================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-QSB/A
                                   AMENDMENT 1


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

         For the quarterly period ended         June 30, 1999
                                        -------------------------------------


[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
         transition period from ______________ to ______________


         Commission file number      033-23138-D
                                ------------------------



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


               Delaware                                 87-0456766
---------------------------------------     -----------------------------------
   (State or other jurisdiction of                    (IRS Employer
    incorporation or organization)                  Identification No.)


             3101 North Hemlock Circle, Broken Arrow, Oklahoma 74012
-------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (918) 362-3600
-------------------------------------------------------------------------------
                           (Issuer's telephone number)


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


================================================================================
<PAGE>

The Company is amending its 10-QSB for the quarter ending June 30, 1999 as a
result of recently discovering two agreements for consulting services, one dated
September 20, 1998, which will have an impact on the Company's financial
statements and a second dated February 1, 1999, which will not affect the
Company's financial statements. Additionally, the Company is amending its 10-QSB
to include a "Statement of Cash Flows For the Three Months Ended June 30, 1998"
and "sales of unregistered securities". The Company is also amending its
financial statements to reflect adjustments to the quarterly financial
information as a result of the audit of the March 31, 2000, financial
statements.

Part I. Financial Information - Items 1 and 2 and Part II. Other Information -
Items 2 and 6 have been amended.


As of June 30, 1999, 9,935,230 shares of Heartsoft, Inc. Common Stock, $0.0005
Par value, were outstanding.

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



























                                       2
<PAGE>

                       HEARTSOFT, INC. - QUARTERLY REPORT
                                TABLE OF CONTENTS





     PART I.           FINANCIAL INFORMATION                                PAGE

     Item 1:  Balance Sheet as of June 30, 1999                               4

              Statements of Operations - Three Months Ending
              June 30, 1999 and June 30, 1998                                 5

              Statements of Cash Flows - Three Months Ending
              June 30, 1999 and June 30, 1998                                 6

              Note to Financial Statements                                    7


     Item 2:  Management's Discussion and Analysis or Plan
              of Operations                                                   7



     PART II.          OTHER INFORMATION


     Item 2:  Changes in Securities                                          13

     Item 6:  Exhibits and Reports on Form 8-K                               14


              Signature Page                                                 14




















                                       3
<PAGE>
PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                                  BALANCE SHEET
                                  -------------
                               AS OF JUNE 30, 1999
                                   (unaudited)
ASSETS
------
CURRENT ASSETS
    Cash                                                              4,177
    Accounts Receivable                                              66,228
    Inventories                                                      33,187
    Prepaid Expenses                                                 12,319
                                                                -----------
Total Current Assets                                                115,911

Plant, Property and Equipment
    Plant, Property and Equipment                                   148,433
    Accumulated Depreciation                                        (97,081)
                                                                -----------
Total Plant, Property and Equipment                                  51,352

OTHER ASSETS
    Developed Software, net                                         627,429
    Other                                                             2,689
                                                                -----------
Total Other Assets                                                  630,118
                                                                -----------
Total Assets                                                        797,381
                                                                ===========
LIABILITIES
-----------
CURRENT LIABILITIES
    Accounts Payable                                                161,112
    Accrued Liabilities (See Note 1)                                149,811
    Current Portion - long-term Debt                                283,806
                                                                -----------
Total Current Liabilities                                           594,729

LONG TERM LIABILITIES
    Loans Payable - Long-term                                       213,146
                                                                -----------
Total Liabilities                                                   807,875

EQUITY
    Preferred Stock                                                   1,140
    Common Stock                                                      4,968
    Additional Paid in Capital                                    3,417,249
    Retained Earnings                                            (3,433,851)
                                                                -----------
        Total Shareholders' Equity                                  (10,494)
                                                                -----------
Total Liabilities and shareholders' Equity                          797,381
                                                                ===========


                                       4
<PAGE>
                            STATEMENTS OF OPERATIONS
                            ------------------------
                               THREE MONTHS ENDED
                                   (unaudited)

