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

                                   FORM 10-QSB
                                   AMENDMENT 1

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

         For the quarterly period ended   DECEMBER 31, 2000
                                         -------------------

[ ]      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.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

             DELAWARE                                     87-0456766
--------------------------------------      ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
             organization)

             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 December 31, 2000 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.

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

As of December 31, 2000, 12,103,837 shares of Heartsoft, Inc. Common Stock,
$0.0005 par value, were outstanding.

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








































                                       2
<PAGE>
                                                                           PAGE
PART I.  FINANCIAL INFORMATION

Item 1:  Balance Sheet as of December 31, 2000                               4

         Statements of Operations For the Six Month Periods Ended
           December 31, 2000 and December 31, 1999                           6

         Statements of Operations For the Three Month Periods Ended
           December 31, 2000 and December 31, 1999                           7

         Statements of Cash Flows For the Six Month Periods Ended
           December 31, 2000 and December 31, 1999                           8

         Notes to Financial Statements                                       9

Item 2:  Management's Discussion, Analysis of Financial Condition,
         and Results of Operations                                          13

PART II.  OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K                                   19

Signature Page                                                              25


INTRODUCTORY STATEMENT REGARDING ADOPTION OF FISCAL YEAR:

On August 4, 2000, the Board of Directors of Heartsoft, Inc. changed the
Company's fiscal year end from March 31 to June 30 effective for the fiscal year
beginning July 1, 2000. Therefore, "Fiscal Year 2001" will be for the period
July 1, 2000 to June 30, 2001 and the three months ended September 30, 2000 and
the three months ended December 31, 2000 represents the first and second
quarters of Fiscal Year 2001, respectively.












                                       3
<PAGE>

PART I -- FINANCIAL INFORMATION

ITEM 1:  FINANCIAL STATEMENTS


                                  BALANCE SHEET
                             As of December 31, 2000
                                   (Unaudited)

Assets
Current assets:
   Cash                                                             $    17,931
   Accounts receivable, trade, net of allowance
      of $24,893                                                         34,079
   Note receivable - officer                                            250,254
   Inventories, at cost                                                  53,482
   Other                                                                118,590
                                                                    -----------

Total current assets                                                    474,336

Property and equipment, at cost:
   Property and equipment                                               282,792
   Less accumulated depreciation                                       (133,056)
                                                                    -----------

Property and equipment, net                                             149,736

Other assets:
   Developed software, net                                              966,222
   Other                                                                  4,668
                                                                    -----------

Total other assets                                                      970,890
                                                                    -----------

Total assets                                                        $ 1,594,962
                                                                    ===========

                                       4
<PAGE>

                                  BALANCE SHEET
                             As of December 31, 2000
                                   (Unaudited)


Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                 $   328,507
   Notes payable                                                        635,361
   Accrued expenses                                                     578,564
                                                                    -----------
Total current liabilities                                             1,542,432

Long term liabilities:
   Notes payable                                                         28,871
                                                                    -----------
Total liabilities                                                     1,571,303

Commitments and contingencies                                              --

Stockholders' equity:
   Preferred stock, $0.01 par value, 5,000,000 shares
     authorized, 827,000 shares issued                                    8,270
   Common stock, $0.0005 par value, 30,000,000 shares
     authorized, 12,103,837 shares issued                                 6,052
   Additional paid-in capital                                         6,765,331
   Accumulated deficit                                               (6,755,994)
                                                                    -----------
Total stockholders' equity                                               23,659
                                                                    -----------
Total liabilities and stockholders' equity                          $ 1,594,962
                                                                    ===========

                                       5
<PAGE>

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                 Six Month Periods Ended
                                                       December 31,
                                            -----------------------------------
                                                2000                    1999
                                            -----------             -----------
Net sales                                   $   208,333             $   152,698

Costs and expenses:
   Cost of production                           101,920                  57,277
   Sales and marketing                          435,399                 211,401
   General and administrative                   874,229                 461,891
   Depreciation and amortization                 73,652                  58,572
                                            -----------             -----------
Total operating expenses                      1,485,200                 789,141
                                            -----------             -----------

Operating loss                               (1,276,867)               (636,443)

