanying notes.*


F-3
 Table
            of Contents


**Findex.com,
                Inc.****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY****Retained****Common
                Stock**
            
            **Paid-In**
            
            
            **Earnings****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **(Deficit)**
            
            
            **Total**Balance,
                December 31, 2004
            
            
            48,619,855
            
            $
            48,620
            
            $
            7,521,339
            
            $
            (6,170,831
            )
            $
            1,399,128Common
                stock warrant reclassified as derivative
            
            
            ---
            
            
            ---
            
            
            (59,915
            )
            
            ---
            
            
            (59,915
            )Net
                loss, December 31, 2005
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            (1,581,266
            )
            
            (1,581,266
            )Balance,
                December 31, 2005
            
            
            48,619,855
            
            $
            48,620
            
            $
            7,461,424
            
            $
            (7,752,097
            )
            $
            (242,053
            )Common
                stock issued for services
            
            
            1,168,462
            
            
            1,168
            
            
            100,332
            
            
            ---
            
            
            101,500Common
                stock warrant issued for services
            
            
            ---
            
            
            ---
            
            
            7,958
            
            
            ---
            
            
            7,958Common
                stock warrant issued for short-term note
            
            
            ---
            
            
            ---
            
            
            4,993
            
            
            ---
            
            
            4,993Employee
                stock options granted
            
            
            ---
            
            
            ---
            
            
            18,177
            
            
            ---
            
            
            18,177Net
                income, December 31, 2006
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            653,700
            
            
            653,700**Balance,
                December 31, 2006**
            
            
            **49,788,317**
            
            **$**
            **49,788**
            
            **$**
            **7,592,884**
            
            **$**
            **(7,098,397**
            **)**
            **$**
            **544,275***See
                accompanying notes.*




























F-4
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          of Contents




**Findex.com,
                Inc.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****Year
                Ended December 31**
            
            
            **2006**
            
            
            2005Cash
                flows from operating activities:Cash
                received from customers
            
            **$**
            **3,795,288**
            
            $
            5,369,139Cash
                paid to suppliers and employees
            
            
            **(3,188,469**
            **)**
            
            (4,761,153
            )Other
                operating receipts
            
            
            **274**
            
            
            13,796Interest
                paid
            
            
            **(75,598**
            **)**
            
            (11,896
            )Interest
                received
            
            
            **791**
            
            
            1,059Taxes
                refunded
            
            
            **5,764**
            
            
            1,400Net
                cash provided by operating activities
            
            
            **538,050**
            
            
            612,345Cash
                flows from investing activities:Acquisition
                of property and equipment
            
            
            **(26,807**
            **)**
            
            (35,746
            )Proceeds
                from sale of property and equipment
            
            
            **9,264**
            
            
            ---Software
                development costs
            
            
            **(491,073**
            **)**
            
            (812,309
            )Website
                development costs
            
            
            **(8,371**
            **)**
            
            (16,163
            )Deposits
                refunded
            
            
            **---**
            
            
            62,796Net
                cash (used) by investing activities
            
            
            **(516,987**
            **)**
            
            (801,422
            )Cash
                flows from financing activities:Payments
                made on long-term notes payable
            
            
            **(91,951**
            **)**
            
            (32,722
            )Proceeds
                from convertible notes payable
            
            
            **150,000**
            
            
            ---Payments
                made on convertible notes payable
            
            
            **(150,000**
            **)**
            
            ---Net
                cash (used) by financing activities
            
            
            **(91,951**
            **)**
            
            (32,722
            )Net
                decrease in cash and cash equivalents
            
            
            **(70,888**
            **)**
            
            (221,799
            )Cash
                and cash equivalents, beginning of year
            
            
            **119,560**
            
            
            341,359Cash
                and cash equivalents, end of year
            
            **$**
            **48,672**
            
            $
            119,560Reconciliation
                of net income to cash flows from operating activities:Net
                income (loss)
            
            **$**
            **653,700**
            
            $
            (1,581,266
            )Adjustments
                to reconcile net income (loss) to net cashprovided
                by operating activities:Software
                development costs amortized
            
            
            **706,445**
            
            
            806,531Stock
                and warrants issued for services
            
            
            **67,670**
            
            
            ---Provision
                for (recovery of) bad debts
            
            
            **(3,858**
            **)**
            
            137,303Depreciation
                & amortization
            
            
            **579,987**
            
            
            582,228(Gain)
                loss on disposal of property and equipment
            
            
            **(3,173**
            **)**
            
            1,869(Gain)
                loss on fair value adjustment of derivatives
            
            
            **(1,535,594**
            **)**
            
            33,797Change
                in assets and liabilities:Decrease
                in accounts receivable
            
            
            **91,238**
            
            
            24,136Decrease
                in inventories
            
            
            **69,260**
            
            
            19,396Decrease
                in refundable taxes
            
            
            **5,764**
            
            
            1,400(Increase)
                decrease in prepaid expenses
            
            
            **(20,313**
            **)**
            
            64,865Increase
                in accrued royalties
            
            
            **177,215**
            
            
            185,034Increase
                (decrease) in accounts payable
            
            
            **145,177**
            
            
            (65,762
            )(Decrease)
                in income taxes payable
            
            
            **(780**
            **)**
            
            ---(Decrease)
                increase in deferred taxes
            
            
            **(291,818**
            **)**
            
            50,709(Decrease)
                increase in other liabilities
            
            
            **(102,870**
            **)**
            
            352,105Net
                cash provided by operating activities
            
            **$**
            **538,050**
            
            $
            612,345*See
                accompanying notes.*


F-5
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            of Contents


**Findex.com,
      Inc.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2006 and 2005**





**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 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 our
      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, and (iii) the life and realization of identifiable
      intangible assets. The amounts we will ultimately incur or recover could differ
      materially from current estimates.





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**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, 2006 and 2005, we did not maintain any uninsured
      cash
      balances.





We
      sell a
      majority of our products to consumers 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 2006, we incurred sales transactions with
      approximately 19,000 consumers and 550 retail bookstores and distributors.
      Our
      top five retail customers in aggregate accounted for 23% of gross sales for
      the
      year ended December 31, 2006. Only one retail customer accounted for more than
      10% of gross sales (10.4%) in the year ended December 31, 2006. Accounts
      receivable relating to this retail customer was $3,584 as of December 31,
      2006.





During
      the years ended December 31, 2006 and 2005, we derived 65% and 66%,
      respectively, of our total revenue from sales of QuickVerse ® ,
      27% and
      26%, respectively, from sales of Membership Plus ® ,
      and 8%
      and 8%, respectively, from sales of other software titles.





During
      the years ended December 31, 2006 and 2005, four vendors provided purchases
      individually of 10% or more of the total product and material purchases as
      follows: Vendor A (cd replicator) accounted for 19% and 24%, respectively,
      Vendor B (printer) accounted for 19% and 23%, respectively, Vendor C (retail
      boxes) accounted for 20% and 19%, respectively, and Vendor D (fulfillment)
      accounted for 17% and 5%, respectively. Accounts payable relating to Vendors
      A,
      B, C, and D were $12,161 and $8,886, $13,160 and $8,820, $26,819 and $17,031,
      and $4,493 and $23,882, as of December 31, 2006 and 2005, 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.





**ACCOUNTS
      RECEIVABLE**





We
      sell
      our products to resellers and distributors generally under terms appropriate
      for
      the creditworthiness of the customer. Our terms generally range from net 30
      days
      for domestic resellers, net 60 days for domestic distributors, to net 90 days
      for international resellers and distributors. Receivables from customers are
      unsecured. We continuously monitor our customer account balances and actively
      pursue collections on past due balances.





We
      maintain an allowance for doubtful accounts comprised of two components, (i)
      historical collections performance and (ii) specific collection issues. If
      actual bad debts differ from the reserves calculated based on historical trends
      and known customer issues, we record an adjustment to bad debt expense in the
      period in which the difference occurs. Such adjustment could result in
      additional expense or a reduction of expense.





