**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**




**FORM
10-KSB/A**




(Mark
One)





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





For the
fiscal year ended December 31, 2004.





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





For the
transition period from ________ to _________.





Commission
File Number: 0-29963












**FINDEX.COM,
INC.**


(Name of
Small Business Issuer in its Charter)





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





(402)
333-1900


(Issuer’s
Telephone Number, Including Area Code)





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





None





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





Common
Stock, $.001 par value


(Title of
Class)





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





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





Revenues
for the fiscal year ended December 31, 2004 totaled $5,218,784.




As
of June 6, 2005, the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the average of the
closing bid and asked prices on such date was approximately $2,151,000.









At June
7, 2005, the registrant had outstanding 48,619,855 shares of common stock, of
which there is only a single class.







**DOCUMENTS
INCORPORATED BY REFERENCE**





None.





Transitional
Small Business Disclosure Format (check one):





Yes __ No X



























































Table of Contents





**TABLE OF
CONTENTS**




**Page
      Number****PART I**ITEM 1. Description of Business.
    1ITEM 2. Description of Property.
    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.
    20ITEM 7. Financial Statements.
    F-1ITEM 8. Changes In and Disagreements With Accountants on
      Accounting and Financial Disclosure.
    41ITEM 8A.Controls and Procedures.
    41ITEM 8B. Other Information.
    42**PART III**ITEM 9. Directors, Executive Officers, Promoters and Control
      Persons; Compliance With Section 16(a) of the Exchange
      Act.
    43ITEM 10. Executive Compensation.
    46ITEM 11. Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters.
    48ITEM 12. Certain Relationships and Related
      Transactions.
    50ITEM 13. Exhibits.
    50ITEM 14. Principal Accountant Fees and Services.
    52









-i-
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**PART I**





**SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




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





**ITEM 1. DESCRIPTION OF BUSINESS.**


****


**OVERVIEW**


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





We were
incorporated in the State of Nevada on November 7, 1997 as EJH Entertainment,
Inc. On December 4, 1997, a predecessor corporation with the same name as our
own but domiciled in Idaho was merged with and into us. Although the predecessor
Idaho corporation was without material assets or operations as of the time of
the merger, since being organized in 1968, it had historically been involved in
mining and entertainment businesses unrelated to our current business.

Beginning
in 1997, and although we were not then a reporting company under the Securities
Exchange Act, our common stock was quoted on the OTC Bulletin Board (originally
under the symbol “TIXX”, which was later changed to “TIXXD”). On May 13, 1999,
we changed our name to FINdex.com, Inc. On March 7, 2000, in an effort
to satisfy a newly imposed NASD Rule eligibility requirement that companies
quoted on the OTC Bulletin Board be fully reporting under the Securities
Exchange Act (thereby requiring recently audited financial statements) and
current in their filing obligations, we acquired, as part of a share exchange in
which we issued 150,000 shares of our common stock, all of the outstandingcapital
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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In
addition to Reagan Holdings, we also have one other wholly-owned subsidiary,
Findex.com, Inc. (*i.e.* the same name as our own), a Delaware
corporation. Like Reagan Holdings, this entity, too, does not currently have any
operations, employees, or revenues. This subsidiary resulted from an acquisition
on April 30, 1999 pursuant to which we acquired all of the issued and
outstanding capital stock of FINdex Acquisition Corp., a Delaware corporation,
from its then stockholders in exchange for 4,700,000 shares of our common stock,
which, immediately following the transaction, represented 55% of our total
outstanding common stock. Our purpose for this acquisition was to broaden our
then-existing stockholder base, an important factor in our effort to develop a
strong market for our common stock. On May 12, 1999, in exchange for the
issuance of 457,625 shares of FINdex Acquisition Corp. common stock, FINdex.com,
Inc., another Delaware corporation (originally incorporated in December 1995 as
FinSource, Ltd.), was merged with and into FINdex Acquisition Corp., with FINdex
Acquisition Corp. remaining as the surviving entity. Our purpose for this merger
was to acquire a proprietary financial information search engine for the
Internet which was to serve as the cornerstone for a Web-based development-stage
business, but which has since been abandoned. As part of the certificate of
merger relating to this transaction, FINdex Acquisition Corp. changed its name
to FINdex.com, Inc. We currently own 4,700,000 shares of FINdex.com, Inc. (the
Delaware corporation), representing 100% of its total outstanding common stock.




**STRATEGY**


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







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


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


-4-
 Table of Contents
  ****
  **Bible Study**





For the
fiscal year ended December 31, 2004, approximately 63% of our revenues were
derived from sales of our flagship QuickVerse®, an
industry-leading Bible-study software now in its 16thyear and
9thversion,
which is available in an array of content package variations ranging in retail
price from $4.50 to $299.95. Originally introduced into the market in 1989,
QuickVerse®has sold
over one million copies since its introduction and is currently believed by us
to be the market leader in its category.


QuickVerse®simplifies biblical research, allowing users to view multiple reference
materials, including Bibles, dictionaries, commentaries and encyclopedias,
side-by-side on the computer screen. A built-in QuickSearch feature enables the
user to highlight a word or Bible verse and find all of its occurrences in a
particular text. Advanced search options also enable users to search by word,
phrase or verse across multiple books. QuickVerse®2005,
our latest version, is currently available in four CD-Rom editions. Each edition
of QuickVerse®contains
several Bible translations (*e.g.*, the
King James Version, the American Standard Version, etc.) along with numerous
reference titles (*e.g.*,
dictionaries, commentaries, encyclopedias, etc.). The QuickVerse®family
of products includes: the QuickVerse®Essentials Edition (which includes 9 Bibles and 40 reference titles), the
QuickVerse®Standard
Edition (which includes 12 Bibles and 56 reference titles), the
QuickVerse®Expanded
Edition (which includes 14 Bibles and 95 reference titles), and the
QuickVerse®Deluxe
Edition (which includes 18 Bibles and 144 reference titles). Each
QuickVerse®purchase
includes access to additional books and content, which can be unlocked or
downloaded and made accessible for an additional fee.





QuickVerse®
PDA, an industry-leading PDA Bible-study software, is compatible on both Pocket
PC® and Palm® OS operating systems, and is currently in
its 3rd year and 2nd version. This program provides the
same simplified access and many of the personal Bible study features found in
the desktop QuickVerse® versions. QuickVerse® PDA is
currently available in four editions as a download and in CD-Rom. Each edition
of QuickVerse® PDA contains several Bible translations
(*e.g.*, the King James Version, the American Standard Version, etc.)
along with numerous reference titles (*e.g.*, dictionaries, commentaries,
encyclopedias, etc.). The QuickVerse® PDA family of products
includes: the Standard Edition (which includes 3 Bibles and 4 reference titles),
the Deluxe Edition (which includes 5 Bibles and 6 reference titles), the Life
Application Study Bible (which includes 1 Bible and 11 reference titles) and a
secular version (which includes 2 Bibles and 4 reference titles). Each edition
contains 25 scripture reading plans and provides the user with the ability to
create their own.







-5-
 Table of Contents





QuickVerse  Left
Behind ® Series,
a New York Times ® Best-Selling book series and the newest addition to the QuickVerse ® PDA
Bible software family, is compatible on both Pocket PC ® and
Palm ® OS
operating systems and was released in 2004. This program provides a new way to
read, reference, recall, retrieve, note, search, and study fiction and
non-fiction. QuickVerse  Left
Behind ® Series
is currently available in four editions as a download and in CD-Rom. Each
edition contains three volumes from the Left Behind ® Series,
1 Bible translation, 4 reference titles and 36 scripture reading plans.


We expect
to introduce QuickVerse ® Macintosh beginning in late spring/early summer 2005. QuickVerse ® Macintosh is compatible with Macintosh ® OS X
10.3 or higher operating systems. This program will be available in two editions
and provide access to several Bible translations ( *e.g.* , the
King James Version, the American Standard Version, etc.) along with numerous
reference titles ( *e.g.* ,
dictionaries, commentaries, encyclopedias, etc.). The QuickVerse ® Macintosh family of products contains numerous Search Panel features, including
user-defined book categorization, desktop books, download books, interactive
workbooks and daily reading plans, as well as an exclusive Preview Drawer,
allowing users to have an unlimited number of books open at any
time.


QuickVerse®customers
include (i) individuals devoted to or otherwise interested in studying
Christianity and (ii) religious and other spiritual organizations including
schools, churches and other faith-based ministries.


In
addition to QuickVerse ® , we also
develop and market certain other Bible study software packages. These include
the Complete Bible Resource Library ® , the
Book ® , The
Life Application Bible ® , A Walk
in the Footsteps of Jesus ® , Adam
Clark’s
Commentary on the Bible ® , and
Dictionaries of the New Testament ® .
Although our prices are subject to change from time to time, these titles
currently range in retail price from $9.95 to $99.95 per unit.




**Financial/Office
Management Products for Churches and other Christian Faith-Based
Ministries**





For the
fiscal year ended December 31, 2004, approximately 28% of our revenues were
derived from sales of Membership Plus ® , an
industry-leading church management software now in its 9 th version.
Membership Plus ® is
available in each of a standard and a deluxe package at retail prices of $149.95
and $349.95 respectively. Each of these product packages provides church
database, financial management and church productivity tools, including those
designed to streamline church office accounting, tasks and scheduling, track
membership and contributions, organize membership databases, and provide
efficiency in producing targeted mailings, attendance reports and IRS-compliant
contribution receipts. The deluxe package is equipped with a broader
functionality and range of features, including, for example, a number of
templates for legal agreements frequently used by these types of organizations
and a fund based accounting function.




Membership
Plus ® is
designed to serve the unique needs of the churches, “ para-church ” organizations and ministries, and non-profit entities. The term “ para-church ” has been
developed by the religious community to refer to religious organizations which
have some of the characteristics of a church, but which are not what most people
would generally consider to constitute a church, including a defined
congregation . Some “ para-church ” organizations are treated as churches for some reasons, and as religious
organizations which are not churches for others. A few examples of a “ para-church ” organization are Campus Crusade for Christian Ministry Resources, Promise
Keepers, and Josh McDowell Ministry.




Over
80,000 churches and faith-based organizations have purchased Membership
Plus ® since
its introduction in 1990. Membership Plus ® 2005,
our latest version, is currently available in two CD-Rom editions: Membership
Plus ® Standard
and Membership Plus ® Deluxe.
We have approximately 50,000 registered users for this product.





-6-
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****


**Print & Graphic
Products**




We
currently sell/distribute ClickArt Christian Publishing ® Suite
III, which is a full desktop publishing package containing over 13,000 Christian
images, icons, maps, Catholic and Jewish imagery and ethnically diverse,
family-oriented illustrations to be used in the creation of a wide range of
printed materials including newsletters, bulletins, posters, fliers, mailings,
calendars, and reports. We also publish/distribute Religious ClipArt ® and
Christian Images ® . Both of
these products are CD-Rom Clipart products that contain faith-based and
Christian graphical images that can be used in the production of other content
related projects. In addition, we also distribute several titles produced and
distributed by International Microcomputer Software, Inc. a leading developer of
software for both professional and home users, including ClipArt & More 2.5
Million and Print Studio Pro Deluxe.
 Although
our prices are subject to change from time to time, our print and graphic
products range in price from $9.99 to $39.99 per unit. In the aggregate, and for
the fiscal year ended December 31, 2004, 3% of our revenues were derived from
sales of these products.


****


**Pastoral Products**





We
currently produce and distribute/sell a line of pastoral products designed to
assist faith-based ministries in streamlining sermon development and research
tasks and in organizing responsibilities. These titles include the following:




•
    Sermon
      Builder®4.0 Deluxe, which is a database compilation of illustrations, anecdotes,
      quotations, proverbs and bits of humor from general topics like children
      and angels to specific Bible passages, which users can use to bring
      messages to a congregation or classroom.
 •
    Ministry
      Notebook®2.0, which is an organizational tool for users to keep better track of
      ministry-related paperwork including sermons, prayer requests, personal
      libraries, telephone contacts, and expense reports.
 •
    Daily
      Journal®,
      which is a tool for entry and recordation of personal thoughts, important
      family and business events.


Although
our prices are subject to change from time to time, our pastoral products range
in price from $9.95 to $49.95 per unit. In the aggregate, and for the fiscal
year ended December 31, 2004, 2% of our revenues were derived from sales of
these products.


****


**Children’s
Products**





We
currently produce and distribute/sell a line of children’s
CD-Rom products designed to appeal to faith-conscious families interested in
spiritually-enriched entertainment and play-along educational content.
Collectively, these titles include Jonah and the Whale ® , Noah
and the Ark ® , Daniel
in the Lion’s
Den ® , and The
Story of Creation ® . In
addition, we also distribute the Veggie Tales ® , a
popular line of children’s
software programs involving interactive adventures with biblical
themes.





Although
our prices are subject to change from time to time, our children’s
CD-Rom products range in price from $5.95 to $22.98 per unit. In the aggregate,
and for the fiscal year ended December 31, 2004, less than 1% of our revenues
were derived from sales of these products.





-7-
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****


**Language Tutorial
Products**





We
currently produce tutorial software programs for learning Greek and Hebrew,
languages frequently studied in conjunction with a Bible-study curriculum or by
biblical scholars. Each of these two programs covers all of the essential
language development skills, including letters, vocabulary and grammar. Although
our prices are subject to change from time to time, our language tutorial
products range in price from approximately $10.00 to approximately $69.95 per
unit. In the aggregate, and for the fiscal year ended December 31, 2004, 3% of
our revenues were derived from sales of these products.


****


**Other Products**


In
addition to our own software products, we resell certain titles and title
versions that we purchase at a discount and that are published by others,
including IMSI, Veggie Tales, and Webroot. These are non-exclusive,
purchase-order only type arrangements in connection with which we carry only
limited inventory. Sales from these titles are derived exclusively online
through our Website and, apart from on our Website, we do not promote these
products. Although prices are subject to change from time to time, these
software products range in price from approximately $5.99 to approximately
$39.99 per unit. In the aggregate, sales of these software products constituted
approximately 2% of our 2004 annual revenues.


**OUR MARKET**





According
to a Gallup poll released in March 2004, 49.4% of Americans identified
themselves as Protestant, while 23.7% identified themselves as Catholic, and
9.1% identified themselves as“Other
Christian”.
According to the same survey, more than 60% of Americans say that religion is
very important to them in their own lives, and another 24% say that religion is
fairly important in their lives.


A survey
released in July 2003 by the Christian Bookseller ’ s
Association indicated that Christian-product sales for the year 2002 were $4.2
billion. The survey also revealed that $2.4 billion of the $4.2 billion total
was sold through Christian retail, with $1.1 billion sold through general
retail, and $725 million sold direct-to-consumer, and through ministry sales
channels. The 3,500-store CBA segment includes several different chains, Family
Christian Stores being the largest with 325 stores. As faith-based retailing
increases, secular stores are offering more faith-based products as evidenced by
the $1.1 billion sales figure in 2002 as reported by the CBA. It is this
faith-based demographic that we seek to target.


****MARKETING AND
ADVERTISING**

In
developing a marketing strategy for our consumer software products, we seek
brands or titles and title versions that we believe will appeal to the interests
of our target consumers. We strive to create marketing campaigns which are
consistent with this strategy and generally market our software
through:

•
    Our
      Website (www.quickverse.com) and the Internet sites of
    others;
•
    Print
      advertising;
•
    Opt-in
      e-mail campaigns;
•
    Product
      sampling through demonstration software;
•
    In-store
      promotions, displays and retailer assisted co-operative advertising;
•
    Publicity
      activities; and
•
    Trade
      shows.**


-8-
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****


**SALES**





****


**Direct Marketing /
Online Sales**





Direct
sales accounted for approximately 65% of our 2004 fiscal year revenue. Over the
past two years, we have devoted significant and increasing resources to the
development of our direct-marketing program. Through this program, we market our
products directly to consumers and Church and “para-church” organizations
through a combination of direct-mailings and opt-in e-mailings of our product
title catalogs and brochures. An important aspect of this initiative is our
online sales. In May of 2004, we launched a full-service online store with many
of the kinds of features and capabilities that online shoppers have come to
expect from cutting-edge Internet retailers. We are currently marketing our
products online through multiple sources including our own www.quickverse.com
Internet Website, other Internet Websites such as www.amazon.com, as well as
several widely used search engines such as Google® and
Yahoo®. While we market our products through these other Internet
Websites and search engines, we are not substantially dependent upon these
marketing relationships and have no written agreements with any one or more of
them. The revenue generated from these Internet Websites and search engines,
excluding our own www.quickverse.com Internet Website, accounted for less than
approximately 1% of our 2004 fiscal year revenue.

We
anticipate online orders will continue to increase as we expand our software
product base and enhance our marketing efforts in this area. ****


**Retail
Sales**




Retail
sales accounted for approximately
35% of our 2004 fiscal year revenue. Our domestic retail sales involve thousands
of retail stores across the United States through which our products are sold,
many of which are members of the CBA. These stores vary from small, family-owned
Christian bookstores to large chain bookstores such as LifeWay Christian Stores,
Family Christian Stores and Berean Christian Stores. We face the continuing
challenge of reaching these stores on a consistent basis to keep them informed
of new releases, promotional offers, etc. In addition to advertising in trade
publications and maintaining visibility at CBA trade shows and events, we
believe that it is critical to be in direct personal contact with each customer
routinely in order to maintain or increase our market position. Towards that
end, our sales representatives are expected to contact each of our customers as
well as each of the independent stores that are not yet our customers regularly
and present them with the latest in our products and promotions. We believe our
personalized approach to marketing provides us with an edge over our
competition, which we believe rely predominantly on advertising to maintain and
develop their relations with CBA customers.





-9-
 Table of Contents





In the
secular retail market, which includes chains such as Best Buy, CompUSA, and
OfficeMax, we believe that we continue to be a top seller of Bible study
software and we are developing additional product offerings and promotions to
grow our market share.




**International
Sales**





International
sales accounted for approximately 2% of our 2004 fiscal year revenue. We
currently sell to distributors and retailers in Canada, New Zealand, Australia,
Philippines, Hong Kong, the United Kingdom, and Singapore. These distributors
and retailers, in turn, sell our products into both Christian and large, secular
retail outlets that sell off-the-shelf consumer software packages.




**Returns and Price
Concessions**


At the
time we ship our products we establish reserves, including reserves that
estimate the potential for future product returns and price concessions.
Management makes these estimates and assumptions based on actual historical
experience regarding allowances for estimated price concessions and product
returns. In determining the percentage of sales for product return
reserves, management considers a number of different statistical factors.
First, it reviews the rate of actual product returns (in total) for the period.
Second, it reviews return rates for the same period(s) of prior years. Third, it
reviews its sales by individual retail customers to assess any unusual return
exposure. Fourth, it reviews actual return rates of specific title and title
versions to determine if there are any unusual trends taking place. Fifth, the
potential for an increase in actual returns resulting from upcoming new title or
title version releases is reassessed. Sixth, and finally, management reviews the
actual returns from the balance sheet date to the date of calculation to
determine if anything unexpected has taken place.
 
 We give
all of our distributors and retail customers a written product return policy
providing for returns, upon written request, within nine months of the invoice
date for credit only. If a new title or title version release falls within that
nine month time span, a distributor has 60 days from the announced release date
to return the old title or title version in exchange for the new title or title
version only. We provide our end-user consumers with a 45 day satisfaction
guarantee, allowing them to return a title or title version within that time
frame if for any reason unsatisfied. Our warranty policy for defective software
is to provide replacement or repair for a period of 45 days from the invoice
date. We believe that these measurement dates provide a consistent period for
assessment and the opportunity to adequately estimate channel inventory levels
for appropriately estimating our return reserves.
    We
generally grant price concessions to our wholesale retail customers when we
deem those concessions necessary to maintain our relationships with those
retailers and maintain continued access to their retail channel customers.
Further, if consumer demand for a specific title falls below expectations or
significantly declines below previous rates of wholesale retail sell-through,
then a price concession or credit may be requested by our retail customers to
spur further retail channel sell-through.
 Trends
that our returns typically follow include (i) the seasonality of sales, and (ii)
the fact that, generally, relatively higher return rates occur during periods of
new title or title version releases. Historically, actual returns have been
within management’s prior estimates, however, we cannot be certain that any
future write-offs exceeding reserves will not occur or that amounts written off
will not have a material adverse effect on our business, our financial
condition, including liquidity and profitability, and our results of operations.
Management continually monitors and adjusts these allowances to take into
account actual developments and sales results in the marketplace. In the past,
particularly during title and title version transitions, we have had to increase
price concessions to our retail customers.
 ****
 -10-
 Table of Contents
 ****
 MANUFACTURING AND
FULFILLMENT




We
prepare a set of master program copies, documentation and packaging materials
for each platform on which a title or title version is available. All of our
software products are manufactured through third-party subcontractors, with
orders for PC-based titles and title versions generally taking seven to ten
days, and reorders taking three to five days. Packaging, printing and assembly
are also performed by third-party subcontractors. To date, we have not
experienced any material returns due to product defects.





We
currently fulfill all of our direct-to-consumer sales out of our own warehouse
located in Omaha, Nebraska and a third-party fulfillment company, also located
in Omaha, Nebraska, fulfills our bulk retail sales.




SIGNIFICANT CUSTOMERS
AND SUPPLIERS





During
the years ended December 31, 2004 and 2003, we had no major customers that
individually accounted for 10% or more of annual sales. As we introduce new
and enhanced software titles into the market, we anticipate our sales to a
single customer, as a percentage of gross consolidated revenue, will continue to
remain below 10%.




Also for
the years ended December 31, 2004 and 2003, product and material purchases from
IsoDisc accounted for 29% and 3%, respectively, Midlands Packaging Corporation
accounted for 18% and 14%, respectively, Frogs Copy and Graphics accounted for
17% and 10%, respectively, MicroBytes, Inc. accounted for 12% and 39%,
respectively, and Cedar Graphics accounted for 7% and 17%, respectively, of the
total product and material purchases made by us. We currently have no long-term
written agreements with any of these suppliers. The payment terms are generally
net 30 days, and we are not substantially dependent upon any one or more of
them; all are easily replaceable with any locally available supplier.


**REGULATION**





We are
not currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally.


****


**COMPETITION**


The
market for our products is rapidly evolving and intensely competitive as new
software products and platforms are regularly introduced. Competition in the
software industry is based primarily upon:
 
 •
    brand
      name recognition;
 •
    availability
      of financial resources;
 •
    the
      quality of titles;
 •
    reviews
      received for a title from independent reviewers who publish reviews in
      magazines, Websites, newspapers and other industry publications;
 •
    publisher’s
      access to retail shelf space;
 •
    the
      price of each title; and
 •
    the
      number of titles then available.
 
 We face
competition from other software publishers, all of which generally sell through
the same combination of channels that we do, including chain store, secular,
CBA, direct and online sales.
 
 Specifically,
and in relation to our QuickVerse ® products, we believe are the market leader in our category. We currently compete
with the following companies and products, among others:
  -11-
 Table of Contents
 
 •
    Logos
      Research Systems, Inc.-Logos Series X®
 •
    Biblesoft,
      Inc.-BibleSoft PC Bible Study®Version 4
 •
    Thomas
      Nelson, Inc.-Nelson eBible®
 •
    WordSearch
      Bible Publishers-WordSearch®7
 •
    Zondervan-Zondervan Bible Study Library®
 Although
each of these companies publishes software packages in several different
variations, generally in a range that includes a standard package, an expanded
package, and a deluxe package (the same way that we do), in each of these
respective categories we believe that we tend to be the least expensive but the
most comprehensive in terms of the number of Bibles and reference titles
included. We believe QuickVerse ’ s ® reputation to be among the most well-respected in its category.
 
 In
relation to our Membership Plus ® products, we currently compete with the following companies and comparable
products, among others:
  •
    ACS
      Technologies®
 •
    CCIS
      Church Software®
 •
    Church
      Data Master Plus®
 •
    Church
      Windows/Computer Helper®
 •
    Church
      Office®
 •
    Logos
      Management Software®
 •
    Power
      Church Software®•
    Servant
      PC®•
    Shelby
      Systems®•
    Shepherd’s
      Staff®(Concordia Publishing House)•
    Specialty
      Software®
 We
believe that Membership Plus®is the
market leader by a margin of over 100% in the church management software
publishing category in terms of registered users. Our Membership
Plus®packages
are also among the least expensive products in the category.
 We rely
upon our product quality, marketing and sales abilities, proprietary technology
and product development capability, the depth of our retail distribution
channels and management experience to compete in the software industry. Although
we believe that we are among the market leaders in each of our two primary
product categories, some of our competitors have longer operating histories,
larger customer bases and greater financial, marketing, service, support,
technical and other resources than we do. Due to these greater resources,
certain of our competitors have the ability to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, pay higher fees to
licensors and pay more to third-party software developers than we can. Moreover,
we believe that competition from new entrants will increase as the market for
faith-based products and services expands.