Other (income) and expense:
   Interest expense                              84,530                  37,128
   Other, net                                    (3,778)                 17,654
                                            -----------             -----------
                                                 80,752                  54,782
                                            -----------             -----------
Loss before income taxes                    $(1,357,619)            $  (691,225)

Income taxes                                       --                      --
                                            -----------             -----------
Net loss                                    $(1,357,619)            $  (691,225)
                                            ===========             ===========

Earnings per share                          $     (0.12)            $     (0.07)
                                            -----------             -----------

                                       6
<PAGE>

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                Three Month Periods Ended
                                                       December 31,
                                            -----------------------------------
                                               2000                     1999
                                            ---------                ---------

Net sales                                   $ 110,717                $  80,804

Costs and expenses:
   Cost of production                          54,306                   32,260
   Sales and marketing                        234,104                  153,126
   General and administrative                 286,135                  293,828
   Depreciation and amortization               35,908                   29,286
                                            ---------                ---------
Total operating expenses                      610,453                  508,500
                                            ---------                ---------
Operating loss                               (499,736)                (427,696)

Other (income) and expense:
   Interest expense                            80,566                   27,981
   Other, net                                  (1,740)                  15,991
                                            ---------                ---------
                                               78,826                   43,972
                                            ---------                ---------
Loss before income taxes                    $(578,562)               $(471,668)

Income taxes                                     --                       --
                                            ---------                ---------

Net loss                                    $(578,562)               $(471,668)
                                            =========                =========

Earnings per share                          $   (0.05)               $   (0.04)
                                            ---------                ---------

                                       7
<PAGE>

                            STATEMENTS OF CASH FLOWS
                      Six Month Periods Ended December 31,
                                   (Unaudited)


                                                      2000             1999
                                                  -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                          $(1,357,619)     $  (691,225)
Adjustments to reconcile net loss to net cash
used in operating activities:
     Depreciation and amortization                     73,652           58,572
     Common stock issued for services                  55,909             --
     Changes in:
         Accounts receivable                           30,333           33,312
         Note receivable                                 --            (11,739)
         Other assets                                  38,469           (1,550)
         Inventories                                   (6,462)          (5,602)
         Accounts payable                              43,207           13,965
         Accrued expenses                             330,798           48,686
                                                  -----------      -----------

Net cash used in operating activities                (791,713)        (555,581)

CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software development costs               (283,055)        (106,693)
Advances on note receivable                          (276,254)            --
Collection of note receivable                          26,000             --
Payments for the purchase of property                 (55,048)         (56,681)
                                                  -----------      -----------

Net cash used in investing activities                (588,357)        (163,374)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt                        629,674           82,500
Principal payments of debt                            (31,993)        (226,361)
Proceeds from issuance of common stock                706,500          964,300
                                                  -----------      -----------

Net cash provided by financing activities           1,304,181          820,439
                                                  -----------      -----------

Net increase (decrease) in cash                       (75,889)         101,484
Cash at beginning of period                            93,820            4,177
                                                  -----------      -----------

Cash at end of period                             $    17,931      $   105,661
                                                  ===========      ===========

                                       8
<PAGE>

                                 HEARTSOFT, INC.
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Unaudited)


           The accompanying unaudited financial statements have been prepared in
accordance with instructions to Form 10-QSB as prescribed by the Securities and
Exchange Commission. In the opinion of management, all adjustments required to
make a fair presentation of the results of operations of Heartsoft, Inc., a
Delaware corporation ("Heartsoft," or the "Company," including its subsidiary),
for the six and three month periods ended December 31, 2000 have been included.
The results of operations for the six month period ended December 31, 2000 are
not necessarily indicative of the results of operations that may be achieved for
the entire fiscal year.

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGE IN YEAR END

           On August 4, 2000, the Board of Directors of the Company changed the
Company's fiscal year end from March 31 to June 30 effective for the fiscal year
beginning July 1, 2000. Therefore, "Fiscal Year 2001" will be for the period
July 1, 2000 to June 30, 2001 and the three months ended September 30, 2000 and
the three months ended December 31, 2000 represents the first and second
quarters of Fiscal Year 2001, respectively.


NOTE 2 - NOTE RECEIVABLE

           On November 13, 2000, an officer of the Company borrowed $276,254
from the organization. Per the promissory note the officer will repay the
principal amount together with interest at a per annum rate of 6.15% upon
maturity. The principal sum of the promissory note plus interest is due on
November 13, 2001. The officer may elect to pay all accrued interest on November
13, 2001 and extend the promissory note until November 13, 2002. As of December
31, 2000 the outstanding balance due the Company was $250,254.