Our
      accounts receivable go through a collection process that is based on the age
      of
      the invoice and requires attempted contacts with the customer at specified
      intervals and the assistance from other personnel within the company who have
      a
      relationship with the customer. If after a number of days, we have been
      unsuccessful in our collections efforts, we may turn the account over to a
      collection agency. We write-off accounts to our allowance when we have
      determined that collection is not likely. The factors considered in reaching
      this determination are (i) the apparent financial condition of the customer,
      (ii) the success we’ve had in contacting and negotiating with the customer and
      (iii) the number of days the account has been outstanding. To the extent that
      our collections do not correspond with historical experience, we may be required
      to incur additional charges.





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**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.





**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 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 $1,714,882 and $2,561,043, less
      accumulated amortization of $1,223,187 and $1,853,976 at December 31, 2006
      and
      2005, 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 $190,726 and $216,397 for the years ended December 31, 2006 and 2005,
      respectively.





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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.





We
      capitalize costs related to the development and maintenance of our website
      in
      accordance with the 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
      $108,582 and $102,663, less accumulated amortization of $72,571 and $46,811
      at
      December 31, 2006 and 2005, 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).





F-9
 Table
          of Contents


Some
      of
      our software arrangements involve multiple copies or licenses of the same
      program. These arrangements generally specify the number of simultaneous users
      the customer may have (multi-user license), or may allow the customer to use
      as
      many copies on as many computers as it chooses (a site license). Multi-user
      arrangements, generally sold in networked environments, contain fees that vary
      based on the number of users that may utilize the software simultaneously.
      We
      recognize revenue when evidence of an order exists and upon delivery of the
      authorization code to the consumer that will allow them the limited simultaneous
      access. Site licenses, generally sold in non-networked environments, contain
      a
      fixed fee that is not dependent on the number of simultaneous users. Revenue
      is
      recognized when evidence of an order exists and the first copy is delivered
      to
      the consumer.





Many
      of
      our software products contain additional content that is “locked” to prevent
      access until a permanent access code, or “key,” is purchased. We recognize
      revenue when evidence of an order exists and the customer has been provided
      with
      the access code that allows the customer immediate access to the additional
      content. All of the programs containing additional locked content are fully
      functional and the keys are necessary only to access the additional content.
      The
      customer’s obligation to pay for the software is not contingent on delivery of
      the “key” to access the additional content.





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 2006 or 2005 and maintain a reserve for rebate
      claims remaining unpaid from 2000 and 2001.





**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.





F-10
 Table
          of Contents


**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, email 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, 2006
      and
      2005 were approximately, $184,000 and $512,000, respectively.





**STOCK-BASED
      COMPENSATION**





Effective
      January 1, 2006, we adopted SFAS No. 123(R), *Share-Based
      Payment* .
      Our
      stock-based compensation plans are described in Note 13. We are reporting this
      change in accounting principle using the modified prospective method.
      Accordingly, prior years were not restated. In addition, we had no compensation
      expense associated with unvested equity-based awards which were granted prior
      to
      2006.





SFAS
      No.
      123(R) requires that we measure the cost of the employee services received
      in
      exchange for an award for equity instruments based on the grant-date fair value
      and to recognize this cost over the requisite service period. It also provides
      that any corporate income tax benefit realized upon exercise or vesting of
      an
      award in excess of that previously recognized in earnings (referred to as a
      “windfall tax benefit”) will be presented in the Consolidated Statements of Cash
      Flows as a financing (rather than as operating) cash flow. Realized windfall
      tax
      benefits are credited to paid-in capital in the Consolidated Balance Sheets.
      Realized shortfall tax benefits (amounts which are less than that previously
      recognized in earnings) are first offset against the cumulative balance of
      windfall tax benefits, if any, and then charged directly to income tax
      expense.





Prior
      to
      adoption of SFAS No. 123(R), we used the intrinsic value method prescribed
      by
      APB No. 25, *Accounting
      for Stock Issued to Employees* to
      account for our employee stock options and other stock-based compensation.
      Under
      this method, because the exercise price of stock options granted to employees
      and directors equaled the market price of the underlying stock on the date
      of
      the grant, no compensation expense was recognized. Expense attributable to
      other
      types of stock-based awards was also generally recognized in our reported
      results under APB No. 25.





**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
      follow
      SFAS No. 109, *Accounting
      for Income Taxes* ,
      which
      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.





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          of Contents


**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.





**DERIVATIVES**





We
      account for warrants issued with shares of common stock in a private placement
      according to EITF Issue 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* .
      In
      accordance with the accounting mandate, the derivative liability associated
      with
      the warrants has been and shall continue to be adjusted to fair value
      (calculated using the Black-Scholes method) at each balance sheet date and
      is
      accordingly reassessed at each such time to determine whether the warrants
      should be classified (or reclassified, as appropriate) as a liability or as
      equity. The corresponding fair value adjustment is included in the consolidated
      statements of operations as other expenses as the value of the warrants
      increases from an increase in our stock price at the balance sheet date and
      as
      other income as the value of the warrants decreases from a decrease in our
      stock
      price.





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**RECENTLY
      ISSUED PRONOUNCEMENTS**





**Uncertain
      Tax Positions**





In
      July
      2006, the FASB issued Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (FIN No.
      48) to clarify what criteria must be met prior to recognition of the financial
      statement benefit, in accordance with SFAS 109, of a position taken in a tax
      return. The provisions of the final interpretation apply broadly to all tax
      positions taken by an enterprise, including the decision not to report income
      in
      a tax return or the decision to classify a transaction as tax exempt. The
      prescribed approach is based on a two-step benefit recognition model. The first
      step is to evaluate the tax position for recognition by determining if the
      weight of available evidence indicates it is more likely than not, based on
      the
      technical merits and without consideration of detection risk, that the position
      will be sustained on audit, including resolution of related appeals or
      litigation processes, if any. The second step is to measure the appropriate
      amount of the benefit to recognize. The amount of the benefit to recognize
      is
      measured as the largest amount of tax benefit that is greater than 50 percent
      likely of being ultimately realized upon settlement. The tax provision must
      be
      derecognized when it is no longer more likely than not of being sustained.
      The
      interpretation also provides guidance on recognition and classification of
      related penalties and interest, classification of liabilities, and disclosures
      of unrecognized tax benefits. The change in net assets, if any, as a result
      of
      applying the provisions of this interpretation is considered a change in
      accounting principle with the cumulative effect of the change treated as an
      offsetting adjustment to the opening balance of retained earnings in the period
      of transition. The final interpretation is effective for the first annual period
      beginning after December 15, 2006, with earlier application encouraged. We
      have
      adopted FIN No. 48 as of January 1, 2007. Management believes the impact of
      adoption is immaterial to the financial statements on the date of
      adoption.





**Fair
      Value**





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* ,
      to
      provide enhanced guidance for using fair value to measure assets and
      liabilities. The standard also expands disclosure requirements for assets and
      liabilities measured at fair value, how fair value is determined, and the effect
      of fair value measurements on earnings. The standard applies whenever other
      authoritative literature requires, or permits, certain assets or liabilities
      to
      be measured at fair value, but does not expand the use of fair value. SFAS
      No.
      157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those years. Early adoption
      is permitted. We plan to adopt SFAS No. 157 as of January 1, 2008. The balance
      sheet items carried at fair value consist of derivatives and other financial
      instruments. Additionally, we use fair value concepts to test various long-lived
      assets for impairment and to initially measure assets and liabilities acquired
      in a business combination. Management is currently evaluating the impact of
      adoption on how these liabilities are currently measured.





**RECLASSIFICATIONS**





Certain
      accounts in our 2005 financial statements have been reclassified for comparative
      purposes to conform with the presentation in our 2006 financial
      statements.