****


**INTELLECTUAL
PROPERTY**


****


**Overview**


We rely
for our business on a combination of copyrights, trademarks, and trade secrets
to protect our intellectual property. Our copyrighted software content and the
brand recognition associated with our related product trademarks are among the
most important assets that we possess in our present ability to generate
revenues and profits, and we rely very significantly on these intellectual
property assets in being able to effectively compete in our market. Our
intellectual property rights derive from a combination of licenses from third
parties, internal development and confidentiality and non-disclosure
agreements.
 
 -12-
 Table of Contents
 
 We cannot
be certain that the precautions we have taken will provide meaningful protection
from unauthorized use by others. If we must pursue litigation in the future to
enforce or otherwise protect our intellectual property rights, or to determine
the validity and scope of the proprietary rights of others, we may not prevail
and will likely have to make substantial expenditures and divert valuable
resources in the process. Finally, we may not have adequate remedies if our
proprietary content is appropriated, our proprietary rights are violated or our
trade secrets are disclosed.
 ****
 **Copyrights**
 
 Our
copyrights, some of which have been registered and others of which remain
unregistered, derive from a combination of program and source code embodied in
software titles that we license from third parties, as well as program and
source code embodied in software titles that we have internally developed on our
own.
 
 We
entered into a license agreement in June 1999 with Parsons Technology, Inc.
which forms the basis of our copyright protection for products that accounted
for approximately 97% of our revenues in 2004, including those generated from
sales of QuickVerse ® and
Membership Plus ® , by far
our two largest selling software titles. A copy of the license that we obtained
from Parsons Technology, which has since been assigned to Riverdeep, Inc., the
latest licensor-assignee in a succession of assignments that have occurred since
June 1999, is incorporated by reference into this annual report on Form 10-KSB
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 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 around
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 as Exhibit
10.14 to this Form 10-KSB/A for the year ended December 31, 2004.
 Since
1999, the developments, including modifications and improvements, that we have
made to the originally acquired copyrighted programs covered by the license have
been extensive. Given these developments, which have been made through four
subsequent versions and seven new editions of QuickVerse ® , four
subsequent versions and one new edition of Membership Plus ® ,
and various subsequent versions of some of the other titles to which
we acquired rights under the license (including those in each of the print and
graphics, pastoral, children’s, and language tutorial product categories), we
believe that the real value of the copyrights associated with these titles lay
almost exclusively at this point in the improvements that we own rather than the
base copyrights that we were originally granted and that continue to be owned by
Riverdeep, Inc. Moreover, it is our belief that the original source code covered
by the license has been effectively rendered valueless by virtue of these
subsequent modifications and improvements.
 
 As noted
above, our largest-selling title, QuickVerse ® , is one
from which we originally derived our rights under the 1999 license. One of the
features that make QuickVerse ® such a
popular title is its breadth of content. A very significant percentage of this
content is licensed by us from various third-party content providers for
inclusion in QuickVerse ® . We are
therefore responsible for paying royalties on a regular basis to these providers
in connection with our sales of QuickVerse ® . In
total, we currently have content licensing agreements with 45 different
publishers for approximately 765 individual Bible translations and other
Biblical or related scholarly works which are incorporated in various editions
of our QuickVerse ® products, or in some cases sold as stand-alone or add-on content. These
licensing agreements are typically non-exclusive and for a fixed duration
( *e.g.* , a term
of 3 or 5 years). Royalties are generally paid within 30 days following the end
of a quarter and are calculated as a percentage of net sales from a work
( *e.g.* , ranging
from 3% to 10%), 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.
 
 In
addition to the copyrights associated with the 1999 license described above,
copyright protection exists in relation to the software titles that we resell
published by others. These copyrights, however, are held by the publishers
and/or their respective third-party content providers.
  **Trademarks**
  As part
of the 1999 license, we acquired the unlimited right to use the registered
trademarks associated with the various titles licensed thereunder exclusively
worldwide in non-secular channels and non-exclusively in secular channels.
Because of the fact that each of QuickVerse ® and
Membership Plus ® had been
on the market for approximately ten years by the time we acquired the license,
and each had a substantial existing user base, the trademarks for these products
alone were deemed at the time to be of great importance and value. We believe
that our initiatives in introducing subsequent versions and editions of these
titles since then, as well as our having maintained extremely high publishing
standards throughout the period that we have been publishing these titles, have
served to sustain and enhance the importance and value of these
trademarks.
 ****
 -14-
 Table of Contents
 ****
 **Trade
Secrets**
  Whenever
we deem it important for purposes of maintaining competitive advantages, our
policy requires parties with whom we share, or who otherwise are likely to
become privy to, our trade secrets or other confidential information, including
source code, to execute and deliver to us confidentiality and/or non-disclosure
agreements prior to their exposure to any such information. Among others, this
includes employees, consultants and other advisors, including our in-house and
outsourced software developers and collaborators, each of whom we require to
execute such an agreement upon commencement of their employment, consulting or
advisory relationships. These agreements generally provide that all confidential
information developed or made known to the individual by us during the course of
the individual’s
relationship with us is to be kept confidential and not to be disclosed to third
parties except in specific circumstances. In the case of employees and
consultants, the agreements provide that all inventions conceived by the
individual in the course of their employment or consulting relationship shall be
our exclusive property.
  **EMPLOYEES**


As
of June 7, 2005, we had twenty-eight full-time employees. Of
those twenty-eight, four were part of the senior-level executive and financial
management team, five were in the product development team, nine were on
the sales team, and ten were in fulfillment, administration, and related
support positions. For the fiscal year ended December 31, 2004, our annual
payroll was $1,523,332, equivalent to 26% of gross revenues. In addition, we
have engaged the services of several consulting firms who are working full or
part-time for us in the area of product development and marketing.

We rely
heavily on our current officers and directors in operating the business. We are
not subject to any collective bargaining agreements and believe that our
relationships with our employees are good.

**SEASONALITY**

Our
business is highly seasonal. More than 50% of our annual sales are expected to
occur in the five months of September through January; the five months of April
through August are generally our weakest, generating only about 33% of our
annual sales.


**ITEM 2. DESCRIPTION OF PROPERTY.**





Our
principal executive offices are located at 11204 Davenport Street, Suite 100,
Omaha, Nebraska. We lease this 6,500 square foot premises under a five year
lease agreement with 11204, LLC. Our monthly rent is $7,094.79 and, as
of June 7, 2005, there were approximately twenty-three months
remaining under the lease.
  We
maintain additional leased office space in Naperville, Illinois for certain
product development activity. We lease this 880 square foot premises under an
eighteen month lease agreement with Transwestern Commercial Services. Our
monthly rent is $1,320.00 and there are three months remaining under the
lease.


Three
of our full-time employees work in home offices located in Cedar Rapids,
Iowa. We do not pay for any space associated with these operations.





-15-
 Table of Contents


****


**ITEM 3. LEGAL PROCEEDINGS.**




In March
2004, a joint settlement was finalized with The Zondervan Corporation and TLC
Multimedia, Inc. in connection with then pending litigation surrounding
royalties owed by us. Pursuant to the settlement, we were required to make
certain payments to The Zondervan Corporation, which obligations, as of July
2004, were satisfied in full. A stipulation of such settlement has since been
duly entered and the matter has been discontinued.

As of the
date of this report, there were no pending material legal proceedings to which
we were a party and we are not aware that any were contemplated. There can be no
assurance, however, that we will not be made a party to litigation in the
future. Moreover, there can be no assurance that our insurance coverage will
prove adequate to cover all liabilities arising out of any claims that may be
initiated against us in the future. Any finding of liability imposed against us
coupled with a lack of corresponding insurance coverage is likely to have an
adverse effect on our business, our financial condition, including liquidity and
profitability, and our results of operations.


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


On
October 15, 2004, we filed a definitive information statement on Schedule 14C
with the SEC. The information statement was mailed to our stockholders on or
about October 18, 2004 solely for the purpose of informing our stockholders of
the approval and unanimous consent by our board of directors, and the
affirmative vote on September 9, 2004 of the holders of a majority of the voting
power to take the following action:

(i)
    amendour
      articles of incorporation to increase our authorized shares of common
      stock from 50,000,000 to 120,000,000 shares; and

(ii)
    ratify
      the designation ofour
      incumbent directors among the three classes of directors.

Ofour
46,153,189 common shares issued and outstanding at the time, the affirmative
vote of the holders of a majority of our voting power was required to approve
the amendment and to ratify the designation. Both the amendment and the
ratification of designation received the approval of holders owning 32,307,090
shares of our common stock, representing 70% of our then total issued and
outstanding common stock (51.97% after adjustment for certain voting
restrictions set forth in our articles of incorporation), each by written
consent as permitted by the Nevada Revised Statutes and our bylaws. The action
approved by the consenting stockholders became effective on November 8, 2004,
which was 20 days after we mailed the information statement to our stockholders.
The amendment to our articles of incorporation was filed and effective with the
Secretary of State of Nevada on November 10, 2004. We did not solicit proxies to
vote at a stockholders’ meeting in connection with either the amendment or the
ratification.

No other
matters were submitted to a vote of our stockholders during the fourth quarter
of the fiscal year ended December 31, 2004.

-16-
Table of Contents


****


**PART II**





**ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.** ****


****


**RECENT SALES
OF UNREGISTERED SECURITIES**




**Date
      Securities Issued**
    
    
    **Securities
      Title**
    
    
    **Issued
      To**
    
    
    **Number
      of Securities Issued**
    
    
    **Consideration
      ***
    
    
    **Footnotes****Common
      Stock Issuances**12/31/04
    
    
    Common
      Stock
    
    
    Business
      Investor Services, Inc.
    
    
    466,666
    
    $
    -
    
    
    2B11/16/04
    
    
    Common
      Stock
    
    
    2030
      Investors, LLC
    
    
    1,000,000
    
    $
    -
    
    
    2B11/16/04
    
    
    Common
      Stock
    
    
    C.
      James Jensen
    
    
    1,000,000
    
    $
    -
    
    
    2B**Common
      Stock Warrant Issuances**11/10/04
    
    
    Common
      Stock
    
    
    Barron
      Partners, LP
    
    
    10,937,500
    
    $
    576,042
    
    
    1A11/10/04
    
    
    Common
      Stock
    
    
    Barron
      Partners, LP
    
    
    10,937,500
    
    $
    576,042
    
    
    1A**Convertible
      Promissory Note Issuances**09/30/04
    
    
    Common
      Stock
    
    
    2030
      Investors, LLC
    
    
    1,000,000
    
    $
    120,000
    
    
    1A09/30/04
    
    
    Common
      Stock
    
    
    C.
      James Jensen
    
    
    1,000,000
    
    $
    120,000
    
    
    1A*
      Consideration is calculated to be the value of the security at the date of
      issuance.1.
      Stock issued in connection with financing activities.2.
      Stock issued in connection with a convertible promissory
    note.A.
      We relied in each case for these unregistered sales on the private
      offering exemption of Section 4(2) of the Securities Act and/or the
      private offering safe harbor provision of Rule 506 of Regulation D
      promulgated thereunder based on the following factors: (i) the number of
      offerees or purchasers, as applicable, (ii) the absence of general
      solicitation, (iii) representations obtained from the acquirors relative
      to their accreditation and/or sophistication (or from offeree or purchaser
      representatives, as applicable), (iv) the provision of appropriate
      disclosure, and (v) the placement of restrictive legends on the
      certificates reflecting the securities coupled with investment
      representations obtained from the acquirors.B.
      We relied on Section 3(a)(9) of the Securities Act as the basis for our
      exemption from registration of these offerings.There
      were no underwriters or placement agents involved in any of the issuances
      set forth above and no commissions were paid.


**MARKET
INFORMATION**





Our
common stock is traded on the OTC Bulletin Board, a service provided by the
Nasdaq Stock Market Inc., under the symbol, “FIND”.





The
following table sets forth for the periods indicated the high and low bid prices
for our common stock as reported each quarterly period within the last two
fiscal years on the OTC Bulletin Board, and as obtained from BigCharts.com. The
prices are inter-dealer prices, do not include retail mark-up, markdown or
commission and may not necessarily represent actual transactions.




**Common
      Stock****2003**
    
    **High**
    
    **Low**First
      Quarter
    
    $0.024
    
    $0.022Second
      Quarter
    
    $0.080
    
    $0.022Third
      Quarter
    
    $0.070
    
    $0.010Fourth
      Quarter
    
    $0.040
    
    $0.025**2004**
    
    **High**
    
    **Low**First
      Quarter
    
    $0.055
    
    $0.020Second
      Quarter
    
    $0.400
    
    $0.018Third
      Quarter
    
    $0.250
    
    $0.090Fourth
      Quarter
    
    $0.190
    
    $0.060


-17-
 Table of Contents
 ****
 **STOCKHOLDERS**




As
of June 6, 2005, there were approximately 800 holders of record of our
common stock, with any shares held by persons or companies in street or nominee
name counted only under such street or nominee name.




**DIVIDENDS**





During
the last two years, no dividends have been paid on our common stock and we do
not anticipate paying any dividends in the foreseeable future. Although it is
our intention to utilize all available funds for the development of our
business, no restrictions are in place that would limit or restrict our ability
to pay dividends.


****


**SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**





**EQUITY
COMPENSATION PLAN INFORMATION**





**Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights**
      **(a)**
    **Weighted-average
      exercise price of outstanding options, warrants and
      rights**
      **(b)**
    **Number
      of Securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))**
      **(c)**Equity
      compensation plans approved by security holders
    910,000
    $0.11
    590,000Equity
      compensation plans not approved by security holders
    2,800,000
    $0.0879
    ---Total
    3,710,000
    $0.0933
    590,000




Our
1999 Stock Incentive Plan authorizes the issuance of various forms of
stock-based awards including incentive and nonqualified stock options, stock
appreciation rights attached to stock options, and restricted stock awards to
our directors, officers and other key employees. The plan has been approved
by our stockholders and as such, provides certain income tax advantages to
employees as provided under Sections 421, 422, and 424 of the Internal Revenue
Code. Stock options are granted at an exercise price as determined by our
board at the time the option is granted and may not be less than the par value
of such shares of common stock. Stock options vest quarterly over three years
and have a term of up to ten years. The plan authorizes an aggregate of
1,500,000 shares of common stock that may be issued.


-18-
 Table of Contents





In
addition, we issue various forms of stock-based awards including nonqualified
stock options and restricted stock awards to directors, officers, other key
employees and third-party consultants, outside of the Stock Incentive Plan.
Awards granted outside of the plan have been granted pursuant to equity
compensation arrangements that have not been approved by our stockholders.
These awards are granted at an exercise price as determined by our board at
the time of grant and are not less than the par value of such shares of common
stock. Stock options granted outside of the plan vest as determined by our
board at the time of grant and have a term of up to ten years. Non-employee
directors, though treated as employees for financial reporting purposes under
FASB Interpretation No. 44, are excluded from the income tax advantages afforded
employees by the Internal Revenue Code.

All
issued options, whether under the plan or not, create the obligation for stock
issuance at the established exercise price.


















































-19-
 Table of Contents


****


**ITEM 6. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**




The
following discussion should be read together with our consolidated
financial statements for the period ended December 31, 2004 and the notes to the
consolidated financial statements.




**CRITICAL
ACCOUNTING POLICIES

Our
critical accounting policies, including the assumptions and judgments underlying
them, are more fully described in the Notes to the Financial Statements. We have
consistently applied these policies in all material respects. These policies
primarily address matters of expense recognition and revenue recognition,
including amortization of software development cost and the calculation for
reserve of returns. Investors are cautioned that these policies are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially. Below are the accounting policies that we
believe are the most critical in order to gain an understanding of our financial
results and condition.

*Use of
Estimates*

The
preparation of consolidated financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Significant estimates used in the consolidated financial
statements include the estimates of (i) doubtful accounts, sales returns, price
protection and rebates, (ii) provision for income taxes and realizability of the
deferred tax assets, (iii) the life and realization of identifiable intangible
assets, and (iv) provisions for obsolete inventory. The amounts we will
ultimately incur or recover could differ materially from current estimates.
****
*****Royalty
Agreements***

We
have entered into certain agreements whereby we are obligated to
pay royalties for content of software published. We generally pay royalties
based on a percentage of sales on respective products or on a fee per unit sold
basis. We expense software royalties as product costs during the period in
which the related revenues are recorded.

*Accounts
Receivable*

Accounts
receivable arise in the normal course of business. It is the policy of
management to review the outstanding accounts receivable quarterly, as well as
the bad debt write-offs experienced in the past, and establish an allowance for
doubtful accounts for uncollectible amounts. Individual accounts are charged
against the allowance when they are deemed uncollectible.

*Inventory*

Inventory,
including out on consignment, consists primarily of software media, manuals and
related packaging materials and is recorded at the lower of cost or market
value, determined on a first-in, first-out, and adjusted on a per-item, basis.
**
*Intangible
Assets*
In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,*Goodwill
and Other Intangible Assets*,
intangible assets with an indefinite useful life are not amortized. Intangible
assets with a finite useful life are amortized on the straight-line method over
the estimated useful lives.
-20-
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 (a) the straight-line basis over the
estimated product life (generally from 12 to 18 months), or (b) 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
2,*Accounting
for Research and Development Costs*,
established accounting and reporting standards for research and development. In
accordance with SFAS 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.

-21-
Table of Contents
******
***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 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.

We
reduce product revenue for estimated returns and price protections that are
based on historical experience and other factors such as the volume and price
mix of products in the retail channel, trends in retailer inventory and economic
trends that might impact customer demand for our products. We also reduce
product revenue for the estimated redemption of end-user rebates on certain
current product sales. Our rebate reserves are estimated based on the terms and
conditions of the specific promotional rebate program, actual sales during the
promotion, the amount of redemptions received and historical redemption trends
by product and by type of promotional program.

We
record the amounts we charge our customers for the shipping and handling of our
software products as product revenue and we record the related costs as cost of
sales on our consolidated statements of operations.
****
***Income
Taxes***

We utilize
SFAS No. 109,*Accounting
for Income Taxes*.
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under this method, deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis
of our assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.**


-22-
 Table of Contents


**RESULTS OF
OPERATIONS FOR YEARS ENDED DECEMBER 31, 2004 AND DECEMBER 31,
2003**





During
the years of 2003 and 2004 we had several non-recurring items take place. For
the twelve months ended December 31, 2003, we had a one-time, non-recurring
write down to accrued royalties of approximately $584,000, wrote down a distinct
category of obsolete inventory of approximately $61,000, and wrote off a note
payable of approximately $650,000 and the interest associated with the note of
approximately $217,000. For the twelve months ended December 31, 2004, we wrote
down the reserve for rebates payable from a change in accounting estimate of
approximately $266,000, wrote down a distinct category of obsolete inventory of
approximately $32,000, and incurred a non-recurring expense of approximately
$155,000 related to a settlement with an institutional private equity investor.
Furthermore, for the twelve months ended December 31, 2004, we recognized
approximately a $1,000,000 gain from extinguishment of debt which is classified
as an extraordinary item. The extinguishment of debt is a direct result from
settling with various vendors and content providers for lump-sum payments at a
reduced amount of balances owed. The non-recurring expense is a direct result of
our coming to terms with an institutional private equity investor for early
termination of a certain investment agreement, originally entered into in June
2001. These non-recurring items had no effect on the cash flow
statement.





Our
income before taxes and the extraordinary item decreased approximately
$1,674,000 from an income of approximately $1,808,000 for the twelve months
ended December 31, 2003 to a loss of approximately $134,000 for the twelve
months ended December 31, 2004. However, our net income increased approximately
$376,000 from a net income of approximately $1,842,000 for the twelve months
ended December 31, 2003 to a net income of approximately $2,218,000 for the
twelve months ended December 31, 2004. This
increase is a result of increased gross revenues along with the non-recurring
items noted above.


Non-cash
expenses related to shares of common stock issued for services increased by
approximately $126,000. For the year ended December 31, 2004, we recognized
approximately $149,000 in non-cash expenses related to shares of common stock
and warrants issued for services and approximately $30,000 in non-cash expenses
related to shares of common stock issued in a settlement agreement.
Comparatively, for the year ended December 31, 2003, we recognized expenses of
approximately $53,000 relating to shares of common stock issued for services.
Overall, interest expense for the twelve months ended December 31, 2004
decreased by approximately $45,000 compared to 2003. This is due to our reducing
trade payables and meeting the scheduled terms. Furthermore, the note
liabilities interest was reduced due to the reclassification of the note payable
in the fourth quarter of 2003. Amortization expense related to the 1999 license
decreased for the twelve months ended December 31, 2004 compared to 2003 as a
result of the final settlement in October 2003, which effectively extended
the life of the license indefinitely. Amortization expense related to software
development costs increased approximately $220,000 for the twelve months ended
December 31, 2004 compared to 2003. This is a direct result from
QuickVerse® 8.0 shipping in late December 2003, Membership
Plus® 8.0 shipping in January 2004, QuickVerse® PDA 2005
shipping in September 2004, and QuickVerse® 2005 shipping in early
December 2004.


*Revenues*  
 We derive
revenues from the sale of packaged software products, product support and
multiple element arrangements that may include any combination of these items.
Revenue is recognized when persuasive evidence of an arrangement exists
(generally a purchase order), we have delivered the product, the fee is fixed or
determinable and collectibility is probable. For our packaged software products,
we typically recognize revenue from the sale when we ship the product. We sell
some of our products on consignment to a limited number of resellers. We
recognize revenue for these consignment transactions only when the end-user sale
has occurred. Service revenue resulting from technical support plans is
recognized over the life of the plan which is generally one year. Revenue
associated with advance payments from our customers is deferred until we ship
the product or offer the support service. Revenue for software distributed
electronically via the Internet is recognized when the customer has been
provided with the access codes that allow the customer to take immediate
possession of the software on its hardware and evidence of the arrangements
exists (web order). For
revenue arrangements involving multiple products or products and services, we
allocate and defer revenue for the undelivered products or products and services
based on their vendor-specific objective evidence of fair value, which is
generally the price charged when that product or product and service is sold
separately.




-23-
 Table of Contents





We reduce
product revenue for estimated returns and price protections that are based on
historical experience and other factors such as the volume and price mix of
products in the retail channel, trends in retailer inventory and economic trends
that might impact customer demand for our products. Estimated returns are also
based upon a percentage of total retail and direct sales. Direct sales accounted
for approximately 65% of our 2004 fiscal year revenue. We account for cash
considerations (such as sales incentives - rebates and coupons) that we give our
customers as a reduction of revenue rather than as an operating expense. Product
revenue is also reduced for the estimated redemption of end-user rebates on
certain current product sales. We did not have any rebate programs during the
twelve months ended December 31, 2003 and 2004, respectively.


Product
returns from distributors and Christian bookstores are allowed primarily in
exchange for new products or for credit towards purchases as part of a
stock-balancing program. These returns are subject to certain limitations that
may exist in the contract in each case. Under certain circumstances, such as
termination or when a product is defective, distributors and bookstores could
receive a cash refund if returns exceed amounts owed. Returns from sales made
directly to the consumer are accepted within 45 days of purchase and are issued
a cash refund. Product returns, price protections or price concessions that
exceed our reserves could materially adversely affect our business and operating
results and could increase the magnitude of quarterly fluctuations in our
operating and financial results.
 
 Software
products are sold separately, without an obligation of future performance such
as upgrades, enhancements or additional software products, and are sold with
post contract customer support services such as customer service and technical
support assistance. In connection with the sale of certain products, we provide
a limited amount of free technical support assistance to our customers. We do
not defer the recognition of any revenue associated with sales of these
products, since the cost of providing this free technical support is
insignificant. The technical support is provided within one year after the
associated revenue is recognized and free product enhancements (bug fixes) are
minimal and infrequent. We accrue the estimated cost of providing this free
support upon product shipment and include it in cost of sales.
 