                                                   30-Jun-99       30-Jun-98
                                                  -----------     -----------
Net Sales                                             117,800         144,936

Costs and expenses:
    Costs of production                                20,783          33,352
    Sales and Marketing                                54,992          69,632
    General and administrative                        152,258         239,291
    Depreciation and amortization                      29,286         119,667
                                                  -----------     -----------
Total operating expenses                              257,319         461,942
                                                  -----------     -----------
Operating Loss                                       (139,519)       (317,006)

Other income and (expenses)
    Gain on sale of interest in software library            0         116,941
    Interest expense                                  (12,118)        (35,972)
    Other, net                                           (704)        (59,374)
                                                  -----------     -----------
Loss before income taxes                             (152,341)       (295,411)

Income taxes                                                -               -
                                                  -----------     -----------
Net loss                                             (152,341)       (295,411)
                                                  ===========     ===========
Net loss per common share - basic and diluted           (0.02)          (0.04)

                                       5
<PAGE>
                            STATEMENTS OF CASH FLOWS
                            ------------------------
                           THREE MONTHS ENDED JUNE 30
                                   (unaudited)


                                                         1999          1998
                                                     ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                             $   (152,341) $   (295,411)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
Depreciation and amortization                              29,286       119,667
Changes in:
        Accounts receivable                               (19,630)      138,123
        Inventories                                       (12,836)      (12,766)
        Other assets                                        2,280         4,710
        Accounts payable                                  (32,635)        1,692
        Accrued expenses                                    6,108        55,728
                                                     ------------  ------------

Net cash provided by (used in) operating activities      (179,768)       11,743

CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software development costs                    (32,378)      (49,525)
Proceeds from the sale of equipment                             -        47,783
Payments for the purchase of equipment                     (3,205)            -
                                                     ------------  ------------

Net cash used in investing activities                     (35,583)       (1,742)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt                             79,500        86,000
Principal payments of debt                                (77,070)     (240,240)
Proceeds from issuance of common stock                    175,509       143,022
                                                     ------------  ------------

Net cash provided by (used in) financing activities       177,939       (11,218)
                                                     ------------  ------------

Net decrease in cash                                      (37,412)       (1,217)
Cash at beginning of period                                41,589         4,411
                                                     ------------  ------------

Cash at end of period                                     $ 4,177       $ 3,194
                                                     ============  ============







                                       6
<PAGE>

ITEM 1. NOTE TO FINANCIAL STATEMENTS

Interim Financial Statements

Management has compiled the interim financial statements for the period ending
June 30, 1999 in accordance with the standards set forth in generally accepted
accounting principles. In the opinion of management, all adjustments required to
make a fair representation of the Company have been included. This compilation
has not been audited or reviewed and accordingly management does not express an
opinion or any other form of assurance on them.

Note 1 - Restatement of Financial Statements

On September 20, 1998, Heartsoft and Intercap Funding LTD ("Intercap") entered
into an agreement whereby Intercap agreed to provide consulting advisory
services over a three year period, primarily related to capital formation, in
exchange for 1.2 million shares of Heartsoft's Convertible Preferred Stock. On
March 16, 2001, Heartsoft issued 1.2 million shares of its common stock to
satisfy the Company's obligation under the agreement.

Upon issuance of the common stock, it was determined that the Company had not
previously given accounting recognition to the agreement. The value of the
agreement, based on the September 20, 1998, trading price of the common stock
into which the preferred stock was to have been convertible, was $240,000. This
value has been allocated to general and administrative expenses over the term of
the agreement. The Company's legal counsel has advised that the preferred stock
called for in the agreement could not have been validly issued prior to the time
the services were rendered. As a result, the obligation will be reported as an
accrued liability as it is accrued over the period October 1998 through March
2001. For the three months ended June 30, 1999 and June 30, 1998, a total of
$23,814 and $0, respectively, were recognized as general and administrative
expense for these consulting advisory services.