**NOTE
      2 - ACCOUNTS RECEIVABLE**





At
      December 31, 2006 and 2005, accounts receivable consisted of the following
      (see
      Note 1):





**2006**
            
            
            2005Trade
                receivables
            
            **$**
            **329,000**
            
            $
            483,380Less:
                Allowance for doubtful accounts
            
            
            **11,000**
            
            
            78,000Accounts
                receivable, trade
            
            **$**
            **318,000**
            
            $
            405,380





**NOTE
      3 - INVENTORIES**





At
      December 31, 2006 and 2005, inventories consisted of the following:





**2006**
            
            
            2005Raw
                materials
            
            **$**
            **83,702**
            
            $
            118,158Finished
                goods
            
            
            **61,642**
            
            
            96,446Inventories
            
            **$**
            **145,344**
            
            $
            214,604





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**NOTE
      4 - PROPERTY AND EQUIPMENT,** **NET**





At
      December 31, 2006 and 2005, property and equipment consisted of the
      following:





**2006**
            
            
            2005Computer
                equipment
            
            **$**
            **76,004**
            
            $
            93,992Computer
                software
            
            
            **78,738**
            
            
            65,442Office
                equipment
            
            
            **61,831**
            
            
            85,431Office
                furniture and fixtures
            
            
            **75,748**
            
            
            68,171Warehouse
                equipment
            
            
            **4,659**
            
            
            12,159**296,980**
            
            
            325,195Less:
                Accumulated depreciation
            
            
            **210,342**
            
            
            211,004Property
                and equipment, net
            
            **$**
            **86,638**
            
            $
            114,191





At
      December 31, 2006 and 2005, Office equipment contained telephone equipment
      under
      a capital lease obligation with a cost basis of $51,788. See Notes 8 and 14.





**NOTE
      5 - SOFTWARE LICENSE AGREEMENT,** **NET**





In
      July
      1999, we completed an exclusive license agreement with Parsons Technology,
      Inc.,
      a subsidiary of 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.





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, 2006 and 2005, the software license consisted of the
      following:





**2006**
            
            
            2005Software
                license cost
            
            **$**
            **5,135,574**
            
            $
            5,135,574Less:
                Accumulated amortization
            
            
            **3,876,805**
            
            
            3,373,298Software
                license, net
            
            **$**
            **1,258,769**
            
            $
            1,762,276





Amortization
      expense related to this intangible asset was $503,508 for both years.
      Amortization expense is expected to be $503,508 each year through 2008 and
      $251,751 for 2009, at which time the license will be fully amortized.





**NOTE
      6 - NOTE PAYABLE**





In
      July
      2006, we entered into a loan agreement with an individual for $150,000. The
      agreement bore interest at a rate of 10% per thirty-day period and carried
      an
      original due date of September 18, 2006. On September 19, 2006, for additional
      consideration of $750, we entered into a modification and extension agreement
      which extended the repayment term of the balance of the outstanding principal
      under the loan, as well as the interest payable thereon, until October 20,
      2006.
      The loan was paid in full on October 19, 2006. The loan agreement was secured
      by
      a first priority security interest in all of our assets, including the
      intellectual property comprising the software products upon which we are
      dependent for revenue, and was convertible, together with any accrued interest
      thereon, into restricted shares of our common stock at a conversion price equal
      to $0.07 per share. In further consideration, we issued the lender a 3-year
      common stock purchase warrant to acquire up to an aggregate of 100,000
      restricted shares of common stock at an exercise price of $0.07 per share.
      See
      Note 10.





F-14
 Table
          of Contents


**NOTE
      7 - DERIVATIVES**





At
      December 31, 2006 and 2005, the derivative liability consisted of the
      following:





**2006**
            
            
            2005Warrant
                A
            
            **$**
            **2,692**
            
            $
            47,389Warrant
                B
            
            
            **276,755**
            
            
            1,030,348Warrant
                C
            
            
            **247,421**
            
            
            984,725Derivatives
            
            **$**
            **526,868**
            
            $
            2,062,462





In
      May
      2004, we issued a 3-year warrant (Warrant A) to purchase up to 600,000 shares
      of
      our common stock to a consultant. This warrant may be exercised on a cashless
      basis at the option of the warrant holder at a price per share of $0.15. We
      will
      receive up to $90,000 from the warrant holder upon the exercise of this warrant.
      This warrant has been accounted for as a liability according to the guidance
      of
      EITF 00-19 and the fair value of the warrant has been determined using the
      Black-Scholes valuation method with the assumptions listed in the table
      below.





In
      November 2004, we issued two 5-year warrants to purchase up to an aggregate
      of
      21,875,000 shares of our common stock in connection with a certain Stock
      Purchase Agreement completed with a New York based private investment
      partnership on July 19, 2004. The first warrant (Warrant B) entitles the holder
      to purchase up to 10,937,500 shares of our common stock at a price of $0.18
      per
      share, and the second warrant (Warrant C) entitles the holder to purchase up
      to
      10,937,500 additional shares of our common stock at a price of $0.60 per share.
      Each warrant is subject to standard adjustment provisions and each provides
      for
      settlement in registered shares of our common stock and may, at the option
      of
      the holder, be settled in a cashless, net-share settlement. The warrant holder
      is prevented from electing a cashless exercise so long as there is an effective
      registration statement for the shares underlying these warrants. The maximum
      number of shares of our common stock to be received for each warrant in a
      net-share settlement would be 10,937,500 but the actual number of shares settled
      would likely be significantly less and would vary based on the last reported
      sale price (as reported by Bloomberg) of our common stock on the date
      immediately preceding the date of the exercise notice. These warrants are
      accounted for as a liability according to the guidance of EITF 00-19 and the
      fair value of each warrant has been determined using the Black-Scholes valuation
      method with the assumptions listed in the table below.





**Warrant
                A**
            
            
            **Warrant
                B**
            
            
            **Warrant
                C**Expected
                term - years
            
            
            0.33
            
            
            2.86
            
            
            2.86Stock
                price at December 31, 2006
            
            $
            0.03
            
            $
            0.03
            
            $
            0.03Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %Expected
                stock price volatility
            
            
            235
            %
            
            212
            %
            
            212
            %Risk-free
                interest rate
            
            
            4.71
            %
            
            4.61
            %
            
            4.61
            %





The
      warrants are revalued at each balance sheet date by using the parameters above,
      reducing the expected term to reflect the passing of time, and using the stock
      price at the balance sheet date. Net fair value adjustments of $1,535,594 and
      ($33,797) have been included in other income (expenses) on the consolidated
      statements of operations for the years ended December 31, 2006 and 2005,
      respectively.





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 Table
          of Contents


**NOTE
      8 - LONG-TERM DEBT**





At
      December 31, 2006 and 2005, long-term debt consisted of the
      following:





**2006**
            
            
            2005Unsecured
                term note payable to a corporation due October 2004 in monthly
                installments of $5,285, including interest at 8%.
            
            **$**
            **---**
            
            $
            2,769Capital
                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.
            
            
            **33,786**
            
            
            42,972Unsecured
                term note payable to a shareholder due March 2008 in monthly installments
                of $10,000, plus interest at 8%, through April 2007, and monthly
                installments of $20,000, plus interest at 8%, beginning May 2007.
                See
                Notes 11 and 17.
            
            
            **256,000**
            
            
            ---**289,786**
            
            
            45,741Less:
                Current maturities
            
            
            **210,318**
            
            
            11,955Long-term
                debt
            
            **$**
            **79,468**
            
            $
            33,786





Principal
      maturities at December 31, 2006 are as follows:





2007
            
            $
            210,3182008
            
            
            67,5912009
            
            
            11,877Total
            
            $
            289,786





**NOTE
      9 - INCOME TAXES**





The
      provision (benefit) for taxes on income from continuing operations for the
      years
      ended December 31, 2006 and 2005 consisted of the following:





**2006**
            
            
            2005**Current:**Federal
            
            **$**
            **---**
            
            $
            ---State
            
            
            **(780**
            **)**
            
            ---**(780**
            **)**
            
            ---**Deferred:**Federal
            
            
            **(273,882**
            **)**
            
            161,169State
            
            
            **(17,936**
            **)**
            
            (110,460
            )**(291,818**
            **)**
            
            50,709Total
                tax provision (benefit)
            
            **$**
            **(292,598**
            **)**
            $
            50,709





The
      reconciliation of income tax computed at statutory rates of income tax benefits
      is as follows:





**2006**
            
            
            2005Expense
                (benefit) at Federal statutory rate - 34%
            
            **$**
            **122,775**
            
            $
            (520,389
            )State
                tax effects, net of Federal taxes
            