 Shipping
and handling costs in connection with our software products are expensed as
incurred and included in cost of sales.
 
 **Revenues
      for Twelve Months Ended December 31**
    
    
    **2004**
    
    **%
      to Gross Sales**
    
    
    
    2003
    
    %
      to Gross Sales
    
    
    
    Change
    
    %Gross
      sales
    
    **$**
    **5,786,427**
    
    **100**
    **%**
    
    $
    4,787,545
    
    100
    %
    
    $
    998,882
    
    21
    %Less
      reserve for sales returns and allowances
    
    
    **567,643**
    
    **10**
    **%**
    
    
    396,788
    
    8
    %
    
    
    170,855
    
    43
    %Net
      sales
    
    **$**
    **5,218,784**
    
    **90**
    **%**
    
    $
    4,390,757
    
    92
    %
    
    $
    828,027
    
    19
    %
 Gross
revenues increased approximately $999,000 from approximately $4,788,000 for the
year ended December 31, 2003 to approximately $5,787,000 for the year ended
December 31, 2004. Such increase is due to our release of an enhanced version of
Membership Plus®, during
the first quarter of 2004 and an enhanced version of QuickVerse®, during
the fourth quarter of 2004. However, delays in duplication, packaging and
distribution caused our QuickVerse®2005 to
begin shipping in early-December 2004, long after the holiday season had been
underway. Due to these delays, we believe we experienced reduced revenues of
approximately $500,000 for the year ended December 31, 2004. In addition to the
QuickVerse®and
Membership Plus®releases, there were several other new product releases in the year 2004 such as
an enhanced version of our QuickVerse®PDA.
However, the retail value of the products ranged from $9.95 to $59.95 compared
to $99.95 to $349.95 for the QuickVerse®and
Membership Plus®titles.
During the year 2003, we only had one major product release,
QuickVerse®8.0,
which shipped in late December 2003. During the years of 2003 and 2004, our
sales efforts were focused on targeting end-users through telemarketing and
Internet sales. These efforts resulted in more consistent sales during the two
years. Sales into the retail market (both CBA and secular) continue to increase;
however, they are not back to the levels of 1999 and 2000.


-24-
 Table of Contents





Sales
returns and allowances increased approximately $171,000 from approximately
$397,000 for the year ended December 31, 2003 to approximately $568,000 for the
year ended December 31, 2004 and increased as a percentage of gross sales from
approximately 8% for the year ended December 31, 2003 to approximately 10% for
the year ended December 31, 2004. The increase in sales returns and allowances
as a percentage is attributable to our release of enhanced versions of
QuickVerse ® and
Membership Plus ® in late
December of 2003 and January of 2004, respectively. The release of these two
enhanced products resulted in an increased quantity of sales returns and
allowances of prior versions as distributors and stores made shelf space during
the first quarter of 2004. Furthermore, the release of QuickVerse ® 8.0 in
late December of 2003 was the only enhancement to the product within a three
year timeframe. We released QuickVerse ® 2005
earlier in the fourth quarter of 2004 with only an eleven month difference from
the last enhancement. Due to the earlier release, we anticipated stores would
have more time to return the previous version of QuickVerse ® than
compared to a year ago. Product returns during the other quarters were
consistent. We anticipate the sales return and allowances as a percentage to
decrease due to our focused sales efforts to the end-users and our decreased
presence in the retail market, because incidents of return are lower for
sales direct to the end-user than sales into the retail stores.




***Cost of Sales***




**Cost
      of Sales for Twelve Months Ended December 31**
    
    
    **2004**
    
    **%
      to Gross Sales**
    
    
    
    2003
    
    %
      to Gross Sales
    
    
    
    Change
    
    %Direct
      costs
    
    **$**
    **579,946**
    
    **10**
    **%**
    
    $
    539,595
    
    11
    %
    
    $
    40,351
    
    7
    %Amortization
      of software development costs
    
    
    **575,480**
    
    **10**
    **%**
    
    
    355,283
    
    7
    %
    
    
    220,197
    
    62
    %Royalties
    
    
    **417,604**
    
    **7**
    **%**
    
    
    264,050
    
    6
    %
    
    
    153,554
    
    58
    %Freight-out
    
    
    **172,634**
    
    **3**
    **%**
    
    
    125,680
    
    3
    %
    
    
    46,954
    
    37
    %Cost
      of sales
    
    **$**
    **1,745,664**
    
    **30**
    **%**
    
    $
    1,284,608
    
    27
    %
    
    $
    461,056
    
    36
    %


Cost of
sales consists primarily of royalties to third-party intellectual property
content providers, the direct costs and manufacturing overhead required to
reproduce, package and ship the software products, the amortized software
development costs and the cost to provide free technical support to our
customers. The direct costs and manufacturing overhead increased from 18.7% of
gross revenues in 2003 to 20.0% of gross revenues in 2004. The increase resulted
directly from amortization of software development costs. The amortization
recognized during the twelve months ended December 31, 2003 resulted from
several new software releases in 2003 including the then newly released
QuickVerse®8.0.
However, the shorter timeframe between our product upgrades during the year of
2004 led to an increased amount of amortization recognized. During the twelve
months ended December 31, 2004 we continued to amortize the costs associated
with QuickVerse®8.0
along with the newly released Membership Plus®8.0, the
updated release of QuickVerse®PDA 2005
and the release of QuickVerse®2005.
Furthermore, the direct costs and manufacturing overhead include the
non-recurring write downs of obsolete inventory as well as the estimated cost of
providing free technical support to our customers. The direct costs and
manufacturing overhead percentage is expected to continue at the 2004 levels as
working capital remains more consistent and as more development projects are
implemented in a shortened timeframe.

Royalties
to third-party intellectual property content providers also increased from
5.5% of gross revenues in 2003 to 7.2% of gross revenues in 2004. The increase
of royalties reflects the release of the QuickVerse®8.0
editions in late December 2003 and the release of QuickVerse®2005
editions in early December 2004. Furthermore, we sold some of the older
QuickVerse®versions
to liquidators at a reduced price throughout the year but had no
such sales during the year ended 2003. During the year ended 2004, we
also renegotiated several royalty contracts which resulted in some cases in a
higher royalty rate along with access to more content. The royalty rate as a
percentage of gross sales is expected to increase in the future as the new
QuickVerse®2005 is
released into the retail market and sales to new users are expected to increase
significantly. However, upgrade sales will continue to be subject to royalties
only on content additions of the upgraded version.


-25-
 Table of Contents





Software
development costs are expensed as incurred as research and development until
technological feasibility and marketability has been established, at which time
development costs are capitalized until the software title is available for
general release to customers. Software
development is segregated by title and technology platform. Once a product has
been successfully released, subsequent revisions and upgrades are considered
development and the costs of the revision and upgrade are capitalized.Capitalized costs are amortized on a product-by-product basis using the
greater of straight-line amortization over the estimated life of the product or
on the ratio of current revenues from the product to the total projected revenue
over the life of the product. Generally, we consider technological feasibility
to have been established with the release of a beta version for testing.
Software development costs are summarized in the table below. The software
development costs, consisting primarily of direct and indirect labor and related
overhead charges, capitalized during the twelve months ended December 31, 2003
and 2004 were approximately $659,000 and approximately $692,000, respectively.
Accumulated amortization of these development costs included in cost of sales
totaled approximately $355,000 and approximately $575,000 for the twelve months
ended December 31, 2003 and 2004, respectively. The increase in both the
capitalization and amortization is a direct result of the increase in the number
of development projects.




**Twelve
      Months Ended******
    ****
    **December
      31,****2004**
    
    
    2003Beginning
      balance
    
    **$**
    **584,706**
    
    $
    280,502Capitalized
    
    ****
    **692,063**
    
    
    659,487Amortized
      (cost of sales)
    
    ****
    **575,480**
    
    
    355,283Ending
      balance
    
    **$**
    **701,289**
    
    $
    584,706Research
      and development expense (General and administrative)
    
    **$**
    **64,653**
    
    $
    128,159


****


***Sales, General
and Administrative***




**Sales,
      General and Administrative Costs for Twelve Months Ended December
      31**
    
    
    **2004**
    
    **%
      to Gross Sales**
    
    
    
    2003
    
    %
      to Gross Sales
    
    
    
    Change
    
    %***Selected
      expenses:***Commissions
    
    **$**
    **814,623**
    
    **14**
    **%**
    
    $
    570,381
    
    12
    %
    
    $
    244,242
    
    43
    %Fulfillment
    
    
    **74,889**
    
    **1**
    **%**
    
    
    43,376
    
    1
    %
    
    
    31,513
    
    73
    %Advertising
      and direct marketing
    
    
    **393,964**
    
    **7**
    **%**
    
    
    194,169
    
    4
    %
    
    
    199,795
    
    103
    %Marketing
      and customer service
    
    
    **10,900**
    
    **0**
    **%**
    
    
    5,511
    
    0
    %
    
    
    5,389
    
    98
    %Research
      and development
    
    
    **64,653**
    
    **1**
    **%**
    
    
    128,159
    
    3
    %
    
    
    (63,506
    )
    -50
    %Personnel
      costs
    
    
    **1,310,506**
    
    **23**
    **%**
    
    
    986,165
    
    21
    %
    
    
    324,341
    
    33
    %Legal
    
    
    **71,003**
    
    **1**
    **%**
    
    
    77,037
    
    2
    %
    
    
    (6,034
    )
    -8
    %Rent
    
    
    **75,555**
    
    **1**
    **%**
    
    
    51,039
    
    1
    %
    
    
    24,516
    
    48
    %Telecommunications
    
    
    **149,443**
    
    **3**
    **%**
    
    
    79,558
    
    2
    %
    
    
    69,885
    
    88
    %Corporate
      services
    
    
    **94,000**
    
    **2**
    **%**
    
    
    -
    
    0
    %
    
    
    94,000
    
    -Interest
    
    
    **42,007**
    
    **1**
    **%**
    
    
    87,144
    
    2
    %
    
    
    (45,137
    )
    -52
    %




-26-
 Table of Contents


Operating
expenses for 2004 include approximately $149,000 in non-cash expenses related to
shares of common stock and warrants issued for services and approximately
$30,000 in non-cash expenses related to shares of common stock issued in a
settlement agreement compared with approximately $53,000 for 2003. With gross
revenues increasing approximately $999,000 from 2003 to 2004, sales expenses
also increased approximately $481,000 from approximately $813,000 for 2003 to
approximately $1,294,000 for 2004. Included in sales expenses, commissions to a
third-party telemarketing firm increased approximately $244,000 as our sales
focus to the direct consumer increased along with the number of new and enhanced
product releases during 2004 compared with that of 2003; fulfillment costs from
a third-party warehouse increased approximately $32,000 as we released three
major product upgrades beginning late December 2003 through December 2004;
advertising, rebates, and direct marketing increased approximately $200,000 as
we launched a full-service online store, began marketing our products online
through multiple sources, attended more retail conferences, and increased the
number of new product upgrades throughout the year; and marketing and customer
service costs increased approximately $5,000 as our sales efforts continue to be
more focused towards the consumer instead of the retail store.





Research
and development costs include salaries and benefits of personnel and third
parties conducting research and development of software products. Software
development costs expensed as research and development (see table above)
amounted to approximately $65,000 for the twelve months ended December 31, 2004
compared to approximately $128,000 incurred for the twelve months ended December
31, 2003. The decrease in 2004 reflects further development of existing products
whereas in 2003 we had more research and development costs associated with new
titles such as QuickVerse ® PDA for
both Pocket PC ® and Palm
OS ® operating systems. Research and development expenses are expected to increase in
future periods as we add new products and versions to our product mix.





Personnel
costs increased approximately $325,000 from approximately $986,000 for the
twelve months ended December 31, 2003 to approximately $1,311,000 for the twelve
months ended December 31, 2004. This increase is primarily from the increase in
our sales and marketing team and technical support staff and the associated
health care costs. We also recognized approximately $14,000 of expense related
to 635,000 restricted shares of common stock issued to employees and
approximately $67,000 in expense for upper management year-end bonus accrual.
Furthermore, the capitalization of direct and indirect labor and related
overhead charges as software development costs and the cost of providing free
technical support to our customers (see “Cost of Sales” above) decreased by
approximately $23,000 from approximately $557,000 for the twelve months ended
December 31, 2003 to approximately $534,000 for the twelve months ended December
31, 2004. This decrease is due to the shortened development time period for the
new development projects that began during the year 2004. It is anticipated that
personnel costs will continue to increase in future periods as operating capital
is available to fund full staffing of our product development team and expansion
of the direct marketing staff. In addition, interest and penalty fees related to
back payroll taxes increased approximately $95,000 for the twelve months ended
December 31, 2004.
  Direct
legal costs increased approximately $38,000 for the twelve months ended December
31, 2004 as the disputes with TLC and Zondervan were finalized in March 2004.
However, approximately $44,000 of legal costs were related to the stock offering
costs incurred in July 2004 and the
related preparation of a 14C information statement and SB-2 registration
statement; and therefore was recorded as a reduction to additional
paid-in capital. It is
anticipated that legal costs will increase as we hold our first annual meeting
of stockholders later this year and pursue our business plan for growth by
acquiring companies and software title properties that are synergistic with our
current product line and customer base.Rent expense increased
approximately $25,000 as we opened a new product development facility located in
Naperville, IL. The increase is also attributed to the capitalization of related
overhead charges as software development costs. See “Cost of Sales” above.
Telecommunications costs increased approximately $70,000 as the call volume
increased in technical support and customer service due to the release of the
three major product upgrades beginning late December 2003 through December 2004.
Corporate service fees increased approximately $94,000 for the twelve months
ended December 31, 2004. These fees are related to the recent hire of an outside
consultant, the expense for an issuance of a warrant to purchase 600,000 shares
of common stock allocated over the term of the consulting contract, and the
expense for a previous issuance of a warrant to purchase 250,000 shares of
common stock.


-27-
 Table of Contents





***Nonrecurring
Items***

We wrote-off
distinctly different categories of obsolete inventory with a carried cost
totaling approximately $61,000 during the twelve months ended December 31, 2003
and approximately $32,000 during the twelve months ended December 31, 2004.
The
2004 inventory write-off was a direct result of the March 2004 settlement
with Zondervan, which forced us to destroy inventory that was not
technologically obsolete but had been produced for resale prior to our receiving
notice to cease and desist selling Zondervan content. These have been recognized
in cost of sales.





During
the year ended December 31, 2003, we recorded an adjustment to the balance
of accrued royalties as of December 31, 2002 in the amount of approximately
$584,000. This adjustment resulted from an internal audit of the royalty
calculations as affected by the June 30, 2001 bad debt provision totaling
$2,391,000 related to net balances owed to us by TLC. The royalty
liabilities had been accrued based on our sales to TLC as originally
reported. This has been recognized as an expense recovery and included in
operating expenses.





During
the year ended December 31, 2004, we incurred approximately $155,000 in
expenses related to a settlement agreement with an institutional private equity
investor for early termination of the agreement. As part of a settlement
agreement, we issued 295,692 shares of common stock and paid a cash lump
sum of $125,000. The shares were valued at $0.10 per share. This has been
treated as expenses incurred in a withdrawn public offering.





During
the year ended December 31, 2003, we reclassified as other income -
nonrecurring items proceeds totaling $650,000, and the corresponding accrued
interest payable totaling approximately $217,000, that were previously recorded
as an unsecured note payable. The determination to reclassify the obligation was
made on the basis of the combined facts that (i) the obligation exists, if at
all, solely pursuant to an oral loan agreement made over three years ago in the
State of North Carolina with a representative of the party to whom the
obligation was believed to have been owed, (ii) no party has ever made any
demand for repayment thereof despite the fact that no payments have ever been
made on the obligation, (iii) the party believed to be owed the obligation, upon
inquiry, claims no record of any such obligation, and (iv) the State of North
Carolina Statute of Limitations applicable to oral agreements, believed to
govern the continued enforceability of the obligation, has expired.





***Rebate Reserve
Adjustment***




During
the year ended December 31, 2004 we adjusted the reserve for rebates by
approximately $266,000 in order to more properly reflect open rebate programs
and the estimated balance of each that management expects to pay. The remaining
reserve balance was estimated based on historical response rates.




***Amortization***


Amortization
of the 1999 license decreased approximately $29,000 from approximately $45,000
for the twelve months ended December 31, 2003 to approximately $16,000 for the
twelve months ended December 31, 2004. Upon final settlement in October of 2003,
the term of that license agreement was effectively extended indefinitely. This
effectively changed the substance from an amortizable intangible asset with a
finite useful life to an unamortizable intangible asset with an indefinite
useful life. Amortization expense, determined using the straight-line method,
was calculated through the settlement date of October 20, 2003. Amortization
expense for 2004 reflects the launch of our new website during the second
quarter.


***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.




-28-
 Table of Contents





We have
recognized a net deferred tax asset whose realization depends on generating
future taxable income. At December 31, 2003, management established the
valuation allowance equal to the total deferred tax assets due to the
uncertainty about our ability to continue as a going concern. At December 31,
2004, management adjusted the amount of valuation allowance based on the
assessment that we will continue as a going concern and will produce
sufficient income in the future to realize our net deferred tax asset. The
resulting deferred tax liability reflects income taxes payable in future periods
on the net deductible differences related to the 1999 license. We currently have
net operating loss carryforwards, for income tax purposes, of approximately
$7,648,000. The carryforwards are the result of income tax losses generated in
2000 ($2,480,000 expiring in 2020) and 2001 ($5,168,000 expiring in 2021). We
will need to achieve a minimum annual taxable income, before deduction of
operating loss carryforwards, of approximately $450,000 to fully utilize the
current loss carryforwards. We believe this is achievable through careful
expense management and continued introduction of new products and enhanced
versions of our existing products.


Although
there can be no assurance, management expects the deductible temporary
differences (reserves) to reverse sometime beyond the next fiscal year.


****


*****Extraordinary
Item***


During
the year ended December 31, 2004, we recognized approximately a $1,000,000
gain from extinguishment of debt which is classified as an extraordinary item.
The extinguishment of debt is a direct result from one-time settling
arrangements with various vendors and content providers for lump-sum payments
ranging from approximately 17% to approximately 60% of balances owed at the
time. Vendors who were offered the settlement had previously provided services
and/or goods to us, and the content providers were owed royalties
from us. Income taxes allocated and subtracted from the total gain were
approximately $401,000, or approximately 40%. We do not anticipate this to be a
recurring event in the future. Below is a list of the vendors and content
providers who we settled with:
 ·
    American
      Bible Society (content provider)·
    David
      Epstein (content provider)·
    Depository
      Trust Company (corporate services)·
    Explorer’s
      Bible Study (content provider)·
    Genesis
      Marketing Group (sales services)·
    Historical
      Exegetical Electronic Publishing (content provider)·
    Innovative
      Church Marketing Group (advertising services)·
    Interactive
      Pictures Corporation (content provider)·
    InterVarsity
      Press (content provider)·
    Ivy
      Hill/Warner Media Services (manufacturing services)·
    Lernout
      & Hauspie Speech Products (content provider)·
    MicroBytes,
      Inc. (CD duplication services)·
    Moody
      Publishers (content provider)·
    National
      Council of the Churches of Christ in the United States of America (content
      provider)·
    NavPress
      Publishing Group (content provider)·
    Oxford
      University Press (content provider)·
    Pillsbury,
      Madison & Sutro LLP (legal services)·
    Rutledge
      Hill Press (content provider)·
    Sonopress
      (manufacturing services)·
    Standard
      Publishing (content provider)·
    The
      Lockman Foundation (content provider)·
    World
      Publishing (content provider)
  -29-
 Table of Contents
 ****
 **LIQUIDITY AND
CAPITAL RESOURCES**










As of
December 31, 2004, we had $1,551,447 in current assets, $1,383,146 in current
liabilities and a retained deficit of $5,631,787. We had a net loss before
income taxes of $134,455 for the year ended December 31, 2004. However,
operating expenses for 2004 included approximately $149,000 in non-cash expenses
related to shares of common stock and warrants issued for services and
approximately $30,000 in non-cash expenses related to shares of common stock
issued in a settlement agreement. See “Results Of Operations” above.







**Cash
      Flows for Twelve Months Ended December 31**
    
    
    **2004**
    
    
    2003
    
    
    ChangeCash
      flows provided (used) by operating activities
    
    **$**
    **(643,668**
    **)**
    $
    882,221
    
    $
    (1,525,889
    )Cash
      flows (used) by investing activities
    
    **$**
    **(741,603**
    **)**
    $
    (714,103
    )
    $
    (27,500
    )Cash
      flows provided (used) by financing activities
    
    **$**
    **1,690,291**
    
    $
    (64,747
    )
    $
    1,755,038


Net cash
provided by operating activities was approximately $882,000 for the year ended
December 31, 2003 and net cash used by operating activities was approximately
$644,000 for the year ended December 31, 2004. The increase in cash used was
primarily due to an increase in the amounts paid to suppliers and employees
which would include all royalty payments to our content providers.




Net cash
used in investing activities was approximately $714,000 and $742,000 for the
years ended December 31, 2003 and 2004, respectively. The increase in cash used
for investing activities results from capitalizing costs associated with
software development and upgrading our internal computer equipment and software
in order to increase our operating efficiency capabilities.




Net cash
used by financing activities was approximately $65,000 for the year ended
December 31, 2003 and net cash provided by financing activities was
approximately $1,690,000 for the year ended December 31, 2004. Cash used by
financing activities reflects final settlement on our accounts receivable line
of credit, payments made on debt obligations, and stock offering costs
associated with private placement equity financing. Cash provided by financing
activities reflects proceeds from issuance of stock and promissory notes.


On March
19, 2001, we entered into an Accounts Receivable Financing Agreement with
Alliance Financial Capital, Inc. Pursuant to this agreement, Alliance agrees to
purchase selected accounts receivable on a discounted basis, including, without
limitation, full power to collect, compromise, sue for, assign, or in any manner
enforce collection thereof. The agreement provides for advances of 60% toward
the purchase of the invoices with a credit line of $250,000. The terms call for
40% to be held in a reserve account from the collection of each invoice.
Invoices not paid by the customer within 90 days of shipment are required to be
repurchased by us out of the reserve account. The agreement carries a 12 month
term with a minimum monthly fee equal to one half of one percent (.5%). The term
renews automatically every 12-months unless a written request for termination is
received by Alliance at least 30 days before the renewal date. During the twelve
months ended December 31, 2004, we transferred accounts receivable totaling
$300,966 to Alliance for cash advances of $180,580. As accounts are paid, the
collected funds (less the amount advanced and appropriate fees) are disbursed to
us. The transfer agreement includes a repurchase requirement and, accordingly,
the proceeds were accounted for as a secured borrowing. At December 31, 2004,
the balance of receivables transferred and included in trade receivables was $0.
The remaining secured borrowing balance included in accrued expenses was $0. On
July 20, 2004, we terminated the Accounts Receivable Financing Agreement with
Alliance.


-30-
 Table of Contents





On July
19, 2004, we completed an equity financing in the amount of $1,750,000 through a
private placement with Barron Partners. Under the terms of the agreement, Barron
purchased 21,875,000 restricted shares of common stock at a price of $0.08 per
share. In addition, according to the terms of the agreement, Barron received two
warrants to purchase common stock. The first warrant entitles the
holder to purchase up to 10,937,500 shares of common stock at a price of
$0.18 per share and the second warrant entitles the holder to purchase
up to 10,937,500 additional shares of common stock at a price of $0.60 per
share. The original terms of the agreement called for the exercise price
associated with each of the warrants to be subject to downward adjustment based
on the occurrence or non-occurrence of certain events. An amendment to the
Barron Partners, LP Stock Purchase Agreement was entered into on September 30,
2004 which removed these provisions. See Exhibits 10.10, 10.11, 10.12 and 10.13.
  On
September 30, 2004, we issued promissory notes to each of two different
individuals. Each of these promissory notes was in the principal amount of
$120,000 and, pursuant to a separate side letter agreement in each case, was
convertible at the option of the holder into 1,000,000 restricted shares of
common stock. On November 16, 2004, the holders of the promissory notes
converted those notes into a total of 2,000,000 shares of our common
stock.





We
were in arrears with the Internal Revenue Service for back payroll taxes
and had been paying the payroll taxes in monthly installments previously
approved by the Internal Revenue Service. Subsequent to the financing received
in July of 2004, we paid all back payroll taxes that were due to the
Internal Revenue Service.