On February 1, 1999 the Company also entered into a Non Circumvention and
Consulting Agreement with Intercap Funding LTD. Under the agreement, Intercap
was to provide Heartsoft with various services for a period of 180 days and it
automatically renewed on the first day of each month thereafter for nine months.
Intercap was to receive a finder's fee in cash equal to a certain percentage of
all amounts invested in the Company. In addition, the Company was to issue
warrants equal to a specified percentage of the number of shares purchased by
any introduced parties. In connection with this agreement the Company must issue
178,763 warrants to Intercap. The warrants are exercisable over five years at
values ranging from $1.3437 to $3.4375 per warrant. The warrants are a cost of
the capital that was raised and their issuance will not affect the Company's
financial statements.

On June 1, 2001, the Company and Intercap Funding LTD entered into a new
Consulting Agreement. The new agreement cancelled the Non Circumvention and
Consulting Agreement, dated February 1, 1999. Pursuant to the new agreement, the
Consultant also agreed to surrendered any and all rights that the Consultant had
to any warrants to purchase shares of common stock of the Company to which the
Consultant was entitled under the Non Circumvention and Consulting Agreement.


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

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This quarterly report on Form 10-QSB contains "forward-looking" statements
regarding potential future events and developments affecting the business of
Heartsoft, Inc., a Delaware corporation ("Heartsoft," or the "Company,"
including its subsidiary). Such statements relate to, among other things:

-    future operations of Heartsoft, including the impact of any year 2000
     issues encountered by Heartsoft;

                                       7
<PAGE>

-    the development of new products and distribution channels and product
     sales;
-    competition for customers for Heartsoft's products;
-    the uncertainty of developing or obtaining rights to new products that will
     be accepted by the market;
-    the timing of the introduction of new products into the market;
-    the limited market life of Heartsoft's products; and
-    other statements about Heartsoft or the educational software market.

Forward-looking statements may be indicated by the words "expects," "estimates,"
"anticipates," "intends," "predicts," "believes" or other similar expressions.
Forward-looking statements appear in a number of places in this Form 10-QSB and
may address the intent, belief or current expectations of Heartsoft and its
Board of Directors and Management with respect to Heartsoft and its business.
Heartsoft's ability to predict results or the effect of any future events on
Heartsoft's operating results is subject to various risks and uncertainties.
Some of these risks and uncertainties include competition for products and
customers, the Company's ability to develop or obtain rights to new products and
the limited market life of Heartsoft's current products.

                                  RISK FACTORS

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY

The Company's quarterly revenues and operating results have varied significantly
in the past and are likely to vary substantially in the future. Quarterly
revenues and operating results may fluctuate as a result of a variety of
factors, including:

-    changes in the level of operating expenses;
-    demand for the Company's products;
-    the introduction of new products and product enhancements by the Company or
     its competitors;
-    changes in customer budgets;
-    competitive conditions in the industry; and
-    general economic conditions.

Further, the Company's customers often experience delays associated with
internal authorization procedures when purchasing the Company's products. For
these and other reasons, the sales cycles for the Company's products are
typically lengthy and subject to a number of significant risks outside the
Company's control including customers' budgetary constraints and internal
authorization reviews. The Company historically has operated with little backlog
because its software products are generally shipped as orders are received. The
Company cannot ensure that it will be profitable in future quarters.

RAPID TECHNOLOGICAL CHANGE

The educational software market is subject to rapid technological change, new
product introductions, evolving industry standards and changes in customer
demands. The introduction of new technologies and the emergence of new industry
standards can render existing products obsolete and unmarketable. The Company's
future success will depend in part on its ability to enhance existing products
and to develop new products that meet changing client requirements. The Company
is in the process of developing a secure Internet browser for children. The
development of any new products utilizing the Internet involves significant
technical risks. The Company may not be successful in developing and marketing
product enhancements or new products. The Company could experience difficulties
that delay or prevent the successful development and marketing of product
enhancements or new products. The Company cannot guarantee that any new products
and product enhancements it may introduce will achieve market acceptance.