            
            **608**
            
            
            (110,460
            )Nondeductible
                expenses
            
            
            **4,933**
            
            
            14,814Nontaxable
                income
            
            
            **(524,689**
            **)**
            
            187,051Deductible
                temporary differences
            
            
            **---**
            
            
            (11,157
            )Net
                operating loss
            
            
            **---**
            
            
            505,575Deferred
                tax asset valuation allowance
            
            
            **103,775**
            
            
            (14,725
            )Income
                tax expense (benefit)
            
            **$**
            **(292,598**
            **)**
            $
            50,709





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 Table
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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, 2006 and 2005 are as follows:





**For
                the year ended December 31, 2006**
            
            
            **Federal**
            
            
            **State**
            
            
            **Total**Current
                Deferred Income TaxesReserves
                and allowances
            
            $
            53,500
            
            $
            360
            
            $
            53,860Accrued
                expenses
            
            
            32,700
            
            
            250
            
            
            32,950Deferred
                revenue
            
            
            5,100
            
            
            40
            
            
            5,140Employee
                stock options
            
            
            6,100
            
            
            50
            
            
            6,150Operating
                loss carryforwards
            
            
            169,600
            
            
            ---
            
            
            169,600267,000
            
            
            700
            
            
            267,700Less:
                Valuation allowance
            
            
            168,500
            
            
            400
            
            
            168,900Deferred
                income tax asset, net
            
            $
            98,500
            
            $
            300
            
            $
            98,800Non-current
                Deferred Income TaxesProperty
                and equipment
            
            $
            450
            
            $
            ---
            
            $
            450State
                deferred tax liabilities
            
            
            1,600
            
            
            ---
            
            
            1,600Operating
                loss carryforwards
            
            
            2,900,350
            
            
            6,300
            
            
            2,906,6502,902,400
            
            
            6,300
            
            
            2,908,700Less:
                Valuation allowance
            
            
            1,831,500
            
            
            2,700
            
            
            1,834,200Deferred
                income tax asset, net
            
            
            1,070,900
            
            
            3,600
            
            $
            1,074,500Capitalized
                development costs
            
            
            (201,800
            )
            
            (1,500
            )
            $
            (203,300
            )Software
                license fees
            
            
            (423,500
            )
            
            (3,200
            )
            
            (426,700
            )State
                deferred tax assets
            
            
            (2,000
            )
            
            ---
            
            
            (2,000
            )Deferred
                income tax liability
            
            
            (627,300
            )
            
            (4,700
            )
            $
            (632,000
            )Deferred
                income tax asset, net
            
            $
            443,600Deferred
                income tax liability, net
            
            
            
            
            $
            (1,100
            )




For
                the year ended December 31, 2005
            
            
            Federal
            
            
            State
            
            
            TotalCurrent
                Deferred Income TaxesReserves
                and allowances
            
            $
            82,209
            
            $
            2,031
            
            $
            84,240Accrued
                expenses
            
            
            50,622
            
            
            1,251
            
            
            51,873Deferred
                revenue
            
            
            8,806
            
            
            218
            
            
            9,024Operating
                loss carryforwards
            
            
            85,091
            
            
            531
            
            
            85,622226,728
            
            
            4,031
            
            
            230,759Less:
                Valuation allowance
            
            
            141,705
            
            
            3,662
            
            
            145,367Deferred
                income tax asset, net
            
            $
            85,023
            
            $
            369
            
            $
            85,392Non-current
                Deferred Income TaxesState
                deferred tax liabilities
            
            $
            7,185
            
            $
            ---
            
            $
            7,185Operating
                loss carryforwards
            
            
            2,794,956
            
            
            25,101
            
            
            2,820,0572,802,141
            
            
            25,101
            
            
            2,827,242Less:
                Valuation allowance
            
            
            1,751,338
            
            
            22,804
            
            
            1,774,142Deferred
                income tax asset, net
            
            
            1,050,803
            
            
            2,297
            
            $
            1,053,100Capitalized
                development costs
            
            
            (270,308
            )
            
            (6,678
            )
            $
            (276,986
            )Property
                and equipment
            
            
            (188
            )
            
            (5
            )
            
            (193
            )Software
                license fees
            
            
            (595,774
            )
            
            (14,719
            )
            
            (610,493
            )State
                deferred tax assets
            
            
            (1,338
            )
            
            ---
            
            
            (1,338
            )Deferred
                income tax liability
            
            
            (867,608
            )
            
            (21,402
            )
            $
            (889,010
            )Deferred
                income tax asset, net
            
            $
            183,195Deferred
                income tax liability, net
            
            
            
            
            $
            (19,105
            )





F-17
 Table
          of Contents


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. The valuation
      allowance for deferred tax assets was increased by $83,591 and $6,411 during
      the
      years ended December 31, 2006 and 2005, respectively.





At
      December 31, 2006, we had available net operating loss carryforwards of
      approximately $9,052,000 for federal income tax purposes that expire in 2026.
      The federal carryforwards resulted from losses generated in 1996 through 2002,
      2005 and 2006. We also had net operating loss carryforwards available from
      various state jurisdictions ranging from approximately $14,000 to approximately
      $841,000 that expire in 2021.





**NOTE
      10 - STOCKHOLDERS’ EQUITY**





**COMMON
      STOCK**




In
      March
      2006, we committed to issue a total of 438,462 restricted shares of common
      stock
      to our then outside directors, at the closing price as of March 30, 2006
      ($0.13), in lieu of cash payments of amounts accrued for their services as
      members of our board from the period of September 1, 2004 through March 31,
      2006. This issuance was valued at $57,000.


In
      April
      2006, we committed to issue a total of 500,000 restricted shares of common
      stock
      to a company for investor relations services, at the closing price as of April
      2, 2006 ($0.13), in accordance with the terms of a twelve-month agreement.
      In
      October 2006, we reached agreement to suspend investor relations services and
      to
      reduce the share commitment by 250,000 shares (250,000 share net commitment).
      This net issuance was valued at $32,500.





In
      October 2006, we committed to issue a total of 480,000 restricted shares of
      common stock to our outside director, at the closing price as of October 26,
      2006 ($0.025), in lieu of cash payment of amounts accrued for his services
      as a
      member of our board from the period of April 1, 2006 through September 30,
      2006.
      This issuance was valued at $12,000.





**COMMON
      STOCK OPTIONS**





During
      2005, 55,000 vested stock options with an exercise price of $0.11, related
      to
      terminated employees, expired unexercised. We did not grant any options or
      other
      stock-based awards to any of the individuals for which the options expired,
      during the six months prior to and after the option expirations.





In
      October 2006, we granted our non-executive employees a total of 850,000 stock
      options. These options carry an exercise price of $0.10 per share, have a 3-year
      life, and vest immediately. These options were valued at $18,177. See Note
      14.





**COMMON
      STOCK WARRANTS**





In
      March
      2006, we committed to issue a 3-year warrant to purchase up to 300,000
      restricted shares of our common stock, at a price per share of $0.13, to our
      legal counsel, in lieu of cash as payment for certain accrued legal fees. This
      warrant was valued at $7,958 based on the negotiated fair value of the services
      provided as prescribed by SFAS No. 123(R), for share-based transactions with
      non-employees.





In
      July
      2006, we issued a 3-year warrant to purchase up to 100,000 restricted shares
      of
      our common stock, at a price of $0.07 per share, to an individual, in connection
      with the issuance of a convertible note payable. This warrant was valued at
      $4,997. See Note 14. The value was treated as a discount on debt issued with
      detachable stock purchase warrants, per APB No. 14, and amortized to interest
      expense over the original life of the note. See Note 6.





During
      2006, warrants to purchase up to 150,000 restricted shares of our common stock
      with an average exercise price of $0.01 per share expired unexercised. During
      the six months prior to and after the warrant expirations, we granted a warrant
      to purchase up to 300,000 restricted shares of our common stock to the
      individual for which the warrants expired (see warrant issuance
      above).





F-18
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          of Contents


**SERIES
      A CONVERTIBLE PREFERRED STOCK**




The
      rights, preferences and privileges of our Series A Preferred Stock, none of
      which currently remain outstanding, are as follows:


**Dividends**
 
 Holders
        of Series A Preferred Stock are 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 are fully cumulative and are payable as determined by our board of
        directors. As of December 31, 2006 and 2005, no dividends had been declared.
 