In July
2004, we made the final payment to Zondervan for $100,000 plus 5% simple
interest. This payment completed all of our obligations that were previously
outlined in the settlement with The Zondervan Corporation and TLC dated October
2003. See Note 18 - Commitments and Contingencies. In addition, according to the
settlement agreement, the term of the 1999 license which has been effectively
extended indefinitely.


**RISK
FACTORS**





Several
of the matters discussed in this document contain forward-looking statements
that involve risks and uncertainties. Factors associated with the
forward-looking statements that could cause actual results to differ from those
projected or forecast are included in the statements below. In addition to other
information contained in this report, readers should carefully consider the
following cautionary statements and risk factors.


****


**GENERAL
BUSINESS RISK**





***Our
liquidity and capital resources are very limited.***
  Our
ability to fund working capital and anticipated capital expenditures will depend
on our future performance, which is subject to general economic
conditions, our customers, actions of our competitors and other
factors that are beyond our control. Our ability to fund operating activities is
also dependent upon (i) the extent and availability of bank and other credit
facilities, (ii) our ability to access external sources of financing, and (iii)
our ability to effectively manage our expenses in relation to revenues. We
believe that the net proceeds received from our 2004 sales of common stock,
warrants and convertible promissory notes, together with future cash flow from
operations, and funds from external sources of credit-based debt financing, will
be adequate to meet our anticipated liquidity requirements over the next twelve
months and will provide additional capital for potential acquisitions. Given our
initiative towards rapid revenue growth, there can be no assurance, however,
that our operations and access to external sources of financing will continue to
provide resources sufficient to satisfy our liabilities arising in the ordinary
course of business.




-31-
 Table of Contents
 ****


***Our
accumulated deficit makes it harder for us to borrow
funds.***
 
 As of
March 31, 2005, and as a result of historical losses in prior years, our
accumulated deficit was $5,470,184. The fact that we maintain an accumulated
deficit, as well as the extent of our accumulated deficit relative to recent
earnings, negatively affects our ability to borrow funds because lenders
generally view an accumulated deficit as a negative factor in evaluating
creditworthiness. Any inability on our part to borrow funds if and when
required, or any reduction in the favorability of the terms upon which we are
able to borrow funds if and when required, including amount, applicable interest
rate and collateralization, would likely have a material adverse effect on our
business, our financial condition, including liquidity and profitability, and
our results of operations.
  **RISKS
ASSOCIATED WITH OUR BUSINESS AND INDUSTRY**





***We
face serious competition in our business segment.***




The
market for our products is rapidly evolving and intensely competitive as new
consumer software products and platforms are regularly introduced. Competition
in the consumer software industry is based primarily upon:


•
    brand
      name recognition;
 •
    availability
      of financial resources;
 •
    the
      quality of titles;
 •
    reviews
      received for a title from independent reviewers who publish reviews in
      magazines, Websites, newspapers and other industry publications;
 •
    publisher’s
      access to retail shelf space;
 •
    the
      price of each title; and
 •
    the
      number of titles then available.
 
 We face
competition from other software publishers, all of which generally sell through
the same combination of channels that we do, including chain store, secular,
CBA, direct and online sales. Specifically, we currently compete with Logos
Research Systems, Inc., Biblesoft, Inc., Thomas Nelson, Inc., WordSearch Bible
Publishers and The Zondervan Corporation, among others.
 
 To remain
competitive in our market segment we rely heavily upon our product quality,
marketing and sales abilities, proprietary technology and product development
capability. However, some of our competitors have longer operating histories,
larger customer bases and greater financial, marketing, service, support,
technical and other resources than we do. Due to these greater resources,
certain of our competitors have the ability to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, pay higher fees to
licensors and pay more to third-party software developers than we can. Only a
small percentage of titles introduced into the software market achieve any
degree of sustained market acceptance. If our titles, including special
editions, are not successful, our business, our financial condition, including
liquidity and profitability, and our results of operations will be negatively
impacted. Moreover, we believe that competition from new entrants will increase
as the market for faith-based products and services continues to expand.
 ******
 ***We
depend on only two titles for the overwhelming majority of our
revenue.***
 In fiscal
year 2004, approximately 91% of our total revenue was derived from two software
titles; QuickVerse ® ,
comprising 63% of total revenue, and Membership Plus ® ,
comprising 28% of total revenue. We expect that a very limited number of popular
products will continue to produce a disproportionately large amount of our
revenue for the foreseeable future. Due to this dependence on a limited number
of titles, the failure of one or more titles or title versions to achieve
anticipated results would likely have a material adverse effect on our business,
our financial condition, including liquidity and profitability, and our results
of operations.
 -32-
 Table of Contents
 ******
 ******We
have experienced, and may continue to experience, reduced revenues and
fluctuations in our quarterly operating results due to delays in the
introduction and distribution of our products.******
 A
significant portion of our revenue for any given quarter is generated by the
sale of new titles and title versions introduced during that quarter or shipped
in the immediately preceding quarter. Our inability to timely begin volume
shipments of a new title or title version in accordance with our internal
development schedule, as has repeatedly been the case in the past, will cause
earnings fluctuations and will negatively impact our business, our financial
condition, including liquidity and profitability, and our results of operations.
Timely introduction of a new title or title version is largely contingent upon
the timing of a variety of other factors. Included amongst these are development
processes themselves, debugging, approval by third-party content licensors and
duplication and packaging processes. Furthermore, the complexity of
next-generation systems (such as PDA) has resulted in longer development cycles,
higher development expenditures and the need to more carefully monitor and plan
development processes associated with these products.
 
 We
cannot be certain that we will be able to meet planned release dates for some or
all of our new titles or title versions. In the past, we have experienced
significant delays in our introduction of some new titles and title versions.
For instance, delays in duplication, packaging and distribution caused our
QuickVerse ® 2005 to begin shipping in early-December 2004, long after the holiday season had
been underway. As a result, we experienced fewer sales than we might otherwise
have had the product been available before the holiday selling season began,
which we believe had a material adverse effect on our results of operations for
the 2004 fourth quarter. It is likely in the future that delays will continue to
occur and that some new title or title versions will not be released in
accordance with our internal development schedule or the expectations of public
market analysts and investors, having a negative impact on our business, our
financial condition, including liquidity and profitability, and our results of
operations in that period.
 ******
 ***We
have experienced, and may continue to experience, reduced revenues and
fluctuations in our quarterly operating results*** ** ***due
to the limited life cycle of our products.*** ****
 
 The
average life cycle of a new title ranges anywhere from a few years to
indefinitely, and the average life cycle of a new title version ranges anywhere
from twelve to upwards of eighteen months. The majority of sales
for a new title or title version occur within the first thirty to one hundred
and twenty days following release and net revenue associated with the initial
introduction generally constitutes a high percentage of the total net revenue
over the life of the title or title version. Factors such as competition, market
acceptance, seasonality and technological, developmental and/or promotional
expenses associated with a title or title version can shorten the life cycle of
older titles and title versions and increase the importance of our ability to
regularly release new titles and title versions. Consequently, if net revenue in
a given period is below expectation, our business, our financial condition,
including liquidity and profitability, and our results of operations in that
period are likely to be negatively affected, as has repeatedly occurred in the
past.
 
 
 ***Product
returns, price protections or concessions that exceed our anticipated reserves
could result in worse than expected operating
results.***
 At the
time we ship our products we establish reserves, including reserves that
estimate the potential for future product returns and price concessions. In the
past, particularly during title version transitions, we have had to increase
price concessions to our wholesale retail customers. If consumer demand for
a specific title or title version falls below expectations or significantly
declines below previous rates of retail sell-through, then a price concession or
credit may be requested by our wholesale retail customers to spur further retail
channel sell-through. Coupled with more competitive pricing, if product
returns, price protections or price concessions exceed our reserves
the magnitude of quarterly fluctuations will increase and our operating and
financial results will be negatively impacted. Furthermore, if we incorrectly
assess the creditworthiness of any one of our wholesale customers who take
delivery of our products on credit, we could be required to significantly
increase reserves previously established.


-33-
 Table of Contents


Typically
we experience the highest reserves at the end of the first quarter and fourth
quarter and the lowest at the end of the third quarter. Historically, actual
returns have been within management ’ s prior
estimates, however, we cannot be certain that any future write-offs exceeding
reserves will not occur or that amounts written off will not have a material
adverse effect on our business, our financial condition, including liquidity and
profitability, and our results of operations.


***Errors
or defects in our software products may cause a loss of market acceptance and
result in fewer sales of our products.***





Our
products are complex and may contain undetected errors or defects when first
introduced or as new versions are released. In the past, we have discovered
software errors in some of our new products and enhancements after their
introduction into the market. Because our products are complex, we anticipate
that software errors and defects will be present in new products or releases in
the future. To date we have not discovered any material errors, however, future
errors and defects could result in adverse product reviews and a loss of, or
delay in, market acceptance of our products.
  ***We
may not have available funds to develop products that consumers
want.***




The
Bible-study, inspirational content and organizational management software
markets are subject to rapid technological developments. Although the life of
most of our titles may be quite long, the life of any given version tends to be
relatively short, in many cases less than three years. To develop products that
consumers, church and other faith-based organizations desire, we must
continually improve and enhance our existing products and technologies and
develop new products and technologies that incorporate these technological
developments. Our
inability to do this would likely have a material adverse effect on our
business, our financial condition, including liquidity and profitability, and
our results of operations.


We focus
our development and publishing activities principally on new versions of our
existing titles. We cannot, however, be certain that we will have the financial
and technical resources available to continue to develop these new title
versions particularly since we must undertake these initiatives while remaining
competitive in terms of performance and price. This will require substantial
investments in research and development, often times well in advance of the
widespread release of a product into the market and any revenues these products
may generate.
 
 Our cash
outlays for product development for the fiscal year ended December 31, 2004 were
higher than the fiscal year ended December 31, 2003. Our product development
cash outlays may increase in the future as a result of the higher costs
associated with releasing more software titles or new title versions across
multiple user interface platforms, and the complexity of developing such titles
and title versions for next-generation systems, among other reasons. We
anticipate that our profitability will continue to be impacted by the levels of
research and development expenditures relative to revenue and by fluctuations
relating to the timing of development in anticipation of future user interface
platforms.
 ************
 ******The
loss of any of our key executives could have a material adverse effect on our
business.******
 Our
success depends to a large degree upon the skills of our three key
executives, Steven Malone, Kirk R. Rowland and William Terrill. We
presently do not maintain key person life insurance on any of our three key
executives. Although we have employment agreements with each of our three key
executives, there can be no assurance that we will be able to retain our
existing key personnel or attract and retain additional key personnel. The loss
of any one of our three key executives would likely have a material adverse
effect on our business, our financial condition, including liquidity and
profitability, and our results of
operations.
 
 -34-
 Table of Contents
 ************
 ******The
successful development of our products depends on our ability to attract,
integrate, motivate and retain highly skilled
personnel.******


Our
success depends to a large extent on our ability to attract, hire and retain
skilled software developers, programmers and other highly skilled technical
personnel. The software industry is characterized by a high level of employee
mobility and aggressive recruiting among competitors for personnel with
programming, technical and product development skills. We may not be able to
attract and retain skilled personnel or may incur significant costs in order to
do so. If we are unable to attract additional qualified employees or retain the
services of key personnel, our business, our financial condition, including
liquidity and profitability, and our results of operations could be negatively
impacted.
 ******


******Our
intellectual property may not be adequately protected from unauthorized use by
others, which could increase our litigation costs and adversely affect our
sales.***

Our
copyrighted software content and the brand recognition associated with our
related product trademarks are the most important assets that we possess in our
ability to generate revenues and profits, and we rely very significantly on
these intellectual property assets in being able to effectively compete in our
market. Approximately 97% of our revenues in 2004 were derived from the
publishing and sales of software titles (i) the source code copyrights through
1999 and registered product trademarks of which we license on a partially
exclusive basis through a single license agreement from a third-party, and (ii)
the source code and other improvements since 1999 of which we own the
(unregistered) copyrights exclusively. There can be no assurance that our
intellectual property rights in this regard will provide meaningful protection
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. We may not have adequate remedies if our
proprietary content is appropriated.

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.

-35-
Table of Contents
******
***Revenue
varies due to the seasonal nature of consumer software purchases.******


Our
business is highly seasonal. More than 50% of our annual sales are expected to
occur in the five months of September through January; the five months of April
through August are generally our weakest, generating only about 33% of our
annual sales. The seasonal pattern is due primarily to the increased consumer
demand for software during the year-end holiday selling season and the reduced
demand for software during the summer months. Our earnings vary significantly
and are materially affected by releases of popular titles and title versions
and, accordingly, may not necessarily reflect the seasonal patterns of the
industry as a whole. We expect that operating results will continue to fluctuate
seasonally in the future.
  **RISKS
ASSOCIATED WITH AN INVESTMENT IN OUR COMMON
STOCK**




***We
face serious financial penalties for any continuing failure to meet our
registration obligations to Barron Partners, LP.***
 
 On July
19, 2004, we entered into a certain Stock Purchase Agreement pursuant to which
we agreed to issue and sell 21,875,000 restricted shares of our common stock,
and warrants to purchase another 21,875,000 shares of our common stock, to
Barron Partners, LP, a New York based institutional investor. As part of the
financing transaction, we also entered into a certain Registration Rights
Agreement with Barron Partners, LP pursuant to which we became committed to
registering all of the shares issued as part of such transaction, including
those issuable under the warrants. On November 22, 2004, we filed a registration
statement on Form SB-2 covering the shares issued to Barron Partners, as well as
the shares underlying the warrants issued to Barron Partners. Under the terms of
the Registration Rights Agreement, as amended, we had until April 22, 2005 to
cause such registration statement to be declared effective by the SEC. In
accordance with the terms of the Registration Rights Agreement, any delays in
meeting this obligation subject us to liability to Barron Partners, LP in
an amount equal to $1,726 per day for the duration of any such delay.
 
 As of the
date of this filing, the registration statement filed on November 22, 2004 had
not yet been declared effective. Pursuant to an agreement reached with Barron
Partners in relation to the associated accruing penalties, we have agreed to pay
Barron Partners an amount in cash equal to $100,000 in two equal installments of
$50,000 between April 22, 2005 and May 22, 2005, which amounts have been paid,
with no additional penalty obligations accruing until June 21, 2005. Although
there can be no assurance, management is hopeful that we will be able to
cause the registration statement to be declared effective by June 21, 2005. If
we are unsuccessful in causing the registration statement to be declared
effective by the SEC by June 21, 2005, however, and depending on how long any
such delay in causing effectiveness to be declared by the SEC continues
thereafter, it is likely to have a very material adverse effect on our business,
our financial condition, including liquidity and profitability, and our results
of operations.


***Up
to 47,491,666 shares of our common stock are likely to become eligible for
public sale as a result of a resale registration statement filing which is
likely to depress our stock price.***
  As of the
date of filing of this annual report with the SEC on Form 10-KSB/A, we also have
a registration statement filed with the SEC on Form SB-2 which, once declared
effective by the SEC, will cause tobe
eligible for immediate resale on the public market24,341,666
shares of our common stock and an additional23,150,000
shares of our common stock underlying warrants(the
resale offering of which shall only be made by means of a separate
prospectus). As a
percentage of our total outstanding common stock, this represents 66.2%. If a
significant number of shares are offered for sale simultaneously, which is
likely to occur, it would have a depressive effect on the trading price of our
common stock on the public market. Any such depressive effect may encourage
short positions and short sales, which could place further downward pressure on
the price of our common stock. Moreover, all of the shares sold in the offering
will be freely transferable thereafter without restriction or further
registration under the Securities Act (except for any shares purchased by our“affiliates”, as
defined in Rule 144 of the Securities Act), which could place even further
downward pressure on the price of our common stock. Furthermore, should a
simultaneous sell-off occur, and due to the thinly-traded market for our common
stock, stockholders may have difficulty selling shares of our common stock, at
or above the price paid, at a fair market value or even at all.
 -36-
 Table of Contents
 ******
 ***Unless
an active trading market develops for our common stock, you may not be able to
sell your shares.***


We are a
reporting company and our common stock is listed on the OTC Bulletin Board
(owned and operated by the Nasdaq Stock Market, Inc.), however, there is no
active trading market for our common stock. There can be no assurance that an
active trading market will ever develop for our common stock or, if it does
develop, that it will be maintained. Failure to develop or maintain an active
trading market will have a generally negative effect on the price of our common
stock, and you may be unable to sell your shares or any attempted sale of such
shares may have the effect of lowering the market price, and therefore your
investment could be a complete or partial loss.


***Since
our common stock is thinly traded, it is more susceptible to extreme rises or
declines in price, and you may not be able to sell your shares at or above the
price you paid.***





You may
have difficulty reselling shares of our common stock, either at or above the
price you paid, or even at a fair market value. The stock markets often
experience significant price and volume changes that are not related to the
operating performance of individual companies, and because our common stock is
thinly traded, it is particularly susceptible to such changes. These broad
market changes may cause the market price of our common stock to decline
regardless of how well we perform as a company, and, depending on when you
determine to sell, you may not be able to obtain a price at or above the price
you paid.





***Trading
in our common stock on the OTC Bulletin Board may be limited thereby making it
more difficult for you to resell any shares you may
own.***





Our
common stock trades on the OTC Bulletin Board owned and operated by the Nasdaq
Stock Market, Inc. The OTC Bulletin Board is not an exchange and, because
trading of securities on the OTC Bulletin Board is often more sporadic than the
trading of securities listed on a national exchange or on the Nasdaq National
Market, you may have difficulty reselling any of the shares of our common stock
that you purchase from the selling stockholders.





***Our
common stock is subject to the “penny stock” regulations, which is likely to
make it more difficult to sell.***





Our
common stock is considered a “penny stock”, which generally is a stock trading
under $5.00 and not registered on national securities exchanges or quoted on the
Nasdaq National Market. The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. This regulation
generally has the result of reducing trading in such stocks, restricting the
pool of potential investors for such stocks, and making it more difficult for
investors to sell their shares. Prior to a transaction in a penny stock, a
broker-dealer is required to:


•
    deliver
      a standardized risk disclosure document that provides information about
      penny stocks and the nature and level of risks in the penny stock
      market;
 •
    provide
      the customer with current bid and offer quotations for the penny
      stock;
 •
    explain
      the compensation of the broker-dealer and its salesperson in the
      transaction;
 •
    provide
      monthly account statements showing the market value of each penny stock
      held in the customer’s
      account; and
 •
    make
      a special written determination that the penny stock is a suitable
      investment for the purchaser and receive the purchaser’s written agreement
      to the transaction.
 -37-
 Table of Contents
 
 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.







The
volatility of our common stock is illustrated by reference to the fact that,
during fiscal year 2004, our trading price fluctuated from a low of $0.018 to a
high of $0.40 per share.


The stock
market has recently experienced significant price and volume fluctuations.
Volatility in the market price for particular companies has often been unrelated
or disproportionate to the operating performance of those companies. These broad
market and industry factors may seriously harm the market price of our common
stock, regardless of our operating performance. In addition, securities class
action litigation has often been initiated following periods of volatility in
the market price of a company ’ s
securities. A securities class action suit against us could result in
substantial costs, potential liabilities and the diversion of
management ’ s
attention and resources from our business. Moreover, and as noted above, our
shares are currently traded on the OTC Bulletin Board and, further, are subject
to the penny stock regulation. Price fluctuations in such shares are
particularly volatile and subject to manipulation by market-makers,
short-sellers and option traders.


-38-
 Table of Contents




***Future
sales of our common stock by our officers or directors may depress our stock
price.***
 
 Although
our officers and directors are contractually obligated to refrain from selling
any of their shares until July 20, 2005, following that date, any shares owned
by our officers or directors which are registered in another registration
statement, or which otherwise may be sold in the future without registration
under the Securities Act to the extent permitted by Rule 144 or other exemptions
under the Securities Act, may be sold. Because of the perception by the
investing public that a sale by such insiders may be reflective of their own
lack of confidence in our prospects, the market price of our common stock could
decline as a result of a sell-off following sales of substantial amounts of
common stock by our officers and directors into the public market, or the mere
perception that these sales could occur.




***Future
issuances of our common or preferred stock may depress our stock price and
dilute your interest.***





We may
want to issue additional shares of our common stock in future financings and may
grant stock options to our employees, officers, directors and consultants under
our stock incentive plan. Any such issuances could have the effect of depressing
the market price of our common stock and, in any case, would dilute the
interests of our common stockholders. In addition, we could issue serial
preferred stock having rights, preferences and privileges senior to those of our
common stock, including the right to receive dividends and/or preferences upon
liquidation, dissolution or winding-up in excess of, or prior to, the rights of
the holders of our common stock. This could depress the value of our common
stock and could reduce or eliminate the amounts that would otherwise have been
available to pay dividends on our common stock (which
are unlikely in any case)or to make distributions on
liquidation.





***If
you require dividend income, you should not rely on an investment in our common
stock.***





Because
we have very limited cash resources and a substantial accumulated deficit
relative to recent earnings, we have not declared or paid any dividends on our
common stock since our inception and we do not anticipate declaring or paying
any dividends on our common stock in the foreseeable future. Rather, we intend
to retain earnings, if any, for the continued operation and expansion of our
business. It is unlikely, therefore, that holders of our common stock will have
an opportunity to profit from anything other than potential appreciation in the
value of our common stock held by them. If you require dividend income, you
should not rely on an investment in our common stock.


***The
lack of a majority of independent directors on our board of directors may affect
our ability to be listed on a national securities exchange or quotation system.***




We are
not currently subject to the listing requirements of any national securities
exchange or quotation system. The listing standards of the national securities
exchanges and automated quotation systems require that a company’s board of
directors consist of a majority of directors who are independent as defined by
the Sarbanes-Oxley Act of 2002 and as defined by applicable listing standards,
and that the audit committee of the board of directors must consist of at least
three members, all of whom are independent.  Similarly, the compensation
and nominating committees of company boards of directors must also consist of
independent directors.  Currently, only two of our directors, who are the
only members of our audit committee, meet the definition of an “independent”
director as defined by the Sarbanes-Oxley Act of 2002 and as defined by listing
standards.  Further, two of our four directors are currently executive
officers and thereby do not satisfy these independence standards.  There is
no guarantee that we will be able to appoint an additional director who will
satisfy these independence requirements.  If we are unable to appoint an
additional independent director to our board, we will be precluded from listing
any of our capital stock on a national securities exchange or quotation
system.




-39-
 Table of Contents




******


****The
even number of members on each of our board of directors, audit committee and
compensation committee could result in a stalemate on important company
matters.****


The
fact that we currently have four members on our board of directors, and two
members on each of our board of directors’ audit and compensation committees,
could result in a tie vote on company matters, including those involving highly
material corporate governance issues. Moreover, we do not currently have any
duly adopted resolution procedures in place that would provide a means for
resolving any stalemate that might occur in this regard. Although we are
currently in the process of considering potential alternative procedures in
order to be prepared for having to face such a potential situation, our current
lack of any such procedure could result in our inability to be able to act under
circumstances in which the failure to act or any delay in acting could have a
material adverse effect on our business, our financial condition, including
liquidity and profitability, and our results of operations.
 
 ***We
have relied on the private placement exemption to raise substantial amounts of
capital and could suffer substantial losses if that exemption is determined not
to have been properly relied upon.***




We have
raised substantial amounts of capital in private placements from time to time.
The securities offered in such private placements were not registered with the
SEC or any state agency in reliance upon exemptions from such registration
requirements. Qualification under some such exemptions involves a degree of
uncertainty and if we inadvertently failed to comply with the requirements of
any of such exemptive provisions, investors would have the right to rescind
their purchase of our securities or otherwise sue for damages. If one or more
investors were to successfully seek such rescission or institute any such suit,
we could face severe financial demands that could materially and adversely
affect our financial position.


***There
may exist a potential conflict of interest between us and each of our former and
current counsel.***
 
 In the
past we have issued, and we may continue in the future to issue, warrants to
purchase our common stock as equity compensation for legal and other services
rendered in connection with the preparation of our securities filings.
Specifically, we have issued warrants to the law firm of Membrado & Montell,
LLP, and to Michael M. Membrado, our corporate counsel. Due to these issuances,
there exists the potential for a conflict of interest between us and each of our
current and former counsel insofar as the recipients may have been or may be
motivated by personal interests that are not necessarily aligned with our
own.