INTENSE COMPETITION

The educational software market is highly competitive and rapidly changing. A
number of companies offer products similar to the Company's products and target
the same customers as the Company. The Company believes its ability to compete

                                       8
<PAGE>

depends upon many factors including:

-    the timely development and introduction of new products and product
     enhancements;
-    product functionality;
-    product performance;
-    price;
-    product reliability;
-    customer service and support;
-    sales and marketing efforts; and
-    product distribution.

Some of the Company's primary and potential competitors are substantially larger
than the Company and have significantly greater financial, technical and
marketing resources as well as established channels of distribution. As a
result, these competitors may be able to respond more quickly to emerging
technologies and changes in customer requirements and can devote greater
resources to their businesses. The Company also expects that competition will
increase as a result of software industry consolidation. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or prospective customers. Accordingly, new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which would have a material adverse effect on the
Company's business, operating results and financial condition. The Company can
not ensure it will be able to compete successfully against current or future
competitors.

MANAGEMENT OF CHANGING BUSINESS; DEPENDENCE ON MANAGEMENT AND KEY EMPLOYEES

The Company has experienced significant changes in its business, including an
expansion in the Company's staff and customer base, and the expansion of its
product lines. Such changes have placed and may continue to place a significant
strain on the Company's management and operations. In order to manage such
change in the future, the Company must continue to enhance its operational,
financial and management information systems and to hire, train and manage
employees. If the Company is unable to implement these systems and manage such
changes effectively, the Company's business, operating results and financial
condition could be materially and adversely affected.

The Company believes that its future success will also depend in large part upon
its ability to attract and retain highly skilled technical, managerial and
marketing personnel. Competition for such personnel is intense. The Company
cannot ensure that it will be successful in attracting and retaining the
personnel it requires to continue growing. Because of the Broken Arrow, Oklahoma
(Tulsa Metropolitan area) location of the Company's headquarters, the Company
may have difficulty in attracting and retaining qualified management and
technical employees who may be required to move to become employed by the
Company.

The Company's success depends to a significant extent on the performance and
continued services of its senior management and certain other key employees. The
loss of one or more of senior management and key employees could have a material
adverse effect upon the Company. In October 1999, the Company began entering
into employment agreements with its key employees in order to reduce the risk of
loss of key employees.

PROTECTION OF INTELLECTUAL PROPERTY

The Company's success is heavily dependent upon its confidential and proprietary
intellectual property. The Company presently has no patents or patent
applications pending. Rather, the Company relies primarily on a combination of
copyright, trademark and trade secrets laws, confidentiality procedures and
contractual provisions to protect its proprietary rights. Trade secret and
copyright laws afford only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use

                                       9
<PAGE>

information that the Company regards as proprietary. In addition, the laws of
some foreign countries do not protect the Company's proprietary rights as well
as the laws of the United States. The Company cannot guarantee that its means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.

The Company does not believe that any of its products infringe upon the
proprietary rights of third parties. However, third parties could claim
infringement by the Company with respect to current or future products. The
Company expects that software product developers such as itself will
increasingly be subject to infringement claims as the number of products in the
educational software market increase and the functionality of such products
overlap. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all. Any dispute regarding the proprietary rights of third
parties could have a material adverse effect upon the Company's business,
operating results and financial condition.

MANAGEMENT OF GROWTH

The Company is experiencing a period of transition and product introductions
that has and may continue to place a significant strain on its resources.
Expansion of the Company's product lines, additional product development and
product introductions, or acquisitions of other technologies, will further place
a strain on the Company's resources and personnel when added to the day-to-day
activities of the Company. In particular, the Company is currently developing a
new secure Internet browser for children, INTERNET SAFARI-Registered Trademark-,
scheduled to be released during the first quarter of the calendar year 2000.