 **Liquidation**
 
 Holders
        of Series A Preferred Stock are 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 are sufficient to make a complete
        distribution to the preferred stockholders, such stockholders will share
        in the
        distribution of our assets on a pro rata basis in proportion to the aggregate
        preferential amounts owed each stockholder. After payment is made to the
        preferred stockholders, any remaining assets and funds will be 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 is 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.
 
 **Redemption**
 
 At
        the
        election of our board of directors, we are 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 are 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 remain outstanding, are as follows:
 
 **Dividends**
 
 The
        holders of Series B Preferred Stock are entitled to receive cumulative cash
        dividends at the rate of $1.60 per annum per share. As of December 31, 2006
        and
        2005, no dividends had been declared.
 
 **Liquidation**
 
 The
        Series B Preferred stockholders are 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
        is 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 is 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.
 
 F-19
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            of Contents
 **Redemption**
 
 Subject
        to restrictions, shares of the Series B Preferred Stock are 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 do 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 is not less than $18.00 per share.
 
 **Voting
        Rights**
 
 The
        holder of each share of Series B Preferred Stock is not entitled to vote,
        except
        as required by law and as a class. Voting as a class, the holders are entitled
        to elect one director to fill one directorship.


**NOTE
      11 - OTHER ADJUSTMENTS**





As
      part
      of the July 19, 2004 financing transaction, we entered into a Registration
      Rights Agreement pursuant to which we became committed to registering all of
      the
      shares issued as part of such transaction, including those issuable under each
      of two warrants. On November 22, 2004 we filed a registration statement on
      Form SB-2 covering the shares issued, as well as the shares underlying the
      warrants. In accordance with the terms of the Registration Rights Agreement,
      as
      amended, we had another 150 days, until April 22, 2005, to cause such
      registration statement to be declared effective by the SEC, with any delays
      in
      meeting this obligation resulting in our being liable to the New York based
      private investment firm in an amount equal to $630,000 per year, pro-rated
      for
      the duration of any such delay, which amounts to $1,726 per day. As of December
      31, 2006 and 2005, we accrued a total of $49,314 and $436,686, respectively,
      in
      penalties under the terms of the Registration Rights Agreement. This has been
      included in other adjustments. See Notes 8 and 17.





**NOTE
      12 - EARNINGS PER COMMON SHARE**





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 our outstanding common stock options
      and
      warrants (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 share and
      the
      effect on income and the average number of shares of dilutive potential common
      stock:





**For
                the Year Ended December 31**
            
            
            **2006**
            
            
            2005Net
                Income (loss)
            
            $
            653,700
            
            $
            (1,581,266
            )Common
                stock dividend on Preferred Series A
            
            
            **---**
            
            
            **---**Net
                income (loss) available to common shareholders
            
            $
            653,700
            
            $
            (1,581,266
            )Basic
                weighted average shares outstanding
            
            
            **49,223,299**
            
            
            48,619,855Dilutive
                effect of:Stock
                options
            
            
            **670,180**
            
            
            **---**Warrants
            
            
            **129,840**
            
            
            **---**Diluted
                weighted average shares outstanding
            
            
            **50,023,319**
            
            
            48,619,855





A
      total
      of 25,380,000 and 25,530,000 dilutive potential securities for the years ended
      December 31, 2006 and 2005, respectively, have been excluded from the
      computation of diluted earnings per common share, as their inclusion would
      be
      anti-dilutive.





F-20
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          of Contents


**NOTE
      13 - STOCK-BASED COMPENSATION**





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 2006 or 2005.





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 granted 850,000 fully-vested options outside of the
      plan during 2006 to non-executive employees and did not grant any options
      outside of the plan during 2005.




The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes option-pricing model that uses the assumptions noted in the
      following table. Expected volatilities are based on implied volatilities from
      historical volatility of our stock. We use historical data to estimate option
      exercise and employee termination within the valuation model; separate groups
      of
      employees that have similar historical exercise behavior are considered
      separately for valuation purposes. The expected term of options granted is
      derived from the output of the option valuation model and represents the period
      of time that options granted are expected to be outstanding. The risk-free
      rate
      for periods within the contractual life of the option is based on the U.S.
      Treasury yield curve in effect at the time of the grant.


**2006**Expected
                volatility
            
            
            193
            %Expected
                dividend yield
            
            
            0.00
            %Expected
                term (in years)
            
            
            3.00Risk-free
                interest rate
            
            
            4.61
            %





Activity
      under our stock option plans is summarized as follows:





**Options**
            
            
            **Shares**
            
            
            **Weighted-Average
                Exercise Price**
            
            
            **Weighted-Average
                Remaining Contractual Term**
            
            
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2006
            
            
            2,380,000
            
            $
            0.08Granted
            
            
            850,000
            
            $
            0.10Exercised
            
            
            ---
            
            
            ---Forfeited
                or expired
            
            
            ---
            
            
            ---Canceled
            
            
            ---
            
            
            ---Outstanding
                at December 31, 2006
            
            
            3,230,000
            
            $
            0.09
            
            
            4.54
            
            
            ---Exercisable
                at December 31, 2006
            
            
            3,230,000
            
            $
            0.09
            
            
            4.54
            
            
            ---





The
      weighted-average grant-date fair value of options granted during 2006 was
      $0.025. There were no non-vested equity instruments at the beginning of the
      year, end of the year, granted or forfeited during the year. The total fair
      value of shares granted/vested during the year ended December 31, 2006 was
      $18,177.





F-21
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          of Contents


We
      maintain a policy of issuing authorized but unissued shares of common stock
      to
      satisfy share option exercises.




The
      fair
      value of each warrant issued is estimated on the date of grant using the
      Black-Scholes option-pricing model that uses the assumptions noted in the
      following table.


**2006**Expected
                volatility
            
            
            196
            %Expected
                dividend yield
            
            
            0.00
            %Expected
                term (in years)
            
            
            3.00Risk-free
                interest rate
            
            
            4.91
            %





Warrant
      activity is summarized as follows:





**Warrants**
            
            
            **Shares**
            
            
            **Weighted-Average
                Exercise Price**
            
            
            **Weighted-Average
                Remaining Contractual Term**
            
            
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2006
            
            
            23,150,000
            
            $
            0.37Granted
            
            
            400,000
            
            $
            0.12Exercised
            
            
            ---
            
            
            ---Forfeited
                or expired
            
            
            (150,000
            )
            
            ($0.01
            )Canceled
            
            
            ---
            
            
            ---Outstanding
                at December 31, 2006
            
            
            23,400,000
            
            $
            0.37
            
            
            2.46
            
            $
            1,200Exercisable
                at December 31, 2006
            
            
            23,400,000
            
            $
            0.37
            
            
            2.46
            
            $
            1,200





No
      other
      equity instruments were issued during 2006 to acquire goods and services. See
      Note 10.





**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 March 2009. We are responsible for all insurance
      expenses associated with this lease. See Note 20.





Rental
      expense for the years ended December 31, 2006 and 2005 amounted to $101,238
      and
      $82,172, respectively. Rental expenses are included in capitalized software
      development costs. See Note 1.





At
      December 31, 2006, the future minimum rental payments required under these
      leases are as follows:





2007
            
            $
            43,4582008
            
            
            16,2802009
            
            
            4,070Total
                future minimum rental payments
            
            $
            63,808





**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 2006 and 2005.





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          of Contents


The
      following table summarizes property held under capital leases at December 31,
      2006:





Office
                equipment
            
            $
            51,788Less:
                Accumulated depreciation
            
            
            22,442Net
                property and equipment under capital lease
            
            $
            29,346





Future
      minimum lease payments under capital leases as of December 31, 2006 for each
      of
      the next five years and in the aggregate are:





2007
            
            $
            13,7262008
            
            
            13,7262009
            
            
            12,5822010
            
            
            ---2011
            
            
            ---Total
                minimum lease payments
            
            
            40,034Less:
                Amount representing interest
            
            
            6,248Total
                obligations under capital lease
            
            
            33,786Less:
                Current installments of obligations under capital lease
            
            
            10,318Long-term
                obligation under capital lease
            
            $
            23,468





**NOTE
      15 - SUPPLEMENTAL CASH FLOW INFORMATION**





We
      did
      not incur any non-cash investing and financing activities during the years
      ended
      December 31, 2006 and 2005, respectively.