-40-
 Table of Contents


****


**ITEM 7. FINANCIAL STATEMENTS.**


**REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
****
**To
the Board of Directors and Stockholders of Findex.com, Inc.:**
****
We have
audited the accompanying consolidated balance sheets of Findex.com, Inc. as of
December 31, 2004 and 2003 and the related consolidated statements of
operations, stockholders’ equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
has determined that it is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion.An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Findex.com,
Inc. as of December 31, 2004 and 2003 and the results of its operations and cash
flows for the years then ended in conformity with U.S. Generally Accepted
Accounting Principles.

Chisholm,
Bierwolf & Nilson, LLC
Bountiful,
UT
February
18, 2005

F-1
Table of Contents


**Findex.com,
      Inc.**
    ******CONSOLIDATED
      BALANCE SHEETS**
    ******December
      31, 2004 and 2003****2004**
    
    
    2003AssetsCurrent
      assets:Cash
      and cash equivalents
    
    **$**
    ****341,359****
    
    $
    36,339Accounts
      receivable, trade (Note 2)
    
    
    **566,819**
    
    
    365,803Inventories
      (Note 3)
    
    
    **234,000**
    
    
    272,600Deferred
      income taxes, net (Note 8)
    
    
    **300,191**
    
    
    **-**Other
      current assets
    
    
    **109,078**
    
    
    21,920Total
      current assets
    
    
    **1,551,447**
    
    
    696,662Property
      and equipment, net (Note 4)
    
    
    **131,019**
    
    
    65,603Software
      license (Note 5)
    
    
    **2,513,158**
    
    
    2,513,158Capitalized
      software development costs, net (Note 1)
    
    
    **701,289**
    
    
    584,706Deferred
      income taxes, net (Note 8)
    
    
    **253,968**
    
    
    -Restricted cash
    
    
    **50,354**
    
    
    105,683Other
      assets
    
    
    **94,101**
    
    
    63,818Total
      assets
    
    **$**
    **5,295,336**
    
    $
    4,029,630Liabilities
      and stockholders’equityCurrent
      liabilities:Notes
      payable (Note 6)
    
    **$**
    **-**
    
    $
    89,999Current
      maturities of long-term debt (Note 7)
    
    
    **35,495**
    
    
    126,876Accrued
      royalties
    
    
    **287,514**
    
    
    1,499,006Accounts
      payable, trade
    
    
    **621,804**
    
    
    989,354Accrued
      payroll
    
    
    **209,984**
    
    
    216,767Reserve
      for sales returns
    
    
    **100,180**
    
    
    57,572Rebates
      payable
    
    
    **29,561**
    
    
    357,451Payroll
      taxes payable
    
    
    **8,235**
    
    
    221,600Other
      current liabilities
    
    
    **90,373**
    
    
    89,554Total
      current liabilities
    
    
    **1,383,146**
    
    
    3,648,179Long-term
      debt (Note 7)
    
    
    **42,972**
    
    
    73,764Deferred
      income taxes, net (Note 8)
    
    
    **253,968**
    
    
    1,051,327Commitments
      and contingencies (Note 18)Stockholders’
      equity (Note 9):Preferred
      stock, $.001 par value5,000,000
      shares authorizedSeries
      A: -0- and 11,400 shares issued and outstanding,
    respectively
    
    
    **-**
    
    
    11Series
      B: -0- and 40,000 shares issued and outstanding,
    respectively
    
    
    **-**
    
    
    40Common
      stock, $.001 par value120,000,000 and
      50,000,000 shares authorized, respectively48,619,855 and
      21,011,438 shares issued and outstanding, respectively
    
    
    **48,620**
    
    
    21,011Paid-in
      capital
    
    
    **9,198,417**
    
    
    7,080,629Retained
      (deficit)
    
    
    **(5,631,787**
    **)**
    
    (7,845,331
    )Total
      stockholders’
      equity
    
    
    **3,615,250**
    
    
    (743,640
    )Total
      liabilities and stockholders’
      equity
    
    **$**
    **5,295,336**
    
    $
    4,029,630*See
      accompanying notes.*
      **
  F-2
 Table of Contents
  **Findex.com,
      Inc.**
    ******CONSOLIDATED
      STATEMENTS OF OPERATIONS**Year
      Ended December 31
    
    **2004**
    
    2003Revenues,
      net of reserves and allowances
    
    **$**
    **5,218,784**
    
    $
    4,390,757Cost
      of sales (Note 10)
    
    
    **1,745,664**
    
    
    1,284,608Gross
      profit
    
    
    **3,473,120**
    
    
    3,106,149Operating
      expenses:Sales
      and marketing
    
    
    **1,294,377**
    
    
    813,438General
      and administrative
    
    
    **2,309,837**
    
    
    1,751,235Nonrecurring
      items (Note 10 )
    
    
    **-**
    
    
    (583,628
    )Rebate
      reserve adjustment (Note 11)
    
    
    **(266,301**
    **)**
    
    -Bad
      debt expense
    
    
    **22,778**
    
    
    23,208Amortization
      expense
    
    
    **16,343**
    
    
    45,157Depreciation
      expense
    
    
    **44,478**
    
    
    43,224Total
      operating expenses
    
    
    **3,421,512**
    
    
    2,092,634Earnings
      from operations
    
    
    **51,608**
    
    
    1,013,515Interest
      income
    
    
    **1,378**
    
    
    9,727Other
      income
    
    
    **9,276**
    
    
    7,977Nonrecurring
      items (Note 10 )
    
    
    **(154,569**
    **)**
    
    866,516Gain
      (loss) on disposition of assets
    
    
    **(141**
    **)**
    
    (2,659
    )Interest
      expense
    
    
    **(42,007**
    **)**
    
    (87,144
    )Income
      (Loss) before income taxes
    
    
    **(134,455**
    **)**
    
    1,807,932Provision
      for income taxes (Note 8)
    
    
    **1,750,908**
    
    
    33,567Income
      before extraordinary item
    
    
    **1,616,453**
    
    
    1,841,499Extraordinary
      item (Note 12) (less applicable income taxes of $400,874)
    
    
    **601,216**
    
    
    -Net
      income
    
    **$**
    **2,217,669**
    
    $
    1,841,499Basic
      earnings per share (Note 14):Before
      extraordinary item
    
    **$**
    **0.05**
    
    $
    0.09Extraordinary
      item
    
    **$**
    **0.02**
    
    $
    -Net
      income
    
    **$**
    **0.06**
    
    $
    0.09Diluted
      earnings per share (Note 14):Before
      extraordinary item
    
    **$**
    **0.05**
    
    $
    0.08Extraordinary
      item
    
    **$**
    **0.02**
    
    $
    -Net
      income
    
    **$**
    **0.06**
    
    $
    0.08Weighted
      average shares outstanding (Note 14):Basic
    
    
    **34,520,754**
    
    
    20,411,438Diluted
    
    
    **35,195,840**
    
    
    22,365,438*See
      accompanying notes.*
  F-3
 Table of Contents
 **Findex.com,
      Inc.**
    ******CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’
      EQUITY**RetainedPreferred
      Stock
    Common
      Stock
    Paid-In
    EarningsSeries
      A
    Series
      B
    Shares
    Amount
    Capital
    (Deficit)
    TotalBalance
      as previously reported, December 31, 2002
    
    $
    11
    
    $
    40
    
    
    19,811,438
    
    $
    19,811
    
    $
    7,029,079
    
    $
    (9,785,777
    )
    $
    (2,736,836
    )Prior
      period adjustment (Note 13)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    98,947
    
    
    98,947Balance,
      restated, December 31, 2002
    
    $
    11
    
    $
    40
    
    
    19,811,438
    
    $
    19,811
    
    $
    7,029,079
    
    $
    (9,686,830
    )
    $
    (2,637,889
    )Common
      stock issued for services
    
    
    -
    
    
    -
    
    
    1,200,000
    
    
    1,200
    
    
    51,550
    
    
    -
    
    
    52,750Net
      income, December 31, 2003
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,841,499
    
    
    1,841,499Balance,
      December 31, 2003
    
    $
    11
    
    $
    40
    
    
    21,011,438
    
    $
    21,011
    
    $
    7,080,629
    
    $
    (7,845,331
    )
    $
    (743,640
    )Common
      stock issued for services
    
    
    -
    
    
    -
    
    
    2,774,105
    
    
    2,774
    
    
    100,445
    
    
    -
    
    
    103,219Common
      stock warrants issued for services
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    75,715
    
    
    -
    
    
    75,715Common
      stock cancelled
    
    
    -
    
    
    -
    
    
    (48,387
    )
    
    (48
    )
    
    48
    
    
    -
    
    
    -Preferred
      Series A common stock dividend
    
    
    -
    
    
    -
    
    
    56,356
    
    
    56
    
    
    4,069
    
    
    (4,125
    )
    
    -Conversion
      of preferred stock
    
    
    (11
    )
    
    (40
    )
    
    484,677
    
    
    485
    
    
    (434
    )
    
    -
    
    
    -Common
      stock issued in connection withprivate
      placement, net of $51,047 of issuance costs
    
    
    -
    
    
    -
    
    
    21,875,000
    
    
    21,875
    
    
    1,677,078
    
    
    -
    
    
    1,698,953Conversion
      of notes payable
    
    
    -
    
    
    -
    
    
    2,466,666
    
    
    2,467
    
    
    260,867
    
    
    -
    
    
    263,334Net
      income, December 31, 2004
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    2,217,669
    
    
    2,217,669**Balance,
      December 31, 2004**
    
    **$**
    **-**
    
    **$**
    **-**
    
    
    **48,619,855**
    
    **$**
    **48,620**
    
    **$**
    **9,198,417**
    
    **$**
    **(5,631,787**
    **)**
    **$**
    **3,615,250***See
      accompanying notes.*
 
 F-4
 Table of Contents
 **Findex.com,
      Inc.**
    ******CONSOLIDATED
      STATEMENTS OF CASH FLOWS**Year
      Ended December 31
    
    
    **2004**
    
    
    2003Cash
      flows from operating activities:Cash
      received from customers
    
    **$**
    **5,062,396**
    
    $
    4,228,649Cash
      paid to suppliers and employees
    
    
    **(5,673,088**
    **)**
    
    (3,364,838
    )Other
      operating receipts
    
    
    **9,276**
    
    
    7,977Interest
      paid
    
    
    **(37,928**
    **)**
    
    (43,203
    )Interest
      received
    
    
    **1,378**
    
    
    9,727Income
      taxes (paid) refunded
    
    
    **(5,702**
    **)**
    
    43,909Net
      cash provided (used) by operating activities
    
    
    **(643,668**
    **)**
    
    882,221Cash
      flows from investing activities:Acquisition
      of property, plant and equipment
    
    
    **(58,247**
    **)**
    
    (18,433
    )Software
      development costs
    
    
    **(692,063**
    **)**
    
    (659,486
    )Website
      development costs
    
    
    **(31,838**
    **)**
    
    (35,684
    )Deposits
      refunded (paid)
    
    
    **40,545**
    ****
    
    (500
    )Net
      cash (used) by investing activities
    
    
    **(741,603**
    **)**
    
    (714,103
    )Cash
      flows from financing activities:Proceeds
      from (payments on) line of credit, net
    
    
    **(20,935**
    **)**
    
    14,657Payments
      made on long-term notes payable
    
    
    **(227,727**
    **)**
    
    (79,404
    )Proceeds
      from convertible notes payable
    
    
    **240,000**
    
    
    -Proceeds
      from issuance of stock
    
    
    **1,750,000**
    
    
    -Stock
      offering costs paid
    
    
    **(51,047**
    **)**
    
    -Net
      cash provided (used) by financing activities
    
    
    **1,690,291**
    
    
    (64,747Net
      increase in cash and cash equivalents
    
    
    **305,020**
    
    
    103,371Cash
      and cash equivalents, beginning of year
    
    
    **36,339**
    
    
    (67,032
    )Cash
      and cash equivalents, end of year
    
    **$**
    **341,359**
    
    $
    36,339Reconciliation
      of net income to cash flows from operating activities:Net
      income
    
    **$**
    **2,217,669**
    
    $
    1,841,499Adjustments
      to reconcile net income to net cashprovided (used)
      by operating activities:Software
      development costs amortized
    
    
    **575,481**
    
    
    355,282Stock
      and warrants issued for services
    
    
    **178,929**
    
    
    52,750Rebate
      reserve adjustment
    
    
    **266,301**
    
    
    -Provision for
      bad debts
    
    
    **22,778**
    
    
    23,208Depreciation
      & amortization
    
    
    **60,821**
    
    
    88,381Non-cash
      non-recurring item
    
    
    **-**
    
    
    (650,000
    )Loss on
      disposal of property, plant and equipment
    
    
    **141**
    
    
    2,659Extraordinary
      item
    
    
    **(1,002,090**
    **)**
    
    -Change
      in assets and liabilities:(Increase) in
      accounts receivable
    
    
    **(223,794**
    **)**
    
    (160,770
    )Decrease in
      inventories
    
    
    **38,600**
    
    
    144,100(Increase)
      decrease in refundable income taxes
    
    
    **(2,948**
    **)**
    
    43,909(Increase)
      decrease in prepaid expenses
    
    
    **(84,211**
    **)**
    
    20,869(Decrease) in
      accrued royalties
    
    
    **(324,360**
    **)**
    
    (631,607
    )(Decrease)
      increase in accounts payable
    
    
    **(271,198**
    **)**
    
    81,793(Decrease) in
      income taxes payable
    
    
    **(1,270**
    **)**
    
    -Increase
      (decrease) in deferred taxes
    
    
    **(1,351,518**
    **)**
    
    (33,567
    )(Decrease) in
      other liabilities
    
    
    **(742,999**
    **)**
    
    (296,285
    )Net
      cash provided (used) by operating activities
    
    **$**
    **(643,668**
    **)**
    $
    882,221*See
      accompanying notes.*
  F-5
 Table of Contents
 
 **Findex.com,
Inc.**
 **Notes
to Consolidated Financial Statements**
 December
31, 2004and
2003
 
 **NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 ****
 **ORGANIZATION**
 
 Findex.com,
Inc. was incorporated under the laws of the State of Nevada on November 7, 1997,
as EJH Entertainment, Inc. On December 4, 1997, we acquired EJH
Entertainment, Inc., an Idaho corporation, in a stock-for-stock transaction. EJH
Idaho was incorporated on June 21, 1968, as Alpine Silver, Inc. Alpine changed
its name to The Linked Companies, Inc. on December 4, 1992. On September 9,
1996, The Linked Companies acquired Worldwide Entertainment, Inc., a Delaware
corporation, in a stock-for-stock transaction and changed its name to Worldwide
Entertainment, Inc. On June 27, 1997, Worldwide Entertainment changed its name
to EJH Entertainment, Inc.

On April
30, 1999, we acquired Findex Acquisition Corporation, a Delaware
corporation in a stock-for-stock transaction and the name of the company 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 an exclusive license agreement with Parsons Technology,
Inc., a subsidiary of TLC Multimedia, Inc., formerly Mattel Corporation, for the
Parsons Church Division of Mattel. In so doing, we obtained the right to market,
sell and continue to develop several Bible study software products. We develop
and publish church and Bible study software products designed to simplify
biblical research and streamline church office tasks.
 **ACCOUNTING
METHOD**
  We
recognize income and expenses on the accrual basis of accounting.
  **PRINCIPLES OF
CONSOLIDATION**
  The
consolidated financial statements include the accounts of the company and its
wholly-owned subsidiaries after eliminations.
  **USE OF
ESTIMATES**
  The
preparation of consolidated financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Significant estimates used in the consolidated financial
statements include the estimates of (i) doubtful accounts, sales returns, price
protection and rebates, (ii) provision for income taxes and realizability of the
deferred tax assets, (iii) the life and realization of identifiable intangible
assets, and (iv) provisions for obsolete inventory. The amounts we will
ultimately incur or recover could differ materially from current
estimates.
  F-6
 Table of Contents
 ****
 **CONCENTRATIONS**
 
 Financial
instruments that potentially subject us to concentrations of credit risk consist
of cash and cash equivalents and accounts receivable. We place our cash and cash
equivalents at well-known, quality financial institutions. We currently maintain
our cash balances in one financial institution located in Omaha, Nebraska. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 2004, our uninsured cash balance totaled
$268,380.
 
 We sell a
majority of our products to end-users through distributors, Christian
bookstores, Internet and direct marketing efforts. Although we attempt to
prudently manage and control accounts receivable and performs ongoing credit
evaluations in the normal course of business, we generally require no collateral
on our product sales. During the years ended December 31, 2004 and 2003, we had
no major customers that individually accounted for 10% or more of the annual
sales.
  During
the year ended December
31, 2004 , we
derived 63% of our total revenue from sales of QuickVerse ® , 28%
from sales of Membership Plus ® , and 9%
from sales of other software titles.
 
 During
the years ended December
31, 2004 and
2003 , five
vendors provided purchases individually of 10% or more of the total product and
material purchases as follows: Vendor A accounted for 29% and 3%, respectively,
Vendor B accounted for 18% and 14%, respectively, Vendor C accounted for 17% and
10%, respectively, Vendor D accounted for 12% and 39%, respectively, and Vendor
E accounted for 7% and 17%, respectively. Accounts payable relating to Vendors
A, B, C, D, and E were $40,234 and $20, $18,426 and $14,379, $34,931 and
$26,194, $-0- and $39,431, and $2,020 and $-0-, as of December 31, 2004 and 2003
respectively.
 ****
 **ROYALTY
AGREEMENTS**
  We have
entered into certain agreements whereby it is obligated to pay royalties for
content of software published. We generally pay royalties based on a
percentage of sales on respective products or on a fee per unit sold
basis. We expense software royalties as product costs during the period in
which the related revenues are recorded.
  **CASH AND CASH
EQUIVALENTS**
  We consider
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
  **RESTRICTED
CASH**
 
 Restricted
cash represents cash held in reserve by our merchant banker to allow for a
potential increase in credit card chargebacks from increased consumer purchases.
The cash held in reserve by our merchant banker will be unrestricted when
consumer sales and chargeback volumes stabilize.
 
 F-7
 Table of Contents
 ****
 **ACCOUNTS
RECEIVABLE**
 
 Accounts
receivable arise in the normal course of business. It is the policy of
management to review the outstanding accounts receivable quarterly, as well as
the bad debt write-offs experienced in the past, and establish an allowance for
doubtful accounts for uncollectible amounts. Individual accounts are charged
against the allowance when they are deemed uncollectible.
 ****
 **INVENTORY**
 
 Inventory,
including out on consignment, consists primarily of software media, manuals and
related packaging materials and is recorded at the lower of cost or market
value, determined on a first-in, first-out, and adjusted on a per-item, basis.
 ****
 **PROPERTY AND
EQUIPMENT**
 
 Property
and equipment are recorded at cost. Furniture, fixtures and computer equipment
are depreciated over five years using the straight-line method. Software is
depreciated over three years using the straight-line method. Expenditures for
maintenance, repairs and other renewals of items are charged to expense when
incurred.
 ****
 **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 Statement of Financial Accounting Standards (“SFAS”) No.
142, Goodwill and Other Intangible Assets, intangible assets with an indefinite
useful life are not amortized. Intangible assets with a finite useful life are
amortized on the straight-line method over the estimated useful
lives.
  **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 (a) the straight-line basis over the
estimated product life (generally from 12 to 18 months), or (b) the ratio of
current revenues to total projected product revenues. Total cumulative
capitalized software development costs were $1,748,735 and $1,056,672, less
accumulated amortization of $1,047,446 and $471,966 at December
31, 2004 and
2003 ,
respectively.
 F-8
 Table of Contents
 
 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 2, *Accounting
for Research and Development Costs* ,
established accounting and reporting standards for research and development. In
accordance with SFAS 2, costs we incur to enhance our existing products after
general release to the public (bug fixes) are expensed in the period they are
incurred and included in research and development costs. Research and
development costs incurred prior to determination of technological feasibility
and marketability and after general release to the public and charged to expense
were $64,653 and $128,159 for the years ended December
31, 2004 and
2003 ,
respectively.
 
 We
capitalize costs related to the development of computer software developed or
obtained for internal use in accordance with the American Institute of Certified
Public Accountants (“AICPA”) 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 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. Total cumulative Website development
costs, included in other assets on our consolidated balance sheets, were $86,500 and $54,662 , less
accumulated amortization of $18,795 and $2,452 at December
31, 2004 and
2003 ,
respectively.
 F-9
 Table of Contents
 ****
 **NET
REVENUE**
 We derive
revenues from the sale of packaged software products, product support and
multiple element arrangements that may include any combination of these items.
We recognize software revenue for software products and related services in
accordance with SOP 97-2, *Software
Revenue Recognition* , as
modified by SOP 98-9, *Modification of SOP 97-2, With Respect to Certain Transactions* . We
recognize revenue when persuasive evidence of an arrangement exists (generally a
purchase order), we have delivered the product, the fee is fixed or determinable
and collectibility is probable.
 
 In some
situations, we receive advance payments from our customers. We defer revenue
associated with these advance payments until we ship the products or offer the
support.
 
 In
accordance with EITF Issue No. 01-9, *Accounting
for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s
Product* , we
generally account for cash considerations (such as sales incentives - rebates
and coupons) that we give to our customers as a reduction of revenue rather than
as an operating expense.
 ****
 **Product
Revenue**
 
 We
typically recognize revenue from the sale of our packaged software products when
we ship the product. We sell some of our products on consignment to a limited
number of resellers. We recognize revenue for these consignment transactions
only when the end-user sale has occurred. Revenue for software distributed
electronically via the Internet is recognized when the customer has been
provided with the access codes that allow the customer to take immediate
possession of the software on its hardware and evidence of the arrangement
exists (web order).
 
 We reduce
product revenue for estimated returns and price protections that are based on
historical experience and other factors such as the volume and price mix of
products in the retail channel, trends in retailer inventory and economic trends
that might impact customer demand for our products. We also reduce product
revenue for the estimated redemption of end-user rebates on certain current
product sales. Our rebate reserves are estimated based on the terms and
conditions of the specific promotional rebate program, actual sales during the
promotion, the amount of redemptions received and historical redemption trends
by product and by type of promotional program. We did not offer any rebate
programs to our customers during 2004 or 2003 and
maintain a reserve for rebate claims remaining unpaid from 2000.
 ****
 **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 and/or 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.
 