NOTE 3 - NOTES PAYABLE

Notes payable consist of the following at December 31, 2000:


   Notepayable to a finance company, $4,575 monthly, due June 2001,
     bearing interest at 14.82%, secured by
     property and equipment.                                            $38,625

   Notepayable to a finance company, $738 monthly, due July 2003,
     bearing interest at 14.82%, secured by property and equipment       16,923

                                        9
<PAGE>

   Note payable to an investment group, balloon payment due
     December 31, 2000, bearing interest at 8%.  Investment
     group has elected to convert to common stock                        60,000

   Notepayable to a finance company, $1,490 monthly, due October 2003,
     bearing interest at 14.82%, secured by property and equipment       38,684

   Note payable to a trust, balloon payment due May 9, 2001,
     bearing interest at 6.15%                                          250,000

   Note payable to a limited partnership, balloon payment
     due May 9, 2001, bearing interest at 6.15%                         250,000

   Note payable to investor, balloon payment due
     June 20, 2001, bearing interest at 8%                               10,000
                                                                     -----------

  Total                                                                 664,232

  Current portion                                                       635,361
                                                                     -----------

  Non-current portion                                                $   28,871
                                                                     ===========

           On November 9, 2000, the Company borrowed a total of $500,000 under
two separate promissory notes, each for the principal sum of $250,000. The
principal sum of both promissory notes plus interest at a per annum rate equal
to 6.15% are due on the earlier of May 9, 2001 or five business days after the
Company shall have received equity investments or debt financing in excess of
$750,000. In order to induce the parties to enter into the promissory notes, the
Company also issued the holders of each of the promissory notes 125,000 shares
of common stock of the Company. The discounted value of the 250,000 shares
totaled $150,000 and will be recorded as interest expense and amortized over the
term of the notes. For the three months ended December 31, 2000 the Company
recorded $46,797 in interest expense associated with this financing arrangement.
The notes may be pre-paid in whole or in part at any time without penalty, but
with interest to the date of payment on the amount prepaid.

NOTE 4  - ACCRUED EXPENSES

General and Administrative Expense:

           On September 27, 2000, the Company and the holder of the Series A
preferred stock entered into an amendment to the Stock Purchase Agreement (the
"Amendment"). Under the terms of the original Stock Purchase Agreement, the
Company agreed to cause a registration

                                       10
<PAGE>

statement relating to the common shares into which the Series A preferred stock
are convertible, and the common shares issuable upon exercise of certain
warrants to become effective by August 1, 2000. Also under the terms of the
original Stock Purchase Agreement , the Company would become liable under a
penalty provision in the Stock Purchase Agreement if the Company were unable to
cause such registration statement to become effective by August 1, 2000. Under
the Amendment to the Stock Purchase Agreement, the Company agreed to cause a
registration statement relating to the common shares into which the Series A
preferred stock are convertible, and the common shares issuable upon exercise of
certain warrants to become effective within a reasonable time after October 1,
2000. In addition, the Company agreed to issue 300,000 shares of common stock to
the Series A preferred stockholder in exchange for the stockholder's agreement
to release the Company from any and all current and future liability that the
Company might have under the penalty provision. A liability totaling $227,810
associated with the 300,000 shares was recorded. The stock was issued on January
3, 2001.

           In the quarter ended June 30, 2000, the Company sold 325,000 shares
of restricted common stock. In connection with the sale of the 325,000 shares,
Heartsoft agreed to file a registration statement. As of February 13, 2001 a
registration has not been filed. Starting October 1, 2000, a penalty of 10,000
shares per month was awarded until the 325,000 shares become free-trading. For
the three months ending December 31, 2000 the Company recorded a liability of
$14,251 in penalties. As of February 13, 2001, these shares have not been
issued.