RISK OF PRODUCT DEFECTS

Prior to release of new products or upgrades to existing products, the Company
conducts exhaustive testing of those products. However, despite testing, new
products or enhancements may contain undetected errors or "bugs" that are
discovered only after a product has been installed and used by customers. There
can be no assurance that such errors will not be discovered in the future. Such
errors can cause delays in shipments that materially and adversely affect the
Company's competitive position and operating results. Although the Company has
not experienced material adverse effects resulting from any such errors to date,
the Company cannot ensure that its new products or releases will be error free
even after commencement of commercial shipments. Discovery of errors in the
Company's products after the commencement of commercial shipping could result in
the following:

-     loss of revenues;
-     delays in market acceptance;
-     diversion of development resources;
-     damage to the Company's reputation; and
-     increased service and warranty costs.

Any of these occurrences could have a material adverse effect upon the Company's
business, financial condition and results of operations.


DEPENDENCE ON PRINCIPAL PRODUCTS

To date, the Company has derived substantially all of its revenue from the sale
of its 40 educational products. Accordingly, the Company's results will depend
on continued market acceptance of these existing products and acceptance of its
new products, including INTERNET SAFARI-Registered Trademark-. Failure to
achieve such acceptance could have a material adverse effect on the Company's
financial condition and results of operations.

                                       10
<PAGE>

DEVELOPMENT OF NEW PRODUCTS AND ENHANCEMENT OF EXISTING PRODUCTS

In order to remain competitive in the educational software market, the Company
must develop and introduce new products and product enhancements on a timely
basis. If the Company fails to develop and introduce new products and
enhancements on a timely basis, it could have a material adverse effect on the
Company's financial condition and results of operations.

YEAR 2000 ISSUES

Many existing computer systems and software products do not properly recognize
dates after December 31, 1999. This "Year 2000" problem could result in
miscalculations, data corruption, system failures or disruptions of operations.
The Company has reviewed its internal systems and believes that such systems are
Year 2000 compliant. However, the Company can not ensure that Year 2000 errors
or defects will not be discovered in the Company's internal software systems. If
such errors or defects are discovered, the costs of making the Company's
internal systems Year 2000 compliant could be material.

The Company is subject to potential Year 2000 problems affecting the systems of
its customers and the systems of its vendors. Additionally, changing purchasing
patterns of customers impacted by Year 2000 issues may result in reduced
resources available for purchases of educational software. These problems could
also have a material adverse effect on the Company's financial condition and
results of operations.

Year 2000 errors or defects in the internal systems maintained by the Company's
vendors could require the Company to incur significant unanticipated expenses to
remedy any problems or replace affected vendors. In order to limit its exposure
to potential Year 2000 inventory problems, the Company has established
relationships with various different sources of raw materials. The Company is
also prepared to increase its inventory of critical raw materials to offset any
unexpected delays in receiving such inventories.

LIMITED RESOURCES

Although the Company believes that its current cash reserves and cash flows from
operations will be adequate to fund its operations for at least the next twelve
months, such resources may be inadequate. Consequently, the Company may require
additional operating funds during or after such period. Additional financing may
not be available on favorable terms or at all.

The Company is currently planning a private placement of equity to be completed
by the first calendar quarter of 2000. If the Company raises additional funds by
selling stock, the percentage ownership of the Company's current shareholders
will be reduced. If the Company cannot raise adequate funds to satisfy its
capital requirements, the Company may have to limit its operations
significantly. The Company's future capital requirements depend upon many
factors, including:

-   the rate at which the Company expands its sales and marketing operations;
-   the extent to which the Company develops its products;
-   the rate at which the Company updates its technology;
-   the Company's ability to complete its planned private placement;
-   the rate at which the Company expands; and
-   the response of competitors to the Company's product and service offerings.

OVERVIEW

Heartsoft, Inc. is a publicly held Delaware Corporation, incorporated January
15, 1988, and traded OTC (Symbol: HTSF). Presently, 30,000,000 shares of common
stock are authorized, with 9,935,230 shares issued and outstanding. During the
period from April, 1999 to June, 1999, the high and low bids for the Company's
stock, as reported by the National Association of Securities Dealers, Inc, were
$2.00 and $1.2188 respectively.