 F-10
 Table of Contents
 
 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: (1) the
above revenue recognition criteria are met; (2) any undelivered products or
services are not essential to the functionality of the delivered products and
services; (3) payment for the delivered products or services is not contingent
upon delivery of the remaining products or service; and (4) we have an
enforceable claim to receive the amount due in the event that we do not deliver
the undelivered products or services.
 ****
 **Shipping and Handling
Costs**
 
 We record
the amounts we charge our customers for the shipping and handling of our
software products as product revenue and we record the related costs as cost of
sales on our consolidated statements of operations.
 ****
 **Customer Service and
Technical Support**
 
 Customer
service and technical support costs include the costs associated with performing
order processing, answering customer inquiries by telephone and through Web
sites, e-mail and other electronic means, and providing technical support
assistance to our customers. In connection with the sale of certain products, we
provide a limited amount of free technical support assistance to customers. We
do not defer the recognition of any revenue associated with sales of these
products, since the cost of providing this free technical support is
insignificant. The technical support is provided within one year after the
associated revenue is recognized and free product enhancements (bug fixes) are
minimal and infrequent. We accrue the estimated cost of providing this free
support upon product shipment and are recorded as cost of sales.
  **ADVERTISING**
  Advertising
costs, including direct response advertising costs, are charged to operations as
incurred. We have determined that direct response advertising costs are
insignificant. Total advertising costs for the years ended December
31, 2004 and
2003 were
approximately, $448 ,000 and $240 ,000,
respectively.
  **STOCK-BASED
COMPENSATION**
  As
permitted under SFAS No. 123, *Accounting for Stock-based Compensation*,
and amended under SFAS No. 148, *Accounting for Stock-based
Compensation-Transition and Disclosure*, we have elected to follow the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, in
accounting for stock-based awards to employees (see Note 15) and, accordingly,
does not recognize compensation cost when employee stock-option grants are made
at fair-market value.
  **LEGAL COSTS
RELATED TO LOSS CONTINGENCIES**
  We accrue
legal costs expected to be incurred in connection with a loss contingency as
they occur.
  F-11
 Table of Contents
 ****
 **INCOME
TAXES**
  We
utilize SFAS No. 109, *Accounting for Income Taxes*. SFAS No. 109
requires the use of the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of our
assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.
  **EARNINGS PER
SHARE**
  We follow
SFAS No. 128, *Earnings Per Share*, to calculate and report basic and
diluted earnings per share (EPS). Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of shares of
common stock outstanding for the period. Diluted EPS is computed by giving
effect to all dilutive potential shares of common stock that were outstanding
during the period. For us, dilutive potential shares of common stock consist of
the incremental shares of common stock issuable upon the exercise of stock
options and warrants for all periods, convertible notes payable and the
incremental shares of common stock issuable upon the conversion of convertible
preferred stock.
  When
discontinued operations, extraordinary items, and/or the cumulative effect of an
accounting change are present, income before any of such items on a per share
basis represents the “control number” in determining whether potential shares of
common stock are dilutive or anti-dilutive. Thus, the same number of potential
shares of common stock used in computing diluted EPS for income from continuing
operations is used in calculating all other reported diluted EPS amounts. In the
case of a net loss, it is assumed that no incremental shares would be issued
because they would be anti-dilutive. In addition, certain options and warrants
are considered anti-dilutive because the exercise prices were above the average
market price during the period. Anti-dilutive shares are not included in the
computation of diluted earnings per share, 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 our components of net income and “other comprehensive income” in a full
set of general-purpose financial statements. “Other comprehensive income” refers
to revenues, expenses, gains and losses that are not included in net income, but
rather are recorded directly in stockholders’ equity. The adoption of this
Statement had no impact on our net income or loss or stockholders’
equity.
  **TRANSFER OF
FINANCIAL ASSETS**
  We have
adopted SFAS No. 140, *Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities*. SFAS No. 140 provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities and provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The adoption of this standard did not have a material
effect on our results of operations or financial position.
  **FAIR VALUE OF
FINANCIAL INSTRUMENTS**
 
 Unless
otherwise indicated, the fair values of all reported assets and liabilities that
represent financial instruments (none of which are held for trading purposes)
approximate the carrying values of such instruments because of the short
maturity of those instruments.
  F-12
 Table of Contents
 **** **RECLASSIFICATIONS**
 
 Certain
accounts in the 2003 financial statements have been reclassified for comparative purposes to conform
with the presentation in the 2004 financial statements.
 
 **NOTE
2 - ACCOUNTS RECEIVABLE**
 
 At December
31, 2004 and
2003 ,
accounts receivable consisted of the following (see Note 1 -
Concentrations):
 
 **2004**
    
    
    2003Trade
      receivables
    
    **$**
    **584,819**
    
    $
    384,803Less:
      Allowance for doubtful accounts
    
    
    **18,000**
    
    
    19,000Accounts
      receivable, trade
    
    **$**
    **566,819**
    
    $
    365,803
  During
the years ended December
31, 2004 and
2003 , we
transferred accounts receivable totaling $300,966 and $320,533 to Alliance
for cash advances of $180,580 and $192,320, respectively. As accounts are paid,
the collected funds (less the amount advanced and appropriate fees) are
disbursed to us. The transfer agreement includes a repurchase requirement and,
accordingly, the proceeds were accounted for as a secured borrowing. The
agreement was terminated in July 2004. At December
31, 2004 and
2003 , the
balance of receivables transferred and included in trade receivables was $-0-
and $34,893, respectively. The remaining secured borrowing balances of
$ - 0- and
$ 20,936 are
included in accrued expenses at December
31, 2004 and
2003 ,
respectively.
  **NOTE
3 - INVENTORIES**
 
 At December
31, 2004 and
2003 ,
inventories consisted of the following:
 
 **2004**
    
    
    2003Raw
      materials
    
    **$**
    **111,300**
    
    $
    75,000Finished
      goods
    
    ****
    **122,700**
    
    
    197,600Inventories
    
    **$**
    **234,000**
    
    $
    272,600
  During
the years ended December
31, 2004 and
2003 , we
wrote-off distinctly different categories of obsolete inventory with a carried
cost totaling $32,396 and $60,792 ,
respectively. These have been recognized in cost of sales. See Note
10.
  **NOTE
4 - PROPERTY AND EQUIPMENT, net**
 
 At December
31, 2004 and
2003 ,
property and equipment consisted of the following:
 
 **2004**
    
    
    2003Computer
      equipment
    
    **$**
    **84,009**
    
    $
    61,905Computer
      software
    
    
    **62,861**
    
    
    41,297Office
      equipment
    
    
    **77,947**
    
    
    24,099Office
      furniture and fixtures
    
    
    **62,594**
    
    
    51,119Warehouse
      equipment
    
    
    **23,150**
    
    
    23,150**310,561**
    
    
    201,570Less:
      Accumulated depreciation
    
    
    **179,542**
    
    
    135,967Property
      and equipment, net
    
    **$**
    **131,019**
    
    $
    65,603
 
 At December
31, 2004 , Office
equipment contained telephone equipment under a capital lease obligation with a
cost basis of $51,788. See Notes 7 and 16.
  F-13
 Table of Contents
 ****
 **NOTE
5 - SOFTWARE LICENSE AGREEMENT**
  During
the year ended December
31, 2003 , we
offset the remaining unpaid installment ($1,051,785) against the carrying value
of the software license in accordance with the terms of a tentative settlement
agreement with TLC. In addition, the agreement called for the extension of the
estimated life of the license from 10 years to 50 years.
 
 On
October 20, 2003, we reached settlement in a dispute with The Zondervan
Corporation and TLC. The settlement extended indefinitely the term of the
software license agreement. This effectively changed the substance from an
amortizable intangible asset with a finite useful life to an unamortizable
intangible asset with an indefinite useful life. Amortization expense for 2003,
determined using the straight-line method, was calculated through the settlement
date.
  **NOTE
6 - NOTES PAYABLE**
 
 At December
31, 2004 and
2003 , notes
payable consisted of the following:
 
 **2004**
    
    
    2003Note
      payable to a corporation, due May 31, 2003, with interest compounded
      monthly at 1.5%. Unsecured. Convertible at the option of the holder into
      666,667 restricted shares of common stock.
    
    **$**
    **---**
    
    $
    33,333Note
      payable to a corporation, due May 31, 2003, with interest compounded
      monthly at 1.5%. Unsecured. Convertible at the option of the holder into
      666,667 restricted shares of common stock.
    
    ****
    **---**
    
    
    33,333Note
      payable to a corporation, due May 31, 2003, with interest compounded
      monthly at 1.5%. Unsecured. Convertible at the option of the holder into
      466,666 restricted shares of common stock. See Notes 17 and
      20.
    
    
    ---
    
    
    23,333Notes
      payable
    
    **$**
    **---**
    
    $
    89,999
  In
September 2004, we borrowed a total of $240,000 from two individuals. Both notes
were unsecured, carried an annual interest rate of 7.5%, were due August 2005,
and were convertible at the option of the holder into a total of 2,000,000
restricted shares of common stock. Both notes were converted in November 2004 at
the election of the respective holder. See Notes 9 and 17.
 
 During
the year ended December
31, 2003 , we
reclassified as other income - nonrecurring items (see Note 10) proceeds
totaling $650,000, and the corresponding accrued interest payable, received in
late 1999 and early 2000 that were previously recorded as an unsecured note
payable.
  F-14
 Table of Contents
 ****
 **NOTE
7 - LONG-TERM DEBT**
 
 At December
31, 2004 and
2003 ,
long-term debt consisted of the following:
  **2004**
    
    
    2003Unsecured
      term note payable to a corporation due October 2004 in monthly
      installments of $5,285, including interest at 8%.
    
    **$**
    **26,679**
    
    $
    53,975Term
      note payable to a corporation due December 2005 in monthly installments of
      $6,833, including interest at 8%. Secured by inventory. See Notes 3 and
      12.
    
    
    **---**
    
    
    146,665Capital
      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 16.
    
    ****
    **51,788**
    
    
    ---**78,467**
    
    
    200,640Less:
      Current maturities
    
    
    **35,495**
    
    
    126,876Long-term
      debt
    
    **$**
    **42,972**
    
    $
    73,764
 
 Principal
maturities at December
31, 2004 are as
follows:
 
 2005
    
    $
    35,4952006
    
    
    9,1862007
    
    
    10,3182008
    
    
    11,5912009
    
    
    11,877Total
    
    $
    78,467
 
 **NOTE
8 - INCOME TAXES**
 
 The
provision (benefit) for taxes on income from continuing operations for the years
ended December
31, 2004 and
2003 consisted of the following:
 
 **2004**
    
    
    2003Current:Federal
    
    **$**
    **---**
    
    $
    ---State
    
    
    **1,484**
    
    
    ---**1,484**
    
    
    ---Deferred:Federal
    
    
    **(1,785,267**
    **)**
    
    (29,061
    )State
    
    
    **32,875**
    
    
    (4,506
    )**(1,752,392**
    **)**
    
    (33,567
    )Total
      tax provision (benefit)
    
    **$**
    **(1,750,908**
    **)**
    $
    (33,567
    )
 
 F-15
 Table of Contents
 
 The
reconciliation of income tax computed at statutory rates of income tax benefits
is as follows:
 
 **2004**
    
    
    2003Expense
      at Federal statutory rate - 34%
    
    **$**
    **284,813**
    
    $
    614,697State
      tax effects, net of Federal tax benefits
    
    
    **25,668**
    
    
    178,721Nondeductible
      expenses
    
    
    **33,636**
    
    
    1,764Taxable
      temporary differences
    
    
    **(269,916**
    **)**
    
    (3,213
    )Deductible
      temporary differences
    
    
    **84,176**
    
    
    (99,761
    )Deferred
      tax asset valuation allowance
    
    
    **(1,909,285**
    **)**
    
    (725,775
    )Income
      tax benefit
    
    **$**
    **(1,750,908**
    **)**
    $
    (33,567
    )
  Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Our total and net deferred tax assets,
deferred tax asset valuation allowances and deferred tax liabilities at December
31, 2004 and
2003 are as
follows:
  For
      the year endedDecember
      31, 2004
    
    Federal
    State
    TotalCurrent
      Deferred Income TaxesReserve
      for sales returns
    
    $
    34,061
    
    $
    8,014
    
    $
    42,075Reserve
      for technical support costs
    
    
    13,362
    
    
    3,144
    
    
    16,506Accrued
      compensation costs
    
    
    34,720
    
    
    8,170
    
    
    42,890Deferred
      revenue
    
    
    14,807
    
    
    3,484
    
    
    18,291Reserve
      for bad debts
    
    
    6,120
    
    
    1,440
    
    
    7,560Operating
      loss carryforwards
    
    
    204,000
    
    
    1,053
    
    
    205,053307,070
    
    
    25,305
    
    
    332,375Less:
      Valuation allowance
    
    
    27,719
    
    
    4,465
    
    
    32,184Deferred income
      tax asset, net
    
    $
    279,351
    
    $
    20,840
    
    $
    300,191Non-current
      Deferred Income TaxesProperty
      and equipment, net
    
    $
    2,312
    
    $
    544
    
    $
    2,856Reorganization
      costs
    
    
    1,700
    
    
    400
    
    
    2,100State
      deferred tax liabilities
    
    
    89,002
    
    
    ---
    
    
    89,002Operating
      loss carryforwards
    
    
    2,552,812
    
    
    7,725
    
    
    2,560,5372,645,826
    
    
    8,669
    
    
    2,654,495Less:
      Valuation allowance
    
    
    1,269,587
    
    
    865
    
    
    1,270,452Deferred income
      tax asset, net
    
    
    1,376,239
    
    
    7,804
    
    $
    1,384,043Software
      development costs
    
    
    (238,438
    )
    
    (56,103
    )
    $
    (294,541
    )Website
      costs
    
    
    (23,020
    )
    
    (5,416
    )
    
    (28,436
    )Software
      license fees
    
    
    (851,074
    )
    
    (200,253
    )
    
    (1,051,327
    )State
      deferred tax assets
    
    
    (9,739
    )
    
    ---
    
    
    (9,739
    )Deferred income
      tax liability
    
    
    (1,122,271
    )
    
    (261,772
    )
    $
    (1,384,043
    )Deferred income
      tax asset, net
    
    $
    253,968Deferred income
      tax liability, net
    
    
    
    
    $
    (253,968
    )
   F-16
 Table of Contents
 For
      the year endedDecember
      31, 2003
    
    Federal
    State
    TotalCurrent
      Deferred Income TaxesReserve
      for sales returns
    
    $
    19,574
    
    $
    4,606
    
    $
    24,180Reserve
      for technical support costs
    
    
    12,580
    
    
    2,960
    
    
    15,540Accrued
      compensation costs
    
    
    60,781
    
    
    14,301
    
    
    75,082Reserve
      for bad debts
    
    
    6,460
    
    
    1,520
    
    
    7,980Operating
      loss carryforwards
    
    
    102,000
    
    
    24,000
    
    
    126,000201,395
    
    
    47,387
    
    
    248,782Less:
      Valuation allowance
    
    
    201,395
    
    
    47,387
    
    
    248,782Deferred income
      tax asset, net
    
    $
    ---
    
    $
    ---
    
    $
    ---Non-current
      Deferred Income TaxesProperty
      and equipment, net
    
    $
    614
    
    $
    144
    
    $
    758Reorganization
      costs
    
    
    11,900
    
    
    2,800
    
    
    14,700State
      deferred tax liabilities
    
    
    68,086
    
    
    ---
    
    
    68,086Operating
      loss carryforwards
    
    
    2,417,615
    
    
    721,673
    
    
    3,139,2882,498,215
    
    
    724,617
    
    
    3,222,832Less:
      Valuation allowance
    
    
    2,498,215
    
    
    724,617
    
    
    3,222,832Deferred income
      tax asset, net
    
    $
    ---
    
    $
    ---
    
    
    ---Software
      license fees
    
    $
    (851,074
    )
    $
    (200,253
    )
    
    (1,051,327
    )Deferred income
      tax liability
    
    $
    (851,074
    )
    $
    (200,253
    )
    
    (1,051,327
    )Deferred income
      tax liability, net
    
    
    
    
    
    
    
    $
    (1,051,327
    )
 
 A
valuation allowance has been recorded primarily related to tax benefits
associated with income tax operating loss carryforwards. Adjustments to the
valuation allowance will be made if there is a change in management’s assessment
of the amount of the deferred tax asset that is realizable. At December 31,
2001, in accordance with SFAS No. 109, Accounting for Income Taxes, management
established the valuation allowance equal to the total deferred tax assets due
to the uncertainty about our ability to continue as a going concern. At December
31, 2004, management adjusted the amount of valuation allowance based on the
assessment that we will continue as a going concern and will produce sufficient
income in the future to realize our net deferred tax asset. The valuation
allowance for deferred tax assets was decreased by $2,168,978 during the year
ended December 31, 2004 and decreased by $725,775 during the year ended December
31, 2003.
 
 At
December 31, 2004, we had available net operating loss carryforwards of
approximately $7,648,000 for federal income tax purposes that expire in 2021.
The federal carryforwards resulted from losses generated in 1996 through 2002.
We also had net operating loss carryforwards available from various state
jurisdictions ranging from approximately $39,000 to approximately $841,000 that
expire in 2021.
  **NOTE
9 - STOCKHOLDERS’ EQUITY**
 ****
 **COMMON
STOCK**
  In July
2003, we issued 250,000 shares of common stock to an employee as settlement of a
2002 signing bonus. These shares were valued at $0.04 per share, the value on
the date the settlement was accepted by the employee.
 
 In July
2003, we issued a total of 600,000 shares of common stock to the external board
of directors in lieu of cash and meeting fees for the period April 2002 through
June 2003. These shares were valued at $0.045 per share.
 In July
2003, we issued a total of 150,000 shares of common stock to three independent
contractors as a bonus for their performance on our software development
projects. These shares were valued at $0.045 per share.
 
 F-17
 Table of Contents
 
 In July
2003, we issued a total of 200,000 shares of common stock to an independent
contractor for past and future performance on preparing written corporate
materials. These shares were valued at $0.045 per share.
 
 In April
2004, we issued a total of 1,519,349 restricted shares of common stock to the
executive management team as payment of the 2003 accrued performance bonus.
These shares were valued at $0.022 per share.
 
 In April
2004, we resolved to issue 637,500 restricted shares of common stock to the
non-executive employees as additional compensation pursuant to an incentive and
retention bonus program. In July, 2004, we removed 2,500 restricted shares of
common stock from the resolution due to voluntary separation from service by a
part-time employee. These shares were valued at $0.022 per share.
 
 In June
2004, we issued 324,074 restricted shares of common stock to the outside board
of directors in lieu of cash and meeting fees for the period from July 2003
through August 2004. These shares were valued at $0.081 per share.
 
 In July
2004, the holders of 11,400 shares of Series A Preferred Stock and the holders
of 40,000 shares of Preferred Series B elected to convert such shares into
218,000 shares of common stock and 266,667 shares of common stock, respectively.
In addition, the holders converted $4,125 unpaid accumulated Series A Preferred
Stock dividends into 56,353 shares of common stock.
 In July
2004, we issued 295,692 non-restricted shares of common stock in settlement of
an agreement with an institutional private equity investor. These shares were
valued at $0.10 per share. A warrant dated March 26, 2001 to purchase 510,000
shares of common stock exercisable at $0.23 per share was cancelled in the
settlement. See Note 10.
  In July
2004, we issued 21,875,000 restricted shares of common stock for proceeds of
$1,750,000 through a private placement with a New York based private investment
partnership. In connection with this issuance, we incurred $51,047 in legal and
other direct costs. These costs have been recorded as a reduction to additional
paid-in capital. In addition, according to the terms of the agreement, the
investor received two warrants to purchase shares of common stock. The first
warrant entitles the holder to purchase up to 10,937,500 shares of common stock
at a price of $0.18 per share, and the second warrant entitles the holder to
purchase up to 10,937,500 additional shares of common stock at a price of $0.60
per share. These warrants are accounted for as rights and were issued on
November 10, 2004.
 In July
2004, we removed 48,387 previously resolved but un-issued shares of common stock
associated with an unexecuted 2001 stock subscription
agreement.
 
 In
October 2004, we increased the number of our authorized shares of common stock
from 50,000,000 to 120,000,000.
 
 In
November 2004, we issued 2,000,000 restricted shares of common stock to holders
of convertible promissory notes who exercised their options to convert. See Note
6.
  **COMMON STOCK
OPTIONS**
 
 In June
2003, we granted an employee 500,000, fully vested stock options with an
exercise price of $0.05 per share. These options expire in June 2013. In
addition, 667 unvested stock options with an exercise price of $1.00 and 6,250
unvested stock options with an exercise price of $0.11 were forfeited upon
termination and 16,250 vested stock options with an exercise price of $1.00 and
30,000 vested stock options with an exercise price of $0.11 expired after
termination. There was no effect on the financial statements resulting from
these transactions. See Note 15.
  F-18
 Table of Contents
 
 In July
2004, we cancelled 190,200 vested stock options with an exercise price of $1.00
per share and 525,000 vested stock options with an exercise price of $1.03 per
share. In addition, 100,000 vested stock options with an exercise price of $0.11
were voluntarily forfeited by management and 1,333 vested stock options with an
exercise price of $1.00 and 38,750 vested stock options with an exercise price
of $0.11 expired after termination. We apply APB
Opinion No. 25 and related interpretations in accounting for our stock
options. Accordingly, no compensation cost has been recognized for these stock
options and therefore, there was no effect on the financial statements resulting
from these cancellations. See Note 15. We did not grant any options or other
stock-based awards to any of the individuals for which the options were
canceled, during the six months prior to and after the option
cancellation.
   **COMMON STOCK
WARRANTS**
 
 In April
2004, we issued a warrant for 150,000 shares of common stock with an exercise
price of $0.022 per share to our corporate counsel as payment for $3,300 of
accrued legal services.
 
 In May
2004, we issued a warrant for 600,000 shares of common stock with an
exercise price of $0.15 per share to a consultant for corporate business
planning, financing, and merger and acquisition assistance. This warrant was
valued at $63,215 using the Black-Scholes method and recorded as an
expense.
 
 In July
2004, we cancelled a warrant for 510,000 shares of common stock with an
exercise price of $0.23 per share with an institutional private equity investor
in connection with a settlement in which 295,692 non-restricted shares of common
stock were issued. See Note 10.
  In
November 2004, we issued two warrants to purchase shares of common stock in
connection with a private placement with a New York based private investment
partnership. The first warrant entitles the holder to purchase up to
10,937,500 shares of common stock at a price of $0.18 per share, and the second
warrant entitles the holder to purchase up to 10,937,500 additional shares
of common stock at a price of $0.60 per share. These
warrants are accounted for as stock rights and have been valued at $576,042 each
($1,152,084 total) using the Black-Scholes valuation method.
  **SERIES A
CONVERTIBLE PREFERRED STOCK**
  The
rights, preferences and privileges of our Series A Preferred Stock, none of
which currently remain outstanding, were as follows:
****
**Dividends**

Holders
of Series A Preferred Stock were entitled to receive common stock dividends of
$0.50 per share per annum, in preference to any payment of cash dividends
declared or paid on shares of common stock. Dividends on Series A Preferred
Stock were fully cumulative and were payable as determined by our board of
directors. As of December 31, 2004, no dividends had been declared. Series A
Preferred Stock dividends, however, were paid to a stockholder as a
conversion incentive.
********
**Liquidation**

Holders
of Series A Preferred Stock were entitled to liquidation preferences over common
stockholders to the extent of $10.00 per share, plus all declared but unpaid
dividends. If funds were sufficient to make a complete distribution to the
preferred stockholders, such stockholders would have shared in the distribution
of our assets on a pro rata basis in proportion to the aggregate preferential
amounts owed each stockholder. After payment would have been made to the
preferred stockholders, any remaining assets and funds would have been
distributed equally among the holders of the common stock based upon the number
of shares of the common stock held by each.****
 F-19
 Table of Contents
 **Conversion**
 
 Each
share of Series A Preferred Stock would have been convertible into shares of
common stock at the rate of 10 shares of common stock for each share of Series A
Preferred Stock., subject to adjustment.

During
the year ended December 31, 2004, all shares of Series A Preferred Stock were
converted into shares of common stock. ****
 **Redemption**
 
 At the
election of our board of directors, we were able to redeem all or part of the
shares of the Preferred Stock at any time (pro rata based upon the total number
of shares of the Series A Preferred Stock held by each holder) by paying in cash
a sum per share equal to $10.00 plus accrued and unpaid dividends per
annum. ****
 **Voting
Rights**
 
 The
holder of each share of Series A Preferred Stock was not entitled to vote except
as required by law. ****
 **SERIES B
CONVERTIBLE PREFERRED STOCK**
  The
rights, preferences and privileges of our Series B Preferred Stock, none of
which currently remains outstanding, were as follows:
  **Dividends**
 
 The
holders of Series B Preferred Stock were entitled to receive cumulative cash
dividends at the rate of $1.60 per annum per share. As of December 31, 2004, no
dividends had been declared.
****
**Liquidation**

The
Series B Preferred stockholders were entitled to a liquidation preference in an
amount equal to the dividends accrued and unpaid, whether or not declared,
without interest, and a sum equal to $20.00 per share, before any payment was to
be made or any assets distributed to the holders of our common stock or any
other class or series of our capital stock ranking junior as to liquidation
rights to the Series B Preferred Stock.
******Conversion**

Each
share of Series B Preferred Stock had been convertible into shares of common
stock at the rate of 1 share of common stock for each share of Series B
Preferred Stock, subject to adjustment.

During
the year ended December 31, 2004, all shares of Series B Preferred Stock were
converted into shares of common stock.
 F-20
 Table of Contents
  **** **Redemption**
 
 Subject
to restrictions, shares of the Series B Preferred Stock were be redeemable at
our option of at any time for a price of $20.00 per share plus, in each case, an
amount equal to the dividends accrued and unpaid thereon to the redemption date.
We did not have the right to redeem any shares of Series B Preferred Stock
unless the current market value of our common stock immediately prior to the
redemption date was not less than $18.00 per share.