NOTE 5  - EARNINGS PER SHARE

Basic and diluted EPS are computed as follows:

                                                Six month periods ended
                                                       December 31,
                                               2000                     1999
                                      ------------------------------------------
Basic EPS computation:

      Net loss                           $ (1,357,619)             $  (691,225)

      Weighted average
         Shares outstanding                11,505,391               10,562,949
                                      ------------------------------------------

      Basic and diluted
         Net loss per share              $      (0.12)             $     (0.07)
                                      ==========================================


NOTE 6  - UNCERTAINTIES

           The Company has experienced recurring operating losses and negative
cash flows from operating activities, which increased to $1,357,619 and
$791,713, respectively, for the six months ended December 31, 2000. Management
implemented a program to increase the marketing and sales staff from previous
year's level, however, the expenses associated with staff increases are not
expected to have a substantial impact on revenues until later in fiscal year
2001.

                                       11
<PAGE>

           In order to finance these negative cash flows, the Company secured
approximately $1,294,000 in funding during the six months ended December 31,
2000 through placement of debt and common stock.

           While product development expenditures have been substantial for
INTERNET SAFARITM - a full-featured secure Internet browser for children, its
final release did not occur as of December 31, 2000.

           Management released INTERNET SAFARITM on February 7, 2001 and
anticipates introducing new products during fiscal 2001. With new products and a
strengthened sales staff, management believes revenues from product sales will
increase. In order to finance the continuing costs of product development and
operating losses, management intends to raise additional capital through equity
offerings. However, the Company has no formal commitments for equity placements.
The ability of the Company to implement its operating plan and to continue as a
going concern depends on its ability to raise equity capital and, ultimately, to
achieve profitable operations.


NOTE 7  - SUBSEQUENT EVENT

           To support the Company's policy of growth and to meet working capital
needs during the development and release of INTERNET SAFARITM, the Company
borrowed $75,000 on January 24, 2001 and $175,000 on February 5, 2001 under a
convertible promissory note for the principal sum of $250,000. The principal sum
of the convertible promissory note plus interest at a per annum rate equal to
6.15% are due on the earlier of August 5, 2001 or five business days after the
Company shall have received equity investments or debt financing in excess of
$1,500,000. In order to induce the party to enter into the convertible
promissory note, the Company issued the holder 125,000 shares of common stock of
the Company and agreed to pledge as collateral all intangible property. The
holder of the convertible promissory note may at his option convert the unpaid
principal amount into shares of Common Stock. The basic conversion rate shall be
one share of Common stock for each $.666666 in principal amount of the note
surrendered for conversion. The note may be pre-paid in whole or in part at any
time without penalty, but with interest to the date of payment on the amount
prepaid.

NOTE 8 - 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

                                       12
<PAGE>

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 six months ended
December 31, 2000 and December 31, 1999, a total of $48,676 and $48,676,
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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

           This 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). 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.

GENERAL INFORMATION

           Heartsoft is a publicly held Delaware Corporation, incorporated on
January 15, 1988, and traded in the Over the Counter Bulletin Board (OTCBB)
market under the symbol "HTSF." The

                                       13
<PAGE>

Company is a provider of proprietary educational computer software products
distributed to the education and consumer markets. Its products are sold through
an internal sales organization, national and international resellers, United
States based catalogers with an annual aggregate circulation in excess of
5,000,000 catalogs and online through four corporate websites,
www.heartsoft.com, www.internet-safari.com, www.thinkology.com, and
www.isafari.com.

           Through the six month period ended December 31, 2000, the Company's
product line was comprised of approximately 50 educational software programs
that assist young children in pre-kindergarten through the 6th grade to practice
and learn basic curriculum subjects. On February 7, 2001, the Company released
its new secure Internet browser for children, INTERNET SAFARITM Version 1.0. The
release of INTERNET SAFARITM will broaden the Company's product line to include
an Internet-based software solution.

           The Company intends to continue to expand its traditional educational
software business through internal growth as well as by focusing a substantial
portion of its resources on the introduction and sale of INTERNET SAFARITM.
Beginning in Fiscal Year 2001, the Company intends to use the Internet to expand
its geographic reach deeper into the consumer market both in the United States
and internationally.

           For the six-month period ended December 31, 2000, the Company
experienced a loss of $1,357,619 and accumulated a total deficit of $6,755,994.
This loss and accumulated deficit have been primarily caused by the Company's
efforts in positioning itself for the release of INTERNET SAFARITM and are
related, for the most part, to marketing and general and administrative
expenses.