                                       11
<PAGE>

Heartsoft is engaged in the design and publishing of its own proprietary
educational software products for distribution to the education market and
consumer market. To date, Heartsoft's Core Products Division has designed and
published more than 40 educational software titles. One of the Company's best
selling proprietary titles is THINKOLOGY-Registered Trademark-, a software
series that teaches young children the skills of critical thinking and higher
order reasoning skills. Released in late 1998, THINKOLOGY-Registered Trademark-
has garnered the prestigious Media & Methods Portfolio Award for 1999.
THINKOLOGY-Registered Trademark- has also received several favorable reviews in
top educational and consumer magazines, including FamilyPC and Multimedia
Schools.

Other popular Heartsoft titles include:

-    TOMMY THE TIME TURTLE, an animated turtle that teaches children ages 5-7
     how to tell time;
-    COIN CHANGER, which introduces children ages 5-7 to the denominations of
     coins; and
-    the HEARTSOFT BESTSELLER SITE LICENSE, which consists of 12 of the
     Company's top selling titles under a license allowing the teacher to copy
     the software for every computer in the school.

Three of the Company's best selling products, HEARTSOFT BESTSELLER SITE LICENSE
(covering 12 software titles) and HEARTSOFT K-8 LIBRARY (containing all 38
titles in the current product line) and its most recent release,
THINKOLOGY-Registered Trademark-, sell from prices ranging from approximately
$400 to $1,400, depending on the configuration. Further, each product license
allows multiple use of the software throughout the school. Within the
consumer, or home market, the Company's products sell in the price range from
approximately $10 to over $100 depending on configuration and educational
support materials.

During the first calendar quarter of 1999, the Company began development of
INTERNET SAFARI-Registered Trademark-, a secure Internet browser for children.
This proprietary product has been under in-house development and is expected to
be available during the first calendar quarter of 2000. INTERNET
SAFARI-Registered Trademark- is designed for children ages 4 through 12 years to
help simplify their use of the Internet. INTERNET SAFARI-Registered Trademark-
will offer its young users access to the Internet with an exciting cartoon
interface built around a safari theme with jungle sounds, music and animation.
The new browser will also utilize artificial intelligence combined with advanced
image detection and analysis software to protect users from inappropriate
Internet content such as adult content, pornography, violence, hate crimes, etc.
INTERNET SAFARI-Registered Trademark- will be distributed to both the consumer
and educational markets.

NET REVENUES

Net Sales of the Company's educational computer software for the 3 months ending
June 30, 1999, were $117,800 compared to $144,936 for the same period one year
ago, a decrease of 19%.

INDUSTRY TRENDS AFFECT SALES

The educational technology industry is composed of both hardware and software
sales to schools. Sales in these categories tend to run counter to one another
and in any given year will be proportionally much higher in one than the other.
It is management's opinion that the industry is currently favoring the sales of
hardware and products related to the building of the Internet infrastructure.
Consequently, software sales have not been as strong as in years past.
Management believes that cyclical forces will move customer buying habits back
to historical growth trends.

                                       12
<PAGE>

COST OF GOODS SOLD

The Company includes in cost of goods sold all costs associated with the
acquisition of components, assembly of the finished product, warehousing and
shipping. The costs associated with production of product for the quarter ending
June 30, 1999 was $20,783 compared to $33,352, for the same period a year ago.

OPERATING EXPENSES

General and administrative expenses decreased $87,033 or 36% for the quarter
ended June 30, 1999 when compared to the quarter ended June 30, 1998. The
decrease in G&A expenses was primarily attributable to writing down fixed assets
in 1998. This decrease was partially offset by expenses for consulting advisory
services disclosed in Note 1 to the financial statements. Costs associated with
Sales and Marketing for already existing product lines declined 21% compared to
the quarter ended June 30, 1998, primarily as a result of lower advertising.