**Voting
Rights**
 
 The
holder of each share of Series B Preferred Stock was not entitled to vote,
except as required by law and as a class. Voting as a class, the holders were
entitled to elect one director to fill one directorship.
 **NOTE
10 - NONRECURRING ITEMS**
 
 APB
Opinion No. 30 requires material events or transactions that are either unusual
or infrequent, but not both, to be presented in the income statement as separate
elements of income from continuing operations.
  During
the years ended December
31, 2004 and
2003 , we
wrote-off distinctly different categories of obsolete inventory with a carried
cost totaling $32,396 and $60,792, respectively. The 2004 obsolete
inventory was a direct result of the March 2004 settlement with The Zondervan
Corporation. See Notes 3 and 18. These
have been included in cost of sales.
 During
the year ended December 31, 2003, we recorded an adjustment to the balance of
accrued royalties in the amount of $583,628. This adjustment resulted from an
internal audit of the royalty calculations as affected by the product sales
provided by TLC during the second quarter of 2001. These reduced sales numbers
also resulted in the June 30, 2001 bad debt provision totaling $2,391,000 from
net balances owed to us by TLC. The royalty liabilities had been
accrued based on our sales to TLC as originally reported. This has been
recognized as an expense recovery and included in operating
expenses.
 
 During
the year ended December 31, 2004, we settled an agreement with an institutional
private equity investor for early termination of the agreement. We issued
295,692 shares of common stock valued at $0.10 per share and paid a cash lump
sum of $125,000. A total of $154,569 has been treated as expenses incurred in a
withdrawn public offering. See Note 9.
 During
the year ended December 31, 2003, we reclassified as other income - nonrecurring
items proceeds totaling $650,000, and the corresponding accrued interest payable
totaling $216,516, that were previously recorded as an unsecured note payable.
The proceeds were originally recorded as an unsecured note payable based upon an
oral understanding with an employee of a third-party consultant in 1999. We had
historically accrued interest on the outstanding balance at 9%, the rate deemed
reasonable by management at the time of the oral agreement. We continued to
accrue interest on the proceeds until we made the determination to reclassify
the proceeds and accumulated accrued interest (from December 1999 through
September 2003). The determination to reclassify the obligation, and related
accrued interest, was made on the basis of the combined facts that (i) the
obligation exists, if at all, solely pursuant to an oral loan agreement made
over three years ago (in 1999) in the State of North Carolina with a
representative of the party to whom the obligation was believed to have been
owed, (ii) no party has ever made any demand for repayment thereof despite the
fact that no payments have ever been made on the obligation, (iii) the party
believed to be owed the obligation, upon inquiry, claims no record of any such
obligation, and (iv) the State of North Carolina Statute of Limitations
applicable to oral agreements, believed to govern the continued enforceability
of the obligation, has expired. This transaction has been reflected in the
Consolidated Statements of Cash Flows as “Non-cash non-recurring item” and
“(Decrease) in other current liabilities”.
 F-21
 Table of Contents
 
 **NOTE
11 - REBATE RESERVE ADJUSTMENT**
  During
the year ended December 31, 2004, we recorded an adjustment to the rebates
reserve in the amount of $266,301. The reserve balance properly reflects open
rebate programs and the estimated balance of each that management expects to
pay. This adjustment resulted from an internal review of the amount owed and our
ability to reach the intended rebate recipients and properly reflects historical
response rates. This has
been recognized as an expense recovery and included in operating
expenses.
  **NOTE
12 - EXTRAORDINARY ITEM**
 
 During
the year ended December 31, 2004, we settled with various vendors and content
providers for lump-sum payments ranging from approximately 17% to approximately
60% of balances owed. The difference between the balance owed and the settlement
amount, totaling $1,002,090, has been treated as gain from extinguishment of
debt in accordance with SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, and classified as an
extraordinary item in accordance with SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Income taxes allocated and subtracted from the total gain were
$400,874, or approximately 40%.
 
 **NOTE
13 - PRIOR PERIOD ADJUSTMENT**
  During
the year ended December 31, 2004, we adjusted retained earnings to reflect the
correction of an error in recording our liability for product rebates. During
the year ended December 31, 2000, we discontinued the use of a third-party to
process rebate claims. Rebate program details were obtained from the third-party
and a liability recorded for the unpaid rebate claims monthly
beginning July 1999 through October 2000. In 2004, we discovered that the
unpaid rebate claims were duplicated between reports received from the
third-party processor and the liability recorded upon our assumption of the
rebate claim fulfillment. The adjustment decreased accounts payable by $98,947,
decreased deferred tax assets by $39,451, increased the deferred tax asset
valuation allowance by $39,451, and decreased the accumulated deficit by
$98,947.
  **NOTE
14 - 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 the outstanding common stock options (see
Note 15), 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:
  F-22
 Table of Contents
  For
      the Year Ended December 31
    
    
    **2004**
    
    
    2003Income
      before extraordinary item
    
    **$**
    **1,616,453**
    
    $
    1,841,499Common
      stock dividend on Preferred Series A
    
    
    **(4,125**
    **)**
    
    ---Income
      before extraordinary item available to common stockholders
    
    **$**
    **1,612,328**
    
    $
    1,841,499Net
      Income
    
    **$**
    **2,217,669**
    
    $
    1,841,499Common
      stock dividend on Preferred Series A
    
    
    **(4,125**
    **)**
    
    ---Net
      income available to common stockholders
    
    **$**
    **2,213,544**
    
    $
    1,841,499Basic
      weighted average shares outstanding
    
    
    **34,520,754**
    
    
    20,411,438Dilutive
      effect of:Stock
      options
    
    
    **429,824**
    
    
    ---Convertible
      notes payable
    
    
    **---**
    
    
    1,800,000Convertible
      Preferred Series A
    
    
    **---**
    
    
    114,000Convertible
      Preferred Series B
    
    
    **---**
    
    
    40,000Warrants
    
    
    **245,262**
    
    
    ---Diluted
      weighted average shares outstanding
    
    
    **35,195,840**
    
    
    22,365,438
 
 A total
of 24,315,000 and 4,075,273 dilutive potential securities for the years ended December
31, 2004 and
2003 ,
respectively, have been excluded from the computation of diluted earnings per
share, as their inclusion would be anti-dilutive.
  **NOTE
15 - 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 2004 or
2003.
 In
addition, we issues various forms of stock-based awards including nonqualified
stock options and restricted stock awards to directors, officers, other key
employees and third-party consultants, outside of the plan. Awards granted
outside of the plan have been granted pursuant to equity compensation
arrangements that have not been approved by our stockholders. These awards are
granted at an exercise price as determined by our board at the time of grant and
are not less than the par value of such shares of common stock. None of the
options granted outside of the plan have been granted with an exercise price
less than fair value of the common stock on the date of grant. Stock options
granted outside of the plan vest as determined by our board at the time of grant
and have a term of up to ten years. Non-employee directors, though treated as
employees for financial reporting purposes under FASB Interpretation No. 44, are
excluded from the income tax advantages afforded employees by the Internal
Revenue Code. We did not grant any options outside of the plan during 2004 and
granted 500,000 nonqualified, fully vested stock options outside of the plan to
an officer during 2003.
 F-23
 Table of Contents
 
 We apply
APB Opinion No. 25 and related interpretations in accounting for our stock
options. Accordingly, no compensation cost has been recognized for outstanding
stock options. Had compensation cost for our outstanding stock options been
determined based on the fair value at the grant date (calculated using the
Black-Scholes Option-Pricing Model) for those options consistent with SFAS No.
123, our net income and primary and diluted earnings per share would have
differed as reflected by the pro forma amounts indicated
below:
 
 **2004**
    
    
    2003Net
      income, as reported
    
    **$**
    **2,217,669**
    
    $
    1,841,499Pro
      Forma compensation charge under SFAS 123
    
    
    **---**
    
    
    (59,722
    )Pro
      Forma net income
    
    **$**
    **2,217,669**
    
    $
    1,781,777Earnings
      per share:Basic
      - as reported
    
    **$**
    **0.06**
    
    $
    0.09Basic
      - pro forma
    
    **$**
    **0.06**
    
    $
    0.09Diluted
      - as reported
    
    **$**
    **0.06**
    
    $
    0.08Diluted
      - pro forma
    
    **$**
    **0.06**
    
    $
    0.08
 
 The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
 
 Expected
      dividend yield
    
    
    0
    %Expected
      stock price volatility
    
    
    280
    %Risk-free
      interest rate
    
    
    6.00
    %
 
 Activity
under our stock option plans is summarized as follows:
  Outstanding
      OptionsNumber
      of Shares
    Weighted-Average
      Exercise PriceBalance
      atDecember
      31, 2002
    
    
    2,843,450
    
    $
    0.33Granted
    
    
    500,000
    
    $
    0.05Exercised
    
    
    ---
    
    
    ---Expired
      or forfeited
    
    
    (53,167
    )
    $
    0.39Canceled
    
    
    ---
    
    
    ---Balance
      atDecember
      31, 2003
    
    
    3,290,283
    
    $
    0.29Granted
    
    
    ---
    
    
    ---Exercised
    
    
    ---
    
    
    ---Expired
      or forfeited
    
    
    (140,083
    )
    $
    0.12Canceled
    
    
    (715,200
    )
    $
    1.02Balance
      atDecember
      31, 2004
    
    
    2,435,000
    
    $
    0.09
 
 No stock
options, or any other form of stock-based awards, were granted to the
individuals for whom the options were cancelled, during the six months prior to
and after the cancellation.
 F-24
 Table of Contents
 
 The
following table summarizes information about stock options outstanding at December
31, 2004 :
 
 Outstanding
      Options
    Exercisable
      OptionsRange
      of Exercise Prices
    
    
    Outstanding
      atDecember
      31, 2004
    
    
    Weighted-Average
      Remaining Contractual Life (Years)
    
    
    Weighted-Average
      Exercise Price
    
    
    Exercisable
      atDecember
      31, 2004
    
    
    Weighted-Average
      Exercise Price$0.00
      to $0.11
    
    
    2,435,000
    
    
    7.1
    
    $
    0.0854
    
    
    2,435,000
    
    $
    0.0854
 
 The
following table summarizes other equity instruments issued during 2004 to
acquire goods and services (see Note 9):
 
 Number
      of Shares
    
    Weighted-Average
      Exercise PriceCommon
      stock
    
    
    2,774,115
    
    $
    0.0372Common
      stock warrants
    
    
    750,000
    
    $
    0.1244
 ****
 **NOTE
16 - RENTAL AND LEASE INFORMATION**
 ****
 **OPERATING
LEASES**
  We lease
office space/warehouse facilities in Omaha, Nebraska under an operating lease
with a third-party with terms extending through 2007. We
are responsible for all taxes, insurance and utility expenses associated
with this lease. There is no lease renewal option contained in the lease.
 
 We lease
office space in Naperville, Illinois under an operating lease with a third-party
with terms extending through September 2005. We are responsible for
all insurance expenses associated with this lease.
  Rental
expense for the years ended December
31, 2004 and
2003 amounted
to $ 75,555 and
$ 51,039 ,
respectively. Rental expenses are included in capitalized software development
costs. See Note 1 - Software Development Costs.
  At December
31, 2004 , the
future minimum rental payments required under these leases are as
follows:
 
 2005
    
    $
    77,2612006
    
    
    65,4912007
    
    
    27,288Total
      future minimum rental payments
    
    $
    170,040
 ****
 **CAPITAL
LEASES**
  We lease
telephone equipment under a capital lease expiring in November 2009. The asset
and liability under the capital lease are recorded at the present value of the
minimum lease payments. The asset is depreciated over a 5 year life.
Depreciation of the asset under the capital lease is included in depreciation
expense for 2004 .
 F-25
 Table of Contents
 
 The
following table summarizes property held under capital leases at December
31, 2004 :
 
 Office
      equipment
    
    $
    51,788Less:
      Accumulated depreciation
    
    
    1,726Net
      property and equipment under capital lease
    
    $
    50,062
 
 Minimum
future lease payments under capital leases as of December
31, 2004 for each
of the next five years and in the aggregate are:
 
 2005
    
    $
    14,8702006
    
    
    13,7262007
    
    
    13,7262008
    
    
    13,7262009
    
    
    12,582Total
      minimum lease payments
    
    
    68,630Less:
      Amount representing interest
    
    
    16,842Total
      obligations under capital lease
    
    
    51,788Less:
      Current installments of obligations under capital lease
    
    
    8,816Long-term
      obligation under capital lease
    
    $
    42,972
 
 **NOTE
17 - SUPPLEMENTAL CASH FLOW INFORMATION**
 
 We
incurred the following non-cash investing and financing activities during the
years ended December
31, 2004 and
2003 ,
respectively:
  **2004**
    
    
    2003Conversion
      of notes payable into common stock. See Note 6.
    
    **$**
    **263,334**
    
    $
    ---Common
      stock dividend on Preferred Series A
    
    **$**
    **4,125**
    
    $
    ---Preferred
      stock converted into common stock
    
    **$**
    **470**
    
    $
    ---Common
      stock and warrants issued for services
    
    **$**
    **178,929**
    
    $
    52,750
  **NOTE
18 - 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
position.
We
entered into a license agreement in June 1999 with Parsons Technology, Inc., a
copy of which has since been assigned to Riverdeep, Inc., the latest
licensor-assignee in a succession of assignments that have occurred since the
original agreement. The license, as we acquired it in 1999, provided us with the
right, for a term of ten years, to publish, use, distribute, sublicense and
sell, exclusively worldwide in non-secular channels and non-exclusively in
secular channels, a collection of top-selling Christian-related software titles
and content owned by Parsons Technology, including certain intellectual
properties owned by The Zondervan Corporation.

In
October 2001, due to a shortage in working capital, we fell in arrears with
certain royalty payments due under the 1999 license. Thereafter we became party
with, among others, Zondervan, Parsons and Riverdeep, to a court supervised
mediation arising out of a content royalty claim. A multi-party settlement was
reached on October 20, 2003, providing for our payment to Zondervan of
$500,000.00 plus 5% simple interest in installments over a period of nine months
from November 2003 to July 2004, as well as for the destruction of all inventory
containing Zondervan-owned content. We have fully complied with the terms of the
agreement and, upon satisfaction, received a covenant in perpetuity with respect
to our rights under the 1999 license, effectively extending the agreement
indefinitely.
  F-26
 Table of Contents
 
 We were
in arrears with the Internal Revenue Service for back payroll taxes and had been
paying the payroll taxes in monthly installments previously approved by the
Internal Revenue Service. In July of 2004, we paid all back payroll taxes that
were due to the Internal Revenue Service and remain current with all payroll tax
deposits and filings.
 
 On July
19, 2004, we entered into a certain Stock Purchase Agreement pursuant to which
we agreed to issue and sell 21,875,000 restricted shares of our common stock,
and warrants to purchase another 21,875,000 shares of our common stock, to
Barron Partners, LP, a New York based institutional investor. As part of the
financing transaction, we also entered into a certain Registration Rights
Agreement with Barron Partners, LP pursuant to which we became committed to
registering all of the shares issued as part of such transaction, including
those issuable under the warrants. On November 22, 2004, we filed a registration
statement on Form SB-2 covering the shares issued to Barron Partners, as well as
the shares underlying the warrants issued to Barron Partners. Under the terms of
the Registration Rights Agreement, as amended, we had until April 22, 2005 to
cause such registration statement to be declared effective by the SEC. In
accordance with the terms of the Registration Rights Agreement, any delays in
meeting this obligation subject us to liability to Barron Partners, LP in
an amount equal to $1,726 per day for the duration of any such delay.

As
of the date of this filing, the registration statement filed on November
22, 2004 had not yet been declared effective. Pursuant to an agreement reached
with Barron Partners in relation to the associated accruing penalties, we have
agreed to pay Barron Partners an amount in cash equal to $100,000 in two equal
installments of $50,000 between April 22, 2005 and May 22, 2005, which amounts
have been paid, with no additional penalty obligations accruing until June 21,
2005. Although there can be no assurance, management believes that the prospects
for our being able to cause the registration statement to be declared effective
by June 21, 2005 are good. If we are unsuccessful in causing the registration
statement to be declared effective by the SEC by June 21, 2005, however, and
depending on how long any such delay in causing effectiveness to be declared by
the SEC continues thereafter, it is likely to have a very material adverse
effect on our business, our financial condition, including liquidity and
profitability, and our results of operations.
 **NOTE
19 - 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
20 - SUBSEQUENT EVENTS**
  Subsequent
to December 31, 2004, we restored a stale check (outstanding more than six
months) in the amount of $23,333 to unrestricted cash. The stale check was
issued to a corporation as payment in full of a note payable (see Note 6).
Communication with the payee resulted in conversion of the note into 466,666
shares of common stock. The transaction has been reflected in unrestricted cash,
common stock and paid-in capital at December 31, 2004. We have stopped payment
on the check.
  F-27
 Table of Contents
 
 As of the
date of this filing, the registration statement filed on November 22, 2004 had
not yet been declared effective. Pursuant to an agreement reached with the New
York based private investment partnership in relation to the associated accruing
penalties, we have agreed to pay the New York based private investment
partnership an amount in cash equal to $100,000 in two equal installments of
$50,000 between April 22, 2005 and May 22, 2005, with no additional penalty
obligations accruing for at least 60 days from April 22, 2005. Although there
can be no assurance, management believes that the prospects for our being able
to cause the registration statement to be declared effective by June 21, 2005
are good. If we are unsuccessful in causing the registration statement to be
declared effective by the SEC by June 21, 2005, however, and depending on how
long any such delay in causing effectiveness to be declared by the SEC continues
thereafter, it is likely to have a very material adverse effect on our business,
our financial condition, including liquidity and profitability, and our results
of operations.
 F-28
 Table of Contents


****


**ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.**




Not
Applicable.


****


**ITEM 8A. CONTROLS AND PROCEDURES**




(a) Formation
of Disclosure Controls and Procedures Officer Committee





Our
Disclosure Controls and Procedures Officer Committee (the “Disclosure Policy
Committee”) was formed in September 2002 and reports directly to our Chief
Executive Officer and Chief Financial Officer. The Disclosure Policy Committee
has implemented disclosure controls and procedures that meet the standards
established by Rule 13a-15 of the Exchange Act. These controls and procedures
have been reviewed and adopted by the audit committee of our board of
directors.

**Disclosure
Controls and Procedures**
 
 The
Disclosure Policy Committee is primarily responsible for establishing and
maintaining disclosure controls and procedures designed to ensure that the
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported in a timely manner as specified in the rules and forms set forth by
the United States SEC. These controls and procedures are designed to ensure that
the information required to be disclosed in our reports is accumulated and
communicated to our management, including our principal executive and principal
financial officers, or other persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
 
 **Internal Control over
Financial Reporting**
 
 The
Disclosure Policy Committee is also responsible for establishing and maintaining
our internal controls over financial reporting. These controls are effectuated
by our board of directors, management and other company personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of our financial statements for external purposes in accordance
with Generally Accepted Accounting Principles. These internal controls and
procedures pertain to: (i) the maintenance of reasonably detailed records that
accurately and fairly reflect transactions with respect to and the disposition
of our assets; (ii) provide reasonable assurance that transactions are recorded
as necessary so as to permit the preparation of financial statements in
accordance with Generally Accepted Accounting Principles; (iii) provide
reasonable assurance that receipts and expenditures are being made in accordance
with the authorization of our board of directors and management; and (iv)
provide reasonable assurance regarding the prevention or timely detection of the
unauthorized acquisition, use or disposition of our assets, that could have a
material effect on our financial statements.
  (b) Evaluation of
Disclosure Controls and Procedures and Annual Report on Internal Control over
Financial Reporting
  The
Disclosure Policy Committee meets quarterly within one week of the last day of
the period in which a given report is due. Members provide information that is
documented in the Quarterly Control and Procedures Report for the period in
which a quarterly 10-QSB or annual 10-KSB report is due. This report contains
attestations and documentation in regard to the following:
  -41-
 Table of Contents
 
 ·
    The
      fact that internal controls have been reviewed as
      of the end of the period covered by a given
      report;·
    Any
      concerns regarding weaknesses in internal
      control;·
    Any
      concerns relating to events that may require
    disclosure;·
    Any
      concerns relating to internal
    fraud/defalcation;·
    Potential
      material losses;·
    New
      off-balance sheet arrangements;·
    Material
      amounts not reflected on the general
  ledger.
 The
Quarterly Control and Procedures Report is completed, signed and presented to
the CEO and CFO prior to completion of the first draft of each 10-QSB and
10-KSB. Because material issues may occur between regularly scheduled quarterly
meetings, this report is to be generated by the disclosure policy appropriate
officers at anytime warranted. The CEO and CFO will consult with our Disclosure
Policy Committee to determine any action that is necessary.
 
 Our CEO
and CFO have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) as of the end of the fiscal quarter covered by this
annual report on Form 10-KSB/A. Based on this evaluation, our CEO and CFO have
concluded that these disclosure controls and procedures are effective and
designed to ensure that the information required to be disclosed in our reports
filed or submitted under the Exchange, is recorded, processed, summarized
and reported within the requisite time periods.
 
 Our CEO
and CFO have evaluated the effectiveness of the design and operation of our
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) as of the end of the fiscal year covered by this annual
report on Form 10-KSB/A. Based on this evaluation, our CEO and CFO have
concluded that these internal controls over financial reporting are effective
and provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external purposes
in accordance with Generally Accepted Accounting Principles.
 
 During
the course of their evaluation our CEO and CFO did not discover any fraud
involving management or any other personnel who play a significant role in our
disclosure controls and procedures or internal controls over financial
reporting. Furthermore, because there were no significant deficiencies and/or
material weaknesses discovered no remedial measures were necessary or taken
during the period covered by this report to correct any such
deficiencies.
 
 (c) Changes
in Internal Control over Financial Reporting
 
 No
changes in our disclosure controls and procedures, internal controls over
financial reporting or other factors have occurred during the fiscal quarter
covered by this report that would materially affect or be reasonably likely to
materially affect our disclosure controls and procedures or internal controls
over financial reporting.


**ITEM 8B. OTHER INFORMATION**


None.


-42-
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****


**PART III**





**ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(****a****)
OF THE EXCHANGE ACT.**





Our
directors and executive officers and their ages as of June 7, 2005 were as
follows:




Name
    
    Age
    
    PositionSteven
      Malone
    
    38
    
    Director,
      Chairman of the Board and PresidentHenry
      M. Washington, Ph.D.
    
    61
    
    DirectorJohn
      A. Kuehne, CA
    
    48
    
    DirectorKirk
      R. Rowland, CPA
    
    45
    
    Director
      and Chief Financial OfficerWilliam
      Terrill
    
    48
    
    Chief
      Technology OfficerBrittian
      Edwards
    
    42
    
    Vice
      President, CBA Sales and LicensingChad
      Grosse-Rhode
    
    35
    
    Vice
      President, Sales and Marketing


****


**Steven
Malone - Chairman of the Board of Directors, President and Chief Executive
Officer**


Mr.
Malone has served as our President and Chief Executive Officer since March 2001
and as a director and Chairman of the Board since February 2002. Between July
2000 and March 2001, Mr. Malone was Senior Vice President and between June 1999
and July 2000 he was a Vice President. Mr. Malone possesses over seventeen years
of experience in the computer industry, with the last eleven focused on software
sales. As a National Account Manager from 1992 to 1996 for Grolier Interactive,
he was responsible for their largest retail and distribution accounts. As
Director of Corporate Sales from 1996 to 1998 for Software Publishing
Corporation, he was responsible for the on-going sales growth of premiere
corporate products, such as the award winning Harvard Graphics, as well as the
introduction of several new products to the corporate marketplace. As Director
of Sales from 1998 to 1999 for InfoUSA, he was responsible for sales and
marketing of InfoUSA’s products to retail, distribution, OEM and corporate
accounts.
 ****
 **Henry M.
Washington, Ph.D. - Director**
  Dr.
Washington has served as one of our directors since December 2000. He is also
presently President of Wren Enterprises Corporation, a position that he has held
since January 2005 . Wren
Enterprises is a private manufacturing solutions company working with
automotive, non-automotive, agricultural markets, utilities and government
agencies providing plastic, metal and fabrication. Prior to his position with
Wren, Dr. Washington served as the interim President for Jamestown Plastic
Molders Corporation from January 2001 to April 2004. During the year of 2000,
Dr. Washington served as Managing Director of Rilas & Rogers, LLC, an
international consulting firm located in Detroit. Dr. Washington has held
short-term assignments with the U.S. Department of Commerce, where he was
Executive Director from 1995 to 1998 of the
Department’s Minority Business Opportunity Committee. He currently serves on
several national organizations including the American Association of Christian
Counselors, The Black Caucus International Think Tank, and the International
Trade and Development Organization dealing with global security issues. Dr.
Washington holds a Bachelor of Management and Metaphysics degree, a Masters of
Metaphysics and Theology degree, and a Doctorate degree in Metaphysical
Counseling, in each case from the University of Metaphysics, and in each case
which are accredited by The International Metaphysical Ministry for use by its
Ministry and for membership in The American Metaphysical Doctors Association.