           To reach profitability, the Company plans, among other things, to do
the following:

  o  Release its secure Internet browser, INTERNET SAFARITM on February 7, 2001;
  o  Expand the marketing of all of the Company's products for the consumer and
     school markets by utilizing additional marketing resources such as direct
     mail, on-line purchasing, demonstration versions of key products, magazine
     advertising and more;
  o  Establish strategic joint venture partners both in the United States and
     internationally.

           The Company plans to strengthen its brand name awareness and position
and to utilize its technological infrastructure and software development
capabilities to continue refining and upgrading its current and future products.
Accordingly, the Company intends to invest heavily in marketing and advertising,
new partnerships and strategic alliances, and its technology infrastructure. The
Company also anticipates that it will continue to experience losses similar to
those reflected in the statement of operations. Significant increases in the
Company's advertising and marketing campaigns will contribute to such loss. The
Company believes that this program of expansion is necessary to continue
building its brand recognition and ability to generate revenues.

                                       14
<PAGE>

           Further, if the investments mentioned above are successful, the
Company anticipates that it will see an increase in revenues and a narrowing of
losses as percentage of revenues. The Company expects that the combination of
increased revenues and decreased expenses as percentage of revenues will lead to
profitability.

           The Company believes that its investment in the development of
INTERNET SAFARITM and the secure browser's release represents a key element of
its future and that the Company can become a leading player in the children's
Internet market.

RESULTS OF OPERATIONS

SIX MONTH PERIOD ENDED DECEMBER 31, 2000 VS. SIX MONTH PERIOD ENDED
DECEMBER 31, 1999

NET REVENUE

           Revenue for the six months ended December 31, 2000 increased to
$208,333 from $152,698 for the six months ended December 31, 1999, an increase
of $55,635 or 36%. The increase is primarily the result of hiring a Vice
President of Sales and Marketing in late 1999, reorganizing and expanding the
education sales division from nine to fifteen employees, and continuing the
implementation of a broad-based marketing strategy. The marketing strategy
focused on adding quality sales personnel and directing their efforts in
promoting educational programs to schools while maintaining existing reseller
business. It also included higher attendance at trade shows and increased direct
mailings, both of which contributed to the increase in revenues.

COST OF PRODUCTION

           Cost of production includes all costs associated with the acquisition
of raw materials, assembly of finished products, warehousing, shipping, and
payroll associated with production and shipping of finished products. This
expense category also includes labor costs associated with maintaining and
implementing enhancements to existing educational programs as well as
miscellaneous costs related to the needs of the Production Department. Cost of
production for the six months ended December 31, 2000 was $101,920 compared to
$57,277 for the six months ended December 31, 1999, an increase of $44,643 or
78%. Cost for the acquisition of raw materials increased approximately $13,135
as a result of increased sales as noted in the Net Revenue discussion above.
Payroll cost increased $12,728 primarily from the addition of a technical
support employee coupled with annual increases for existing employees. Labor
costs associated with maintaining and enhancing existing educational programs
increased approximately $9,741. Expenses for office rent increased $8,505 as a
result of leasing additional office space in late 1999 and early 2000.

SALES AND MARKETING

              Sales and marketing expenses for the six months ended December 31,
2000 were $435,399 versus $211,401 for the six months ended December 31, 1999,
an increase of $223,998 or 106%. As noted previously, in the Net Revenue
discussion, a Vice President of Sales and

                                       15
<PAGE>

Marketing was hired in late 1999, the education sales division was reorganized
and expanded, as the Company's broad-base marketing strategy continues to be
implemented. This strategy involves active utilization of temporary personnel to
fill selected positions, then upon satisfactory completion of work
responsibilities the hiring of these individuals as full-time employees. All of
the above factors, coupled with direct mail campaigns targeted at schools, new
advertising materials and higher attendance at industry trade-shows lead to
increased expenses in sales and marketing. An approximate breakdown by component
of the major increases in sales and marketing expense follows: payroll and
benefits $144,276; travel and conferences $40,241; and contract labor $18,185.