**NOTE
      16 - COMMITMENTS AND CONTINGENCIES**





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.





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 Technical 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 ($17,191 included in accrued payroll at December 31, 2006), bonuses
      ($19,647 from fiscal 2004 and $19,895 from fiscal 2006 included in accrued
      payroll at December 31, 2006), and any vested deferred vacation compensation
      ($26,196 included in accrued payroll at December 31, 2006) 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
      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.





F-23
 Table
          of Contents


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
      a New York based institutional investor, at a price of $0.08 per share. Under
      the terms of transaction, the investor 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 the investor pursuant to which we became committed to registering
      all of the shares issued as part of such transaction, including those issuable
      under the warrants. The agreement also requires we maintain an effective
      registration statement until the earlier of (i) July 19, 2007, or (ii) such
      time
      as all of the securities which are the subject of such registration statement
      cease to be registrable securities. On November 22, 2004, we filed a
      registration statement on Form SB-2 covering the shares issued to the investor,
      as well as the shares underlying the warrants issued to the investor. On
      February 1, 2006, the registration statement was declared effective by the
      SEC.





**NOTE
      17 - RELATED PARTY TRANSACTIONS**





Our
      executive officers and employees, from time to time, make purchases of materials
      and various expense items via their personal credit cards in lieu of a corporate
      check for COD orders and/or prior to establishment of a line of credit with
      a
      vendor. We do not provide our employees or executive officers with corporate
      credit cards and reimburse these purchases promptly.





On
      April
      7, 2006, we signed a 2-year, $336,000, 8% promissory note with the New York
      based institutional investor for payment of the unpaid registration rights
      penalties. See Notes 8 and 11.





We
      had no
      other transactions with related parties during the years ended December 31,
      2006
      and 2005.





**NOTE
      18 - 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
      19 - GOING CONCERN**





The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America, which
      contemplates our continuation as a going concern. However, as of December 31,
      2006 and 2005, we had negative working capital of $1,705,824 and $3,025,697,
      respectively, and had an accumulated deficit of $7,098,397 and $7,752,097,
      respectively. Although these factors raise substantial doubt about our ability
      to continue as a going concern, we have taken several actions to mitigate the
      risk that we will be unable to continue as a going concern through December
      31,
      2007. These actions include potentially selling some of our intangible assets
      and pursuing mergers and acquisitions that will provide profitable operations
      and positive operating cash flow.





**NOTE
      20 - SUBSEQUENT EVENTS**





In
      January 2007, our merchant banker held $40,000 cash in reserve to allow for
      a
      potential increase in credit card chargebacks from increased consumer purchases
      during the fourth quarter of 2006.





In
      March
      2007, we secured a 2-year extension to our Naperville, Illinois office lease.
      The extension expires March 31, 2009 and continues at a base rent of $1,357
      per
      month.







F-24
 Table
          of Contents


**ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE.**
 
 There
        were no previously unreported events under this Item 8 during the fiscal
        year
        ended December 31, 2006.
 
 **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 Securities Exchange Act of 1934, as amended
        (the “Exchange Act”).
 
 **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
        Exchange Act, is recorded, processed, summarized and reported in a timely
        manner
        as specified in the rules and forms set forth by the SEC and 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.
 
 **(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 disclosure controls and procedures have been reviewed
                  as of the
                  end of the period covered by a given report;▪
              Any
                  concerns regarding weaknesses in disclosure controls and
                  procedures;▪
              Any
                  concerns relating to events that may require
                  disclosure;▪
              Any
                  concerns relating to internal fraud/defalcation;▪
              Potential
                  material losses;▪
              New
                  off-balance sheet arrangements; and▪
              Material
                  amounts not reflected on the general
                  ledger.
 
 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. Based on this evaluation, our CEO and CFO have concluded
        that
        our 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 Act, is recorded, processed, summarized and reported within
        the
        requisite time periods.
 
 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. 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.
 
 -47-
 Table
            of Contents
 **(c)
        Changes in Internal Control over Financial Reporting**
 
 No
        changes in our disclosure controls and procedures, internal control 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 control
        over financial reporting.
 
 **ITEM
        8B. OTHER INFORMATION.**
 Our
          Annual Meeting of the Stockholders of Findex.com, Inc., previously scheduled
          to
          be held on May 4, 2007, has been rescheduled for September 21,
          2007.
 There
        were no reportable events under this Item 8B during the fiscal quarter ended
        December 31, 2006.
 
 **PART
        III**
 
 **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,CONTROL PERSONS AND CORPORATE
        GOVERNANCE; COMPLIANCE WITH SECTION 16(****a** **)
        OF THE EXCHANGE ACT.**
 
 Our
        directors and executive officers and their ages as of April 17, 2007 were
        as
        follows:
 
 **Name**
              
              **Age**
              
              **Position**Steven
                  Malone
              
              40
              
              Director,
                  Chairman of the Board and PresidentJohn
                  A. Kuehne, CA
              
              49
              
              DirectorKirk
                  R. Rowland, CPA
              
              47
              
              Director
                  and Chief Financial OfficerWilliam
                  Terrill
              
              50
              
              Chief
                  Technology OfficerBrittian
                  Edwards
              
              44
              
              Vice
                  President, CBA Sales and Licensing
  **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 nineteen
        years
        of experience in the computer industry, with the last thirteen 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 to1999 for InfoUSA, he was responsible for sales
        and
        marketing of InfoUSA’s products to retail, distribution, OEM and corporate
        accounts.
 
 **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
        venture capital and management consulting 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 public
        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 $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.
 
 -48-
 Table
            of Contents
 **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.
 
 **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 27 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 19 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 1998
        to
        become the National Sales Manager for Parsons Technology, then owned by
        Broderbund.
 
 **Board
        of Directors Committees**
 
 There
        are
        currently two standing committees comprised of members of our board of
        directors. These include our audit committee and our compensation
        committee.
 
 Since
        December 2000, our board of directors has maintained an audit committee.
        As of
        April 17, 2007, the audit committee consisted of only one member, John Kuehne,
        who is a “financial expert” within the meaning of Item 407(d)(5) of Regulation
        S-B. Mr. Kuehne qualifies as “independent” under Item 7(d)(3)(iv) of Schedule
        14A of the Securities Exchange Act of 1934.
 
 Since
        July 2003, we have maintained a compensation committee. We currently only
        have
        one member, John A. Kuehne, serving on our compensation committee.
 
 -49-
 Table
            of Contents
 On
        March
        31, 2006, Dr. Henry M. Washington resigned as a member of our board of directors
        as a result of other professional obligations, leaving us with only one
        independent director and causing the entire board to temporarily function
        as the
        compensation committee. As of the date of the filing of this annual report
        on
        Form 10-KSB for the fiscal year ended December 31, 2006, and despite our
        efforts
        to do so, we have not yet identified a suitable replacement.
 
 Except
        as
        may be provided in our bylaws (incorporated by reference into this Form 10-KSB
        as Exhibt 3(ii)), we do not currently have specified procedures in place
        pursuant to which whereby security holders may recommend nominees to the
        Board
        of Directors.
 
 **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 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 forth the compliance reporting under Section 16(a) for
        the
        fiscal year ended December 31, 2006.
 
 **Number
                  of Late**
                **Reports**
              
              
              **Number
                  of**
                **Transactions
                  Not**
                **Timely
                  Reported**
              
              
              **Failure
                  to**
                **File**Barron
                  Partners, LP
              
              
              ---
              
              
              ---
              
              
              1
 
 -50-
 Table
            of Contents
 **ITEM
        10. EXECUTIVE COMPENSATION.**
 
 **SUMMARY
        COMPENSATION TABLE**
 
 The
        following table sets forth the total compensation awarded to, earned or paid,
        for each of the last two fiscal years to our Chief Executive Officer and
        each of
        our executive officers earning a total compensation of $100,000 or more during
        any such fiscal 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 total compensation in excess of $100,000 during the fiscal
        year
        ended December 31, 2006.
 