-43-
 Table of Contents
 ****
**John A.
Kuehne, CA - Director**

Mr.
Kuehne has served as one of our directors since December 2000. He is also
currently a management consultant and the President of SmallCap Corporate
Partners Inc., (www.smallcap.ca), a
corporate finance and investor communications advisory firm for microcap public
companies. He has held this position since August 2003. Prior to SmallCap, Mr.
Kuehne served as a management consultant with Alliance Corporate Services Inc.
from July 2000 through to June 2003. Mr. Kuehne worked in finance and accounting
for Deloitte & Touche for eight years. He also has industry experience,
including over seven years with Doman Industries Limited (1990 to 1999), a large
private Canadian forest products company, where he eventually became Chief
Financial Officer. As the CFO of Doman Industries, Mr. Kuehne gained practical
experience in corporate finance and mergers and acquisitions, completing a US
$125 million senior note issue through Bear Stearns and the $140 million
acquisition of Pacific Forest Products. Mr. Kuehne holds a Bachelor of Commerce
degree from the University of Alberta (1984) and a Masters of Management from
the J.L.Kellogg Graduate School of Management at Northwestern University (1990).
From June 2000 to May 2004 he served as a director of Prospector Consolidated
Resources Inc., a Canadian public company. From January 2003 to November 2004 he
served as a director of Beau Pre Explorations Ltd., also a Canadian public
company. Mr. Kuehne qualified as a Canadian Chartered Accountant in 1983 and as
an American Certified Public Accountant in 1985.
****
**Kirk R.
Rowland, CPA - Chief Financial Officer**

Mr.
Rowland has served as our Chief Financial Officer and as one of
our directors since April 2002. He served as our Vice President of Finance
from March 2001 to April 2002, and as our Director of Finance from December 1999
through March 2001. Mr. Rowland has over seventeen years of experience in public
accounting working in a multitude of industries, including insurance,
manufacturing, and agriculture. Most recently, and from 1992 to 1999 he was a
partner in Manning & Associates, P.C. a local Nebraska accounting firm. From
1984 to 1988, Mr. Rowland was a Senior Staff Accountant with KMG Main Hurdman
(now KPMG), an international accounting firm, and from 1988 to 1992 he was an
Audit Supervisor with Sommer, Magnuson, & Dawson, P.C.
****
**William
Terrill - Chief Technology Officer**

Mr.
Terrill rejoined us in July 2002 as our Chief Technology Officer after having
been involved with us from July 1999 to July 2000. He has over 25 years of
experience managing software divisions and technology efforts for us, The
Learning Company, Mindscape, and The Software Toolworks. As Vice President of
the Parsons Church Division for The Learning Company, from January 1999 to July
1999, Mr. Terrill managed a 30% annual revenue increase and shared
responsibilities in the transaction that resulted in our acquiring that
division. Mr. Terrill was the Senior Vice President Reference Products Division
for Mindscape from 1989 to 1995 managing revenues exceeding $14 million. He has
extensive experience managing international software development teams in China,
Singapore, United Kingdom, India, and Russia. Mr. Terrill has experience with
joint ventures, spin-offs, mergers, IPOs, and corporate acquisitions. In
addition, Mr. Terrill has lead software product marketing teams and
content/media acquisition efforts for over ten years. As a
consultant from 1996 to 1998, Mr. Terrill has extensive experience leading
large-scale product development and information technology efforts for Navistar,
Nalco Chemical, American Express, Motorola, and IBM Global Services. From July
2000 to July 2002, Mr. Terrill served as the IT Integration Program Manager for
Blue Diamond Joint Venture between Ford Motor Company and International Truck
and Engine Corporation.
****


-44-
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****


**Brittian
Edwards - Vice President of CBA Sales and Licensing**




Mr.
Edwards has served as our Vice President of CBA Sales and Licensing since July
2004. Mr. Edwards served as our Vice President of Sales from April 2002 to July
2004 and director of Christian Booksellers Association Sales from July 1999 to
April 2002. Mr. Edwards has been in the Christian Booksellers
Association marketplace for more than 17 years. He began his career in 1988
with LifeWay Christian Resources as LifeWay Christian Stores retail manager. He
then worked successfully for Genesis Marketing Group from 1994 to 1995 as a
Sales Manager for Texas, Oklahoma, Louisiana and New Mexico. From there he
served as a Product Manager for the largest Christian distributor, Spring Arbor,
which is now owned by Ingram Book Group. He left Spring Arbor as National Sales
Manager in 1988 to become the National Sales Manager for Parsons Technology,
then owned by Broderbund.





**Chad
Grosse-Rhode - Vice President of Sales and Marketing**




Mr.
Grosse-Rhode joined us in August 2004 as our Vice President of Sales and
Marketing. Mr. Grosse-Rhode was most recently with Summitsoft Corporation,
(www.summisoftcorp.com), from July 2003 to July 2004, where he served as the
Vice President of Sales and Marketing. Summitsoft produces a full line of small
business software products, which are available in both PC and
Macintosh ® platforms and are sold in most major secular retail outlets. Prior to
Summitsoft, Mr. Grosse-Rhode was General Manager of NewLeadsUSA from April 1995
to June 2003, which is a subsidiary of InfoUSA. In this role, Mr. Grosse-Rhode
managed the compilation, production, marketing and sales of multiple direct
marketing databases. Mr. Grosse-Rhode has over 10 years of senior management
experience in both sales and marketing.




**Board of Directors
Committees**





There are
currently two standing committees comprised of members of our board of
directors. These include the audit committee and the compensation
committee.

Since
December 2000, we have had an audit committee. The current members of our audit
committee include John A. Kuehne and Dr. Henry M. Washington. We currently have
one member, John A. Kuehne, who is a “financial expert” (as defined in
Regulation 228.401(e)(1)(i)(A) of Regulation S-B) serving on our audit
committee. Mr. Kuehne and Dr. Washington both qualify as “independent” directors
under Item 7(d)(3)(iv) of Schedule 14A of the Securities Exchange Act of
1934.

Since
July 2003, there have been two members on our board of directors standing
compensation committee. The current members of our compensation committee
include Dr. Henry M. Washington and John A. Kuehne.


The fact
that we currently have four members on our board of directors, and two members
on each of our board of directors’ audit and compensation committees, could
result in a tie vote on company matters, including those involving highly
material corporate governance issues. We do not currently have any duly adopted
resolution procedures in place that would provide a means for resolving any
stalemate that might occur in this regard, but are currently in the process of
considering potential alternative procedures in order to be prepared for having
to face such a potential situation.
  **Disclosure Policy
Committee**




Since
September 2002, we have had a Disclosure Controls and Procedure
Officer Committee (the “Disclosure Policy Committee). The current members of the
Disclosure Policy Committee include Steven Malone, John A. Kuehne, and Kirk R.
Rowland. The Disclosure Policy Committee has implemented disclosure controls and
procedures that meet the standards established by Rule 13a-15 of the Securities
Exchange Act.


-45-
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****


**Code of
Ethics**


We have
adopted the Code of Ethics attached as Exhibit 14.1 to this Form 10-KSB/A
for our senior financial officers and the principal executive
officer.




**Compliance with
Section 16(a)**





Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than ten percent of a registered class of our equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of our common stock and other equity securities of ours.
Officers, directors and greater than ten percent stockholders are required by
the SEC’s regulations to furnish us with copies of all Section 16(a) forms they
filed.


The
following table sets for the compliance reporting under Section 16(a) during the
last fiscal year.





Number
      of Late
      Reports
    
    Number
      of
      Transactions
      Not
      Timely
      Reported
    
    Failure
      to
      FileHenry
      M. Washington
    1
    
    1
    
    ---William
      Terrill
    1
    
    1
    
    ---Barron
      Partners, LP
    ---
    
    ---
    
    2




**ITEM 10. EXECUTIVE COMPENSATION.**


****
 **SUMMARY
COMPENSATION TABLE**





The
following table sets forth the total compensation paid to each of our executive
officers who earned compensation of $100,000 or more during any such year.
Steven Malone has served as our President and Chief Executive Officer since
March 2001. William Terrill has served as our Chief Technology Officer since
July 2002. Kirk R. Rowland has served as our Chief Financial Officer and
director since April 2002. No other individuals employed by us earned a salary
and bonus in excess of $100,000 during 2004.


Long
      Term CompensationAnnual
      Compensation
    
    AwardsRestricted
    
    SecuritiesStock
    
    UnderlyingName
      and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Awards
    
    Options/SARs
      (#)Steven
      Malone,
    
    2004
    
    $150,000
    
    $22,192
    
    -0-
    
    -0-President
      and Chief Executive
    
    2003
    
    $150,000
    
    $18,079
    
    -0-
    
    -0-Officer
    
    2002
    
    $150,000
    
    $2,203
    
    $37,306
    
    -0-William
      Terrill
    
    2004
    
    $150,000
    
    $22,192
    
    -0-
    
    -0-Chief
      Technology Officer
    
    2003
    
    $150,000
    
    $18,079
    
    $14,536
    
    500,0002002
    
    $72,115
    
    $2,203
    
    -0-
    
    500,000Kirk
      R. Rowland
    
    2004
    
    $108,846
    
    $22,192
    
    -0-
    
    -0-Chief
      Financial Officer
    
    2003
    
    $82,306
    
    $18,079
    
    -0-
    
    -0-2002
    
    $80,000
    
    -0-
    
    $31,807
    
    -0-


****


-46-
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****


**INFORMATION
CONCERNING STOCK OPTIONS**





Our Stock
Incentive Plan, adopted in 1999, authorizes the issuance of various forms of
stock-based awards including incentive and nonqualified stock options, stock
appreciation rights attached to stock options, and restricted stock awards to
our directors, officers and other key employees. In accordance with the terms of
the Stock Incentive Plan, stock options are granted at an exercise price as
determined by our board of directors at the time any such option is granted but
which may not be less than the par value of our common shares ($0.001).
 
 We did
not grant stock options during the fiscal year ended December 31, 2004. No
executive exercised any stock options during the fiscal year 2004.
  **Option/SAR
Grants in Last Fiscal Year**





Name
    
    Number
      of Securities
      Underlying
      Options/SARs
      Granted
      (#)
    
    Percent
      of Total
      Options/SARs
      Granted to
      Employees
      in Fiscal Year
    
    Exercise
      or
      Base
      Price
      ($/Sh)
    
    Expiration
      DateSteven
      Malone
    
    -0-
    
    -0-
    
    -0-
    
    N/AWilliam
      Terrill
    
    -0-
    
    -0-
    
    -0-
    
    N/AKirk
      R. Rowland
    
    -0-
    
    -0-
    
    -0-
    
    N/A





The
following table sets forth the number of stock options/SARs held by the
executive officers named in the Summary Compensation Table as of December 31,
2004 and the value of unexercised “in-the-money” options/SARs held which
represents the positive difference between the exercise price and the market
price at fiscal year end. No such executive exercised any options/SARs during
the fiscal year 2004.


****


**Aggregated
Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR** **Values**





Name
    
    Shares
      Acquired
      on
      Exercise
      (#)
    
    Value
      Realized
      ($)
    
    Number
      of Unexercised
      Options/SARs
      at
      Fiscal
      Year End (#)
    
    Value
      of Unexercised
      “In-the-Money”
      Options/
      SARs
      at Fiscal Year End ($)Steven
      Malone
    
    -0-
    
    -0-
    
    250,000
    
    -0-William
      Terrill
    
    -0-
    
    -0-
    
    1,000,000
    
    $15,000Kirk
      R. Rowland
    
    -0-
    
    -0-
    
    150,000
    
    -0-


****


-47-
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 ****
 **DIRECTOR
COMPENSATION**





Pursuant
to authority granted under our Article III, Section 13 of our bylaws,
non-officer directors are entitled to such compensation as our board of
directors shall from time to time determine. On July 25, 2003, we resolved to
issue each of our outside directors 300,000 shares of common stock valued at
$0.045 per share in lieu of cash and meeting fees, for the period April 1, 2002
through June 30, 2003. On June 4, 2004, we resolved to issue our outside
directors a total of 324,074 shares of common stock valued at $0.081 per share
in lieu of cash and meeting fees, for the period July 1, 2003 through August 31,
2004. These shares were issued on September 9, 2004. We have
accrued $7,500 for our outside directors’ fees, for the period September 1, 2004
through December 31, 2004.


****


**EMPLOYMENT
AGREEMENTS**




Mr.
Malone is employed pursuant to a three-year employment agreement, which
commenced on July 25, 2003. The agreement provides for a base annual salary
equal to $150,000 and an annual bonus equal to 1% of our net income. In the
event Mr. Malone is terminated by us, other than for cause, we
are required to pay him his then base salary until the later of (i) the
expiration of the employment agreement or (ii) one year. Mr. Malone has agreed
to refrain from competing with us for a period of one year following the
termination of his employment.





Mr.
Terrill is employed pursuant to a three-year employment agreement, which
commenced on June 7, 2002. The agreement provides for a base annual salary equal
to $150,000, an annual bonus equal to 1% of our net income, 500,000 stock
options upon his start date at an exercise price of $0.05 per share, and an
additional 500,000 stock options upon the one year anniversary of his start date
based on performance criteria outlined in a separate agreement. The agreement
also included a signing cash bonus of $10,000, which was converted on July 25,
2003 into 250,000 shares of common stock at the market price of $0.04 per share,
the value on the date the settlement was accepted. In the event Mr. Terrill is
terminated by us, other than for cause, we are required to pay
him his then base salary until the later of (i) the expiration of the employment
agreement or (ii) one year. Mr. Terrill has agreed to refrain from competing
with us for a period of one year following the termination of his
employment.





Mr.
Rowland is employed pursuant to a two-year employment agreement, which commenced
on July 25, 2003. The agreement provides for a base annual salary equal to
$110,000 and an annual bonus equal to 1% of our net income. In the event Mr.
Rowland is terminated by us, other than for cause, we are required to
pay him his then base salary until the later of (i) the expiration of the
employment agreement or (ii) one year. Mr. Rowland has agreed to refrain from
competing with us for a period of one year following the termination of his
employment.




**ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS****.**




The
tables below set forth information regarding the beneficial ownership of our
common stock as of June 7, 2005. The information in these tables provides
the ownership information for:





·
    each
      person known by us to be the beneficial owner of more than 5% of our
      common stock;·
    each
      of our directors and executive officers;
      and·
    all
      of our directors and executive officers as a
      group.
 
 -48-
 Table of Contents
 
 Beneficial
ownership has been determined in accordance with the rules and regulations of
the SEC and includes voting or investment power with respect to our common stock
and those rights to acquire additional shares within sixty days. Unless
otherwise indicated, the persons named in the table below have sole voting and
investment power with respect to the number of shares of common stock indicated
as beneficially owned by them, except to the extent such power may be shared
with a spouse. Common stock beneficially owned and percentage ownership are
based on 71,769,855 shares of common stock currently outstanding (reflects a
1-for-50 reverse stock-split of our common stock that occurred in 1997 and a
1-for-20 reverse stock-split of our common stock that occurred on March 18,
1998) and 23,150,000 additional shares potentially acquired within sixty days.
The address of each person listed is in care of Findex.com, Inc., 11204
Davenport Street, Suite 100, Omaha, Nebraska 68154.


**Name
      of Beneficial Owner**
    
    **Amount
      and Nature of Beneficial Owner**
    
    **Percent
      of Class**Barron
      Partners, LP (1)
    
    43,750,000
    
    61.0%





(1)
    Consists
      of warrants to acquire up to 21,875,000 shares of common stock and
      21,875,000 shares of common stock directly
owned.




**Name
      of Beneficial Owner**
    
    **Amount
      and Nature of Beneficial Owner**
    
    **Percent
      of Class**Steven
      Malone (1)
    
    2,143,111
    
    3.0%Henry
      M. Washington (2)
    
    1,583,025
    
    2.2%John
      A. Kuehne (3)
    
    1,691,849
    
    2.4%Kirk
      R. Rowland (4)
    
    1,819,111
    
    2.5%William
      Terrill (5)
    
    1,751,127
    
    2.4%All
      officers and directors
      as
      a group (5 persons)
    
    8,988,223
    
    12.5%





(1)
    Consists
      of stock options to acquire up to 250,000 shares of common stock, all of
      which are presently exercisable, 1,719,111 shares of common stock directly
      owned, and stock options to acquire up to 50,000 shares of common stock
      all of which are presently exercisable and 124,000 shares of common stock
      indirectly owned through spouse.





(2)
    Consists
      of stock options to acquire up to 175,000 shares of common stock, all of
      which are presently exercisable and 1,408,025 shares of common stock
      directly owned.





(3)
    Consists
      of stock options to acquire up to 175,000 shares of common stock, all of
      which are presently exercisable and 1,516,849 shares of common stock
      directly owned.





(4)
    Consists
      of stock options to acquire up to 150,000 shares of common stock, all of
      which are presently exercisable and 1,669,111 shares of common stock
      directly owned.





(5)
    Consists
      of stock options to acquire up to 1,000,000 shares of common stock, all of
      which are presently exercisable and 751,127 shares of common stock
      directly owned.




-49-
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****


**ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**





On July
19, 2004, we entered into a certain Stock Purchase Agreement pursuant to which
we agreed to issue and sell 21,875,000 restricted shares of our common stock to
Barron Partners, LP, a New York based institutional investor, at a price of
$0.08 per share. Under the terms of transaction, Barron Partners, LP received
two of our common stock purchase warrants. The first warrant entitles
the holder, for a period of up to five years, to purchase up to 10,937,500
common shares at a price of $0.18 per share.  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.

As part
of the financing transaction, we also entered into a certain Registration Rights
Agreement with Barron Partners, LP pursuant to which we became committed to
registering all of the shares issued as part of such transaction, including
those issuable under the warrants. On November 22, 2004, we filed a
registration statement on Form SB-2 covering the shares issued to Barron
Partners, as well as the shares underlying the warrants issued to Barron
Partners. Under the terms of the Registration Rights Agreement, as amended, we
had until April 22, 2005 to cause such registration statement to be declared
effective by the SEC. In accordance with the terms of the Registration Rights
Agreement, any delays in meeting this obligation subjected us to liability
to Barron Partners, LP in an amount equal to $1,726 per day for the duration of
any such delay.  As
of the date of this filing, we had accrued a total of $100,000 in
registration rights penalties for not causing the registration statement to
be declared effective by the SEC.
As of the
date hereof, Barron Partners, LP owns 45.43% of our outstanding common stock
and, subject to the restrictions contained in Article VII, subsection B of our
articles of incorporation, controls the vote associated with such
shares.


**ITEM 13. EXHIBITS.**




**No.**
    **Description
      of Exhibit**2.1
    Share
      Exchange Agreement between Findex.com, Inc. and the stockholders of Reagan
      Holdings, Inc. dated March 7, 2000, incorporated by reference to Exhibit
      2.1 on Form 8-K filed March 15, 2000.3.1(i)
    Articles
      of Incorporation of Findex.com, Inc., incorporated by reference to Exhibit
      3.1 on Form 8-K filed March 15, 2000.3.1(ii)
    Amendment
      to Articles of Incorporation of Findex.com, Inc. dated November 12, 2004
      incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed November
      12, 2004.
 3.2
    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.
  -50-
 Table of Contents
  10.4
    Employment
      Agreement between Findex.com, Inc. and Steven Malone dated July 25, 2003,
      incorporated by reference to Exhibit 10.4 on Form 10-KSB/A filed May 13,
      2004.10.5
    Employment
      Agreement between Findex.com, Inc. and Kirk Rowland dated July 25, 2003,
      incorporated by reference to Exhibit 10.5 on Form 10-KSB/A filed May 13,
      2004.10.6
    Employment
      Agreement between Findex.com, Inc. and William Terrill dated June 7, 2002,
      incorporated by reference to Exhibit 10.6 on Form 10-KSB/A filed May 13,
      2004.10.7
    Restricted
      Stock Compensation Agreement between Findex.com, Inc. and John A. Kuehne
      dated July 25, 2003, incorporated by reference to Exhibit 10.7 on Form
      10-KSB/A filed May 13, 2004.10.8
    Restricted
      Stock Compensation Agreement between Findex.com, Inc. and Henry M.
      Washington dated July 25, 2003, incorporated by reference to Exhibit 10.8
      on Form 10-KSB/A filed May 13, 2004.10.9
    Restricted
      Stock Compensation Agreement between Findex.com, Inc. and William Terrill
      dated July 25, 2003, incorporated by reference to Exhibit 10.9 on Form
      10-KSB/A filed May 13, 2004.10.10
    Stock
      Purchase Agreement, including the form of warrant agreement, between
      Findex.com, Inc. and Barron Partners, LP dated July 19, 2004, incorporated
      by reference to Exhibit 10.1 on Form 8-K filed July 28,
    2004.10.11
    Amendment
      No. 1 To Barron Partners, LP Stock Purchase Agreement dated September 30,
      2004, incorporated by reference to Exhibit 10.3 on Form 8-K filed October
      6, 2004.10.12
    Registration
      Rights Agreement between Findex.com, Inc. and Barron Partners, LP dated
      July 26, 2004, incorporated by reference to Exhibit 10.2 on Form 8-K filed
      July 28, 2004.10.13
    Waiver
      certificate between Findex.com, Inc. and Barron Partners, LP dated
      September 16, 2004, incorporated by reference to Exhibit 10.4 on Form 8-K
      filed October 6, 2004.10.14
    Settlement
      Agreement between Findex.com, Inc., The Zondervan Corporation, Mattel,
      Inc., TLC Multimedia, Inc., and Riverdeep, Inc. dated October 20, 2003.
      FILED HEREWITH.14.1
    Code
      of Ethics, adopted by Board of Directors June 7, 2005. FILED
      HEREWITH.21.1
    Share
      Exchange Agreement between Findex.com, Inc. and the stockholders of Reagan
      Holdings Inc., dated March 7, 2000, incorporated by reference to Exhibit
      2.1 on Form 8-K filed March 15, 2000.31.1
    Certification
      of Findex.com, Inc. Chief Executive Officer, Steven Malone, required by
      Rule 13a-14(a) or Rule 15d-14(a), and dated June 7, 2005. FILED
      HEREWITH.31.2
    Certification
      of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland, required by
      Rule 13a-14(a) or Rule 15d-14(a), and dated June 7, 2005. FILED
      HEREWITH.
 32.1
    Certification
      of Findex.com, Inc. Chief Executive Officer, Steven Malone, required by
      Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title
      18 of the United States Code (18 U.S.C. 1350), and dated June 7,
      2005. FILED HEREWITH.32.2
    Certification
      of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland, required by
      Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title
      18 of the United States Code (18 U.S.C. 1350), and dated June 7,
      2005. FILED HEREWITH.





-51-
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**ITEM 14.PRINCIPAL
ACCOUNTANT FEES AND SERVICES** .





Summarized
below is the aggregate amount of various professional fees billed by our
principal accountants with respect to our last two fiscal years:





**2004**
    
    2003Audit
      fees
    
    $14,390
    
    $14,237Audit-related
      fees
    
    $---
    
    $---Tax
      fees
    
    $---
    
    $---All
      other fees
    
    $---
    
    $---All
      other fees, including tax consultation and preparation
    
    $---
    
    $---




All audit
fees are approved by our audit committee and board of directors. Chisholm,
Bierwolf & Nilson, LLC does not
provide any non-audit services to us.




**Signatures**





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





**FINDEX.COM,
      INC.**By:
      /s/ Steven MaloneSteven
      MalonePresident
      and Chief Executive Officer




Date: June
7, 2005





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
    
    June
      7, 2005Steven
      Malone
    
    Executive
      Officer (principal executive officer)/s/
      John A. Kuehne
    
    Director
    
    June
      7, 2005John
      A. Kuehne/s/
      Henry M. Washington
    
    Director
    
    June
      7, 2005Henry
      M. Washington/s/
      Kirk R. Rowland
    
    Director
      and Chief Financial Officer
    
    June
      7, 2005Kirk
      R. Rowland
    
    (principal
      financial and accounting officer)




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