GENERAL AND ADMINISTRATIVE

           Total general and administrative (G&A) expense for the six months
ended December 31, 2000 was $874,229 compared to $461,891 for the same period in
1999, an increase of $412,338. The primary reason for this increase relates to
accruing penalties totaling $227,810 and $14,251, respectively. The first amount
in connection with amending a Stock Purchase Agreement whereby the Company
agreed to issue 300,000 shares of Common Stock in order to eliminate any
liability the Company might have under a penalty provision in that Stock
Purchase Agreement and the second amount for recording a penalty provision for
the three months ending December 31, 2000 relating to another Agreement (see
Financial Statement Note 4 - Accrued Expenses).

           Additional factors causing the increase in G&A expense can be
attributed to taking the necessary steps to build the Company's infrastructure.
These factors include the addition of a Chief Financial Officer, assuming full
reporting status to become compliant with SEC regulations, and strengthening
strategic customer and investor relationships, all of which are critical to
minimizing risks to the Company and execution of its business plan. Further, on
a historical basis, executive management focused primarily on the development of
educational programs resulting in capitalization of appropriate executive
salaries. This focus shifted from development to more of an administrative role
resulting in the expensing of appropriate executive salaries and an increase in
related G&A payroll costs. An approximate breakdown by component (excluding the
late registration filing penalty expense noted above) of other major increases
in G&A expense follows: payroll and benefits $77,498; professional costs related
to accounting, legal fees, and investment service fees $72,837; and
miscellaneous expenses $12,471 which includes cost associated with the Vice
President of Sales and Marketing relocation to Heartsoft's Corporate Office in
Broken Arrow, Oklahoma.

           Expenses for consulting advisory services disclosed in Note 8 to the
financial statements totaled $48,686 for the six months ended December 31, 2000
and December 31, 1999, respectively.

INTEREST EXPENSE

           Interest expense for the six months ended December 31, 2000 was
$84,530 compared to $37,128 for the same period in 1999, an increase of $47,402.
The primary reason for this increase relates to recording interest for financing
agreements made on November 9, 2000. The

                                       16
<PAGE>

Company borrowed a total of $500,000 under two separate promissory notes and
issued 250,000 shares of common stock to induce the parties to enter into the
promissory notes (see Financial Statement Note 3 - Notes Payable).

THREE MONTH PERIOD ENDED DECEMBER 31, 2000 VS. THREE MONTH PERIOD ENDED
DECEMBER 31, 1999

NET REVENUE

           Revenue for the three months ended December 31, 2000 increased to
$110,717 from $80,804 for the three months ended December 31, 1999, an increase
of $29,913 or 37%. As noted previously the increase is primarily the result of
hiring a Vice President of Sales and Marketing in late 1999, reorganizing and
expanding the education sales division and continuing the implementation of a
broad-based marketing strategy.

COST OF PRODUCTION

           Cost of production includes all costs associated with the acquisition
of raw materials, assembly of finished products, warehousing, shipping, and
payroll associated with production and shipping of finished products. This
expense category also includes labor costs associated with maintaining and
implementing enhancements to existing educational programs as well as
miscellaneous costs related to the needs of the Production Department. Cost of
production for the three months ended December 31, 2000 was $54,306 compared to
$32,260 for the three months ended December 31, 1999, an increase of $22,046 or
68%. Cost for the acquisition of raw materials increased approximately $7,280 as
a result of increased sales as noted in the Net Revenue discussion above. Labor
costs associated with maintaining and enhancing existing educational programs
increased approximately $7,475. Expenses for office rent increased $5,820 as a
result of leasing additional office space in late 1999 and early 2000.

SALES AND MARKETING

              Sales and marketing expenses for the three months ended December
31, 2000 were $234,104 versus $153,126 for the three months ended December 31,
1999, an increase of $80,978 or 53%. As noted previously, in the Net Revenue
discussion, a Vice President of Sales and Marketing was hired in late 1999, the
education sales division was reorganized and expanded, as the Company's
broad-base marketing strategy continues to be implemented. An increase in
headcount coupled with higher attendance at industry trade-shows lead to
increased expenses in sales and marketing. An approximate breakdown by component
of the major increases in sales and marketing expense follows: payroll and
benefits $70,164; and travel and conferences $17,430.


GENERAL AND ADMINISTRATIVE

           Total general and administrative (G&A) expense for the three months
ended December 31, 2000 was $286,135 compared to $293,828 for the same period in
1999, a decrease of $7,693.