 **Summary
                  Compensation****Name
                  and Principal Position**
              
              
              **Year**
              
              
              **Salary**
                **($)**
              
              
              **Bonus
                  ($)**
              
              
              **Stock
                  Awards ($)**
              
              
              **Option
                  Awards ($)**
              
              
              **Non-equity
                  Incentive Plan Compensation ($)**
              
              
              **Non-qualified
                  Deferred Compensation Earnings ($) (a)**
              
              
              **All
                  Other Compensation ($) (b)**
              
              
              **Total**
                **($)**Steven
                  Malone,
              
              
              2006
              
              $
              150,000
              
              $
              6,632
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              650
              
              $
              5,041
              
              $
              162,323*President
                  and Chief Executive Officer*
              
              
              2005
              
              $
              150,000
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              14,136
              
              $
              164,136William
                  Terrill,
              
              
              2006
              
              $
              150,000
              
              $
              6,632
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              4,680
              
              $
              10,872
              
              $
              172,184*Chief
                  Technology Officer*
              
              
              2005
              
              $
              150,000
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              4,500
              
              $
              12,181
              
              $
              166,681Kirk
                  R. Rowland,
              
              
              2006
              
              $
              110,000
              
              $
              6,632
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              10,283
              
              $
              126,915*Chief
                  Financial Officer*
              
              
              2005
              
              $
              110,000
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              10,314
              
              $
              120,314(a)
                  Represents accrued deferred compensation from our Simple IRA retirement
                  plan, which allows for those employees who participate to receive
                  an
                  employer's match in contribution funds up to 3% of the employee's
                  annual
                  gross pay.(b)
                  Represents earnings accrued at the end of each fiscal year for
                  vacation
                  hours earned that would be required to be paid in connection with
                  any
                  termination, including without limitation through retirement, resignation,
                  severance or constructive termination of any such executive officer's
                  employment.
 
 The
        following table sets forth the outstanding equity awards, specifically
        unexercised options, stock that has not vested, and equity incentive plan
        awards, held by the executive officers named in the Summary Compensation
        Table
        as of fiscal year ended December 31, 2006.
 
 **Outstanding
                  Equity Awards at Fiscal Year-End****Option
                  awards**
              **Stock
                  awards****Name**
              
              
              **Number
                  of Securities Underlying Unexercised options (#)
                  Exercisable**
              
              
              **Number
                  of Securities Underlying Unexercised options (#)
                  Unexercisable**
              
              
              **Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options (#)**
              
              
              **Option
                  Exercise Price ($)**
              
              
              **Option
                  Expiration Date**
              
              
              **Number
                  of Shares or Units of Stock that have not Vested
                  (#)**
              
              
              **Market
                  Value of Shares or Units of Stock that have not Vested
                  ($)**
              
              
              **Equity
                  Incentive Plan Awards: Number of Unearned Shares, Units or Other
                  Rights
                  that have not Vested (#)**
              
              
              **Equity
                  Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                  Units or
                  Other rights that have not Vested ($)**Steven
                  Malone
              
              
              250,000
              
              
              ---
              
              
              ---
              
              $
              0.11
              
              
              July
                  17, 2011
              
              
              ---
              
              $
              ---
              
              
              ---
              
              $
              ---William
                  Terrill
              
              
              500,000
              
              
              ---
              
              
              ---
              
              $
              0.05
              
              
              June
                  6, 2012
              
              
              ---
              
              $
              ---
              
              
              ---
              
              $
              ---William
                  Terrill
              
              
              500,000
              
              
              ---
              
              
              ---
              
              $
              0.05
              
              
              June
                  7, 2013
              
              
              ---
              
              $
              ---
              
              
              ---
              
              $
              ---Kirk
                  R. Rowland
              
              
              150,000
              
              
              ---
              
              
              ---
              
              $
              0.11
              
              
              July
                  17, 2011
              
              
              ---
              
              $
              ---
              
              
              ---
              
              $
              ---
 
 -51-
 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 ($.001).
 
 We
        did
        not grant stock options to our executive officers during the fiscal year
        ended
        December 31, 2006. No executive exercised any stock options during the fiscal
        year 2006.
 
 **EMPLOYMENT
        AGREEMENTS**
 
 Mr.
        Malone is employed by us pursuant to a two-year employment agreement extension,
        which extension commenced on March 31, 2006, and which is a term extension
        to
        the previous employment agreement originally dated July 25, 2003. The original
        agreement provided for a base annual salary equal to $150,000 and an annual
        bonus equal to 1% of our net income. The employment agreement extension was
        amended on April 13, 2007 to provide for an annual bonus equal to 1% of income
        from operations adjusted for other income and interest expense for 2007 and
        beyond. In the event Mr. Malone is terminated by us for reason other than
        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 by us pursuant to a two-year employment agreement extension,
        which extension commenced on March 31, 2006, and which is a term extension
        to
        the previous employment agreement originally dated June 7, 2002. The original
        agreement provided 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 common
        shares at the market price of $0.04 per share, the quoted trading price on
        the
        date the agreement was reached. The employment agreement extension was amended
        on April 13, 2007 to provide for an annual bonus equal to 1% of income from
        operations adjusted for other income and interest expense for 2007 and beyond.
        In the event Mr. Terrill is terminated by us for reason other than 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 by us pursuant to a two-year employment agreement extension,
        which extension commenced on March 31, 2006, and which is a term extension
        to
        the previous employment agreement originally dated July 25, 2003. The original
        agreement provided for a base annual salary equal to $110,000 and an annual
        bonus equal to 1% of our net income. The employment agreement extension was
        amended on April 13, 2007 to provide for an annual bonus equal to 1% of income
        from operations adjusted for other income and interest expense for 2007 and
        beyond. In the event Mr. Rowland is terminated by us for reason other than
        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.
 
 -52-
 Table
            of Contents
 **DIRECTOR
        COMPENSATION**
 
 Pursuant
        to authority granted under 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. On March 31, 2006, we resolved to issue
        our
        outside directors a total of 438,462 shares of common stock valued at $0.13
        per
        share in lieu of cash and meeting fees, for the period September 1, 2004
        through
        March 31, 2006. On October 26, 2006, we resolved to issue our outside director
        a
        total of 480,000 shares of common stock valued at $0.025 per share in lieu
        of
        cash and meeting fees, for the period of April 1, 2006 through September
        30,
        2006. As of the date hereof, we have accrued approximately $12,000 in director’s
        fees for our outside director for the period of October 1, 2006 through March
        31, 2007.
 
 The
        following table sets forth the compensation of our outside directors for
        the
        fiscal year ended December 31, 2006.
 
 **Director
                  Compensation****Name**
              
              
              **Fees
                  Earned or Paid in Cash ($)**
              
              
              **Stock
                  Awards ($)**
              
              
              **Option
                  Awards ($)**
              
              
              **Non-Equity
                  Incentive Plan Compensation ($)**
              
              
              **Non-Qualified
                  Deferred Compensation Earnings ($)**
              
              
              **All
                  Other Compensation ($)**
              
              
              **Total
                  ($)**John
                  Kuehne (a)
              
              $
              6,000
              
              $
              18,000
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              24,000Henry
                  Washington (b)
              
              $
              ---
              
              $
              3,000
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              ---
              
              $
              3,000(a)
                  Stock awards consists of 46,154 restricted shares of common stock
                  issued
                  on March 31, 2006 at $0.13 per share in lieu of cash and meeting
                  fees and
                  480,000 restricted shares of common stock issued on October 26,
                  2006 at
                  $0.025 per share in lieu of cash and meeting fees.(b)
                  Stock awards consists of 23,077 restricted shares of common stock
                  issued
                  on March 31, 2006 at $0.13 per share in lieu of cash and meeting
                  fees.
 
 Mr.
        Kuehne has served as one of our directors since December 2000. Mr. Kuehne's
        compensation agreement currently provides for a monthly fee of $1,000 for
        committee services and a monthly fee of $1,000 for services as a “financial
        expert” (as defined in Regulation 228.401(e)(1)(i)(A) of Regulation S-B). We
        currently accrue $2,000 a month for Mr. Kuehne’s services. Dr. Washington has
        also served as one of our directors since December 2000; however, on March
        31,
        2006, Dr. Washington resigned as a member of our board of directors as a
        result
        of other professional obligations. Dr.Washington's compensation agreement
        had
        provided for a monthly fee of $1,000 for committee services.
 