NET INCOME

The Company realized a loss in the quarter ending June 30, 1999 of $152,341
compared to a loss of $295,411 for the quarter ending June 30, 1998. The
loss for the quarter ending June 30, 1999 was incurred as a result of unexpected
trends in the education industry, i.e., research showed greater emphasis in
Internet and hardware purchasing and a decrease in software purchases (see
previous discussion).

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1999, the Company's principal sources of liquidity included cash
and accounts receivables of $70,405. During the quarter ending June 30, 1999,
the company began implementation of Phase II of a structured growth plan.
Management believes that although current liquidity will sustain the Company at
it's present growth rate, additional funding will be required in order to
compete in the Internet industry. Management shall continue to seek additional
capital through equity and debt instruments to fund Phase III of the growth
plan.

PART II -- OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES.

           During the quarter ended June 30, 1999, the Company has issued the
following securities without registering the securities under the Securities Act
of 1933:

--------------------------------------------------------------------------------
Class of Persons                         Consideration
------------------------ -------------------------------------------------------
Individuals and Trust    A total of 350,000 shares of common stock were issued
                         for cash consideration.
------------------------ -------------------------------------------------------
Individual               A total of 10,000 shares of common stock were issued to
                         induce an individual to enter into a promissory note.
------------------------ -------------------------------------------------------
Individuals              A total of 315,835 shares of common stock were issued
                         for investor relation and printing services.
------------------------ -------------------------------------------------------
Individual               A total of 400,000 shares of common stock were issued
                         for payment of debt.
------------------------ -------------------------------------------------------
Individuals              A total of 211,600 shares of common stock were granted
                         for conversion of convertible preferred stock.
------------------------ -------------------------------------------------------
Individuals              A total of 23,581 shares of common stock were issued to
                         individuals in lieu of preferred stock dividends.
------------------------ -------------------------------------------------------
Employees                A total of 55,000 shares were issued for services.
------------------------ -------------------------------------------------------
Individual               A total of 600,000 shares of common stock were returned
                         in settlement of an employment contract dispute.
--------------------------------------------------------------------------------

           The Company relied on the exemption set forth in Section 4(2) of the
Securities Act of 1933, as amended, in connection with the issuances of stock
set

                                       13
<PAGE>
forth above. All parties listed above are sophisticated persons or entities,
performed services for the Company or had prior or existing relationships with
members of Company's management staff at the time of the transactions listed
above.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

A.   Exhibits:

     10.1        Consulting Agreement by and between Heartsoft, Inc. and
                 Intercap Funding LTD dated September 20, 1998. (Incorporated by
                 reference to the Company's Form 10-QSB for the period ended
                 March 31, 2001, which was filed on May 15, 2001.)

     10.2        Non Circumvention and Consulting Agreement by and between
                 Intercap Funding LTD dated February 1, 1999. (Incorporated by
                 reference to the Company's Form 10-QSB for the period ended
                 March 31, 2001, which was filed on May 15, 2001.)

B.   Reports on Form 8-K:

     There were no reports on Form 8-K filed by the Company during the fiscal
     quarter ended June 30, 1999.

                                   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.

                                      HEARTSOFT, INC.
                                      (Registrant)

Date: July 13, 2001                   /s/ Benjamin P. Shell
     ----------------------           -----------------------------------------
                                      Benjamin P. Shell, Chairman of the Board,
                                      President, and Chief Executive Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Date: July 13, 2001                   /s/ Benjamin P. Shell
     ----------------------           -----------------------------------------
                                      Benjamin P. Shell, Chairman of the Board,
                                      President, and Chief Executive Officer
                                      (Principal Executive Officer)


Date: July 13, 2001                   /s/ Rodger Graham
     ----------------------           -----------------------------------------
                                      Rodger Graham, Chief Financial Officer
                                      (Principal Financial Officer)


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