                                       17
<PAGE>

During this period, payroll and benefits increased approximately $35,068
primarily from the addition of a Chief Financial Officer, and a shifting of
executive salaries from a product development to an administrative role. This
increase was more than offset by decreases in personal property taxes and
professional fees versus previous year expenses.

           Expenses for consulting advisory services disclosed in Note 8 to the
financial statements totaled $24,343 for the three months ended December 31,
2000 and December 31, 1999, respectively.


LIQUIDITY AND CAPITAL RESOURCES

           To support the Company's policy of growth and to meet working capital
needs during the development of INTERNET SAFARITM, the Company secured
approximately $1,294,000 in funding during the six months ended December 31,
2000 through private placements of debt and common stock. A breakdown of this
funding is as follows:

o     On August 18, 2000, the Company borrowed $100,000 under a convertible
      promissory note agreement. On September 27, 2000, the Company amended this
      agreement to issue 80,000 shares of restricted common stock in lieu of a
      payment of $40,000. This stock issuance reduced the promissory note to
      $60,000.

o     On November 9, 2000, the Company borrowed $500,000 under two separate
      promissory notes, each for the principal sum of $250,000. The principal
      sum of both promissory notes plus interest at a per annum rate equal to
      6.15% are due on the earlier of May 9, 2001 or five business days after
      the Company shall have received equity investments or debt financing in
      excess of $750,000

o     On December 20, 2000 the Company received a loan from a private investor
      for $10,000. The loan bears interest at 8% and is due and payable on June
      20, 2001.

o     During the six months ended December 31, 2000, the Company sold 760,500
      shares of restricted common stock. Proceeds of the sale aggregated
      $684,000 less offering expenses of $17,500. As of December 31, 2000,
      280,500 shares remain to be issued.

           In order to maintain current level of operations, the Company will
need to secure additional funding sources to meet its operating expenses. Such
funding sources may include, but are not limited to, additional private
placements of common or convertible equities, placement of debt with banks,
private or public investors, or other lending institutions and/or licensing
agreements with strategic partners. The Company believes that through a
combination of outside sources of capital and revenues generated from product
sales it can produce sufficient sources of capital to meet its operating needs.
However, any substantial delays in receipt of or failure to obtain such capital
may prevent the Company from operating as a going concern, given its limited
revenues and capital reserves.

                                       18
<PAGE>

SUMMARY OF RISK FACTORS

           To date, the Company has funded its operations primarily through
revenues generated by various products and equity financings. The Company will
need additional capital before INTERNET SAFARITM begins generating a sufficient
cash flow to sustain operations and anticipated growth. Additionally, Heartsoft
is subject to other risks and uncertainties. A summary of risk factors is
discussed in Part III of Heartsoft's Form 10-KSB for the transition period April
1, 2000 to June 30, 2000, which was filed on September 28, 2000.


PART II -- OTHER INFORMATION

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

(a)        Exhibits:

   EXHIBIT NO.                       DESCRIPTION
--------------------------------------------------------------------------------
   3.1            Articles of Incorporation of the Company. (Incorporated by
                  reference to the Company's Form 10-KSB/A for the period ended
                  March 31, 1999, which was filed on January 22, 2000.)

   3.2            By-Laws of the Company. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

   4.1            Specimen of Certificate for Heartsoft, Inc. Common Stock.
                  (Incorporated by reference to the Company's Form 10-KSB/A for
                  the period ended March 31, 1999, which was filed on January
                  22, 2000.)

   10.1           Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
                  dated February 12, 1998. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

   10.2           Software Agreement dated May 16, 1997 between Heartsoft, Inc.
                  and Heartsoft 1997 Limited Partnership. (Incorporated by
                  reference to the Company's Form 10-KSB/A for the period ended
                  March 31, 1999, which was filed on January 22, 2000.)

   10.3           Acquisition Note dated May 16, 1997 from Heartsoft 1997
                  Limited Partnership. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

                                       19
<PAGE>

   10.4           Assumption Agreement dated April 30, 1997 by and among
                  Heartsoft 1997 Limited Partnership, Heartsoft, Inc. and
                  Limited Partners. (Incorporated by reference to the Company's
                  Form 10-KSB/A for the period ended March 31, 1999, which was
                  filed on January 22, 2000.)