 **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 April 17, 2007. 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.
 
 -53-
 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 49,788,317 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 23,000,000 additional shares potentially acquired within sixty
        days,
        for a total of 72,788,317 shares. The address of each person listed is in
        care
        of Findex.com, Inc., 11204 Davenport Street, Suite 100, Omaha, Nebraska 68154.
 
 **Title
                  of Class**
              
              **Name
                  of Beneficial Owner**
              
              **Amount
                  and Nature of Beneficial Owner**
              
              **Percent
                  of Class**Common
                  Stock
              
              Barron
                  Partners, LP (1)
              
              43,750,000
              
              60.1%
 
 (1)
        Consists of warrants to acquire up to 21,875,000 shares of common stock,
        all of
        which are presently exercisable and 21,875,000 shares of common stock directly
        owned.
 
 **Title
                  of Class**
              
              **Name
                  of Beneficial Owner**
              
              **Amount
                  and Nature of Beneficial Owner**
              
              **Percent
                  of Class**Common
                  Stock
              
              Steven
                  Malone (1)
              
              2,203,111
              
              3.0%Common
                  Stock
              
              John
                  A. Kuehne (2)
              
              2,464,157
              
              3.4%Common
                  Stock
              
              Kirk
                  R. Rowland (3)
              
              1,819,111
              
              2.5%Common
                  Stock
              
              William
                  Terrill (4)
              
              1,751,127
              
              2.4%Common
                  Stock
              
              All
                  officers and directorsas
                  a group (4 persons)
              
              8,237,506
              
              11.3%
 
 (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 110,000 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 2,289,157 shares of common stock directly
        owned.
 
 (3)
        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.
 
 (4)
        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 AND DIRECTOR INDEPENDENCE.**
 
 **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.
 
 -54-
 Table
            of Contents
 Upon
        receipt of the requisite stockholder approval to increase the number of
        authorized common shares so as to allow us to deliver the warrants, effectively
        obtained and effectuated as of November 10, 2004, we had 30 days within which
        to
        file 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. Accordingly, this registration statement was filed on
        November 22, 2004. On
        February 1, 2006, the SEC declared this registration statement effective.
        Due to
        continued delays in effectiveness of this registration statement (due
        principally to ongoing efforts made necessary by our determination to restate
        certain of our historical financial information), and in accordance with
        the
        Registration Rights Agreement, we accrued a total of approximately $490,000
        (284
        days at $1,726 per day) in penalties, of which we had paid $150,000 prior
        to
        April 7, 2006. On April 7, 2006, we issued a two-year promissory note for
        $336,000 together with simple interest at the rate of 8% per annum to Barron
        Partners for the unpaid registration rights penalties. The note agreement
        calls
        for monthly installments for the first twelve months of $10,000, beginning
        May
        1, 2006 and $20,000 per month thereafter. The accrual and payment on the
        registration rights penalties has had a material adverse effect on our business,
        our financial condition, including liquidity and profitability, and our results
        of operations.
 
 As
        of the
        date hereof, Barron Partners, LP owns 44.0% 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.
 
 **DIRECTOR
        INDEPENDENCE**
 
 We
        currently have three directors serving on our Board of Directors, Mr. Malone,
        Mr. Rowland and Mr. Kuehne. We
        are
        not a listed issuer and, as such, are not subject to any director independence
        standards. Using the definition of independence set forth in the rules of
        the
        American Stock Exchange, only Mr. Kuehne would be considered an independent
        director of the Company.
 
 **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)
              Restated
                  Articles of Incorporation of Findex.com, Inc. dated June 1999 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
                  10, 2004
                  incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed
                  November
                  10, 2004.3(ii)
              Restated
                  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.
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  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 Stock Purchase Agreement between Findex.com, Inc. and
                  Barron
                  Partners, LP 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, 2004.10.13
              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,
                  incorporated by reference to Exhibit 10.14 on Form 10-KSB/A filed
                  December
                  14, 2005.10.15
              Employment
                  Agreement Extension between Findex.com, Inc and Steven Malone dated
                  March
                  31, 2006, incorporated by reference to Exhibit 10.1 on Form 8-K
                  filed
                  April 6, 2006.10.16
              Employment
                  Agreement Extension between Findex.com, Inc and William Terrill
                  dated
                  March 31, 2006, incorporated by reference to Exhibit 10.2 on Form
                  8-K
                  filed April 6, 2006.10.17
              Employment
                  Agreement Extension between Findex.com, Inc and Kirk R. Rowland
                  dated
                  March 31, 2006, incorporated by reference to Exhibit 10.3 on Form
                  8-K
                  filed April 6, 2006.10.18
              Promissory
                  Note to Barron Partners, LP dated April 7, 2006, incorporated by
                  reference
                  to Exhibit 10.1 on Form 8-K filed April 13, 2006.10.19
              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, 2000.10.20
              Convertible
                  Secured Promissory Note between FindEx.com, Inc. and W. Sam Chandoha,
                  dated July 20, 2006, incorporated by reference to Exhibit 10.1
                  on Form 8-K
                  filed July 26, 2006.10.21
              Security
                  Agreement between FindEx.com, Inc. and W. Sam Chandoha, dated July
                  20,
                  2006 incorporated by reference to Exhibit 10.2 on Form 8-K filed
                  July 26,
                  2006.10.22
              Common
                  Stock Purchase Warrant between FindEx.com, Inc. and W. Sam Chandoha,
                  dated
                  July 20, 2006 incorporated by reference to Exhibit 10.3 on Form
                  8-K filed
                  July 26, 2006.
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  10.23
              Modification
                  and Extension Agreement Between FindEx.com, Inc. and W. Sam Chandoha,
                  dated September 20, 2006, incorporated by reference to Exhibit
                  10.1 on
                  Form 8-K filed September 25,2006.10.24
              Employment
                  Agreement Extension Amendment between Findex.com, Inc. and Steven
                  Malone
                  dated April 13, 2007. FILED HEREWITH.10.25
              Employment
                  Agreement Extension Amendment between Findex.com, Inc. and William
                  Terrill
                  dated April 13, 2007. FILED HEREWITH.10.26
              Employment
                  Agreement Extension Amendment between Findex.com, Inc. and Kirk
                  R. Rowland
                  dated April 13, 2007. FILED HEREWITH.14.1
              Code
                  of Ethics, adopted by Board of Directors April 17, 2006. FILED
                  HEREWITH.21.1
              Subsidiaries
                  of Findex.com, Inc. as of December 31, 2006. FILED
                  HEREWITH.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 April 17, 2007. 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 April 17, 2007. 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 April
                  17, 2007.
                  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 April
                  17, 2007.
                  FILED HEREWITH.
 
 **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND
        SERVICES.**
 
 The
        following table sets forth the aggregate amount of various professional fees
        billed by our principal independent accountants for our last two fiscal years.
        On December 22, 2005, upon recommendation of our Audit Committee, our Board
        of
        Directors dismissed Chisholm, Bierwolf &Nilson, LLC and engaged Brimmer,
        Burek & Keelan LLP, as our principal independent accountants. Through the
        fiscal year ended December 31, 2005, we had not been billed by Brimmer, Burek
        & Keelan LLP with respect to their audit work performed for fiscal year
        ended December 31, 2005. The fees shown in the table under the 2005 column
        reflect fees billed to us by Chisholm, Bierwolf & Nilson, LLC.
 
 **2006**
              
              
              2005Audit
                  fees
              
              $
              57,955
              
              $
              20,446Audit-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. Neither
        Chisholm, Bierwolf & Nilson, LLC nor Brimmer, Burek & Keelan LLP
        provided any non-auditing services to us.
 
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 **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:
        April 17, 2007
 
 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
              
              April
                  17, 2007Steven
                  Malone
              
              Executive
                  Officer (principal executive officer)/s/
                  John A. Kuehne
              
              Director
              
              April
                  17, 2007John
                  A. Kuehne/s/
                  Kirk R. Rowland
              
              Director
                  and Chief Financial Officer
              
              April
                  17, 2007Kirk
                  R. Rowland
              
              (principal
                  financial and accounting officer)
  
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