   10.5           Joint Venture Agreement dated May 16, 1997 between Heartsoft,
                  Inc. and Heartsoft 1997 Limited Partnership. (Incorporated by
                  reference to the Company's Form 10-KSB/A for the period ended
                  March 31, 1999, which was filed on January 22, 2000.)

   10.6           Software Agreement dated July 30, 1997 between Heartsoft, Inc.
                  and Heartsoft II 1997 Limited Partnership. (Incorporated by
                  reference to the Company's Form 10-KSB/A for the period ended
                  March 31, 1999, which was filed on January 22, 2000.)

   10.7           Acquisition Note dated July 30, 1997 from Heartsoft II 1997
                  Limited Partnership. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

   10.8           Assumption Agreement dated July 30, 1997 by and among
                  Heartsoft II Limited Partnership, Heartsoft, Inc. and Limited
                  Partners. (Incorporated by reference to the Company's Form
                  10-KSB/A for the period ended March 31, 1999, which was filed
                  on January 22, 2000.)

   10.9           Joint Venture Agreement dated July 30, 1997 between Heartsoft,
                  Inc. and Heartsoft II 1997 Limited Partnership. (Incorporated
                  by reference to the Company's Form 10-KSB/A for the period
                  ended March 31, 1999, which was filed on January 22, 2000.)

   10.10          Software Agreement dated October 28, 1997 between Heartsoft,
                  Inc. and Heartsoft III 1997 Limited Partnership. (Incorporated
                  by reference to the Company's Form 10-KSB/A for the period
                  ended March 31, 1999, which was filed on January 22, 2000.)

   10.11          Acquisition Note dated October 28, 1997 from Heartsoft III
                  1997 Limited Partnership. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

   10.12          Assumption Agreement dated July 30, 1997 by and among
                  Heartsoft III 1997 Limited Partnership, Heartsoft, Inc. and
                  Limited Partners. (Incorporated by reference to the Company's
                  Form 10-KSB/A for the period ended March 31, 1999, which was
                  filed on January 22, 2000.)

                                       20
<PAGE>

   10.13          Joint Venture Agreement dated October 28, 1997 between
                  Heartsoft, Inc. and Heartsoft III 1997 Limited Partnership.
                  (Incorporated by reference to the Company's Form 10-KSB/A for
                  the period ended March 31, 1999, which was filed on January
                  22, 2000.)

   10.14          Letter Agreement by and between Heartsoft, Inc. and the
                  Weather Channel Enterprises, Inc. dated September 1, 1999.
                  (Incorporated by reference to the Company's Form 10-KSB for
                  the period ended March 31, 2000, which was filed on July 14,
                  2000.)

   10.15          Co-branding Program Agreement by and between Heartsoft, Inc.
                  and Ask Jeeves, Inc. dated September 16, 1999. (Incorporated
                  by reference to the Company's Form 10-KSB for the period ended
                  March 31, 2000, which was filed on July 14, 2000.)

   10.16          Lease dated November, 1999 for commercial office space in
                  Broken Arrow, Oklahoma. (Incorporated by reference to the
                  Company's Form 10-KSB for the period ended March 31, 2000,
                  which was filed on July 14, 2000.)

   10.17          Lease dated January, 2000 for commercial office space in
                  Broken Arrow, Oklahoma. (Incorporated by reference to the
                  Company's Form 10-KSB for the period ended March 31, 2000,
                  which was filed on July 14, 2000.)

   10.18          Stock Purchase Agreement by and between Heartsoft, Inc. and
                  Hi-Tel Group, Inc. dated March 1, 2000 with Certificate of
                  Designation of the Series A Convertible Preferred Stock
                  attached as Exhibit A and Common Share Purchase Warrant
                  between Heartsoft, Inc. attached as Exhibit B. (Incorporated
                  by reference to the Company's Form 10-KSB for the period ended
                  March 31, 2000, which was filed on July 14, 2000.)

   10.19          Web Service Agreement by and between Heartsoft, Inc. and
                  Gaggle, Inc. dated June 9, 2000. (Incorporated by reference to
                  the Company's Form 10-KSB for the period ended March 31, 2000,
                  which was filed on July 14, 2000.)

   10.20          Amendment to Stock Purchase Agreement by and between
                  Heartsoft, Inc. and Hi-Tel Group, Inc. dated September 27,
                  2000. (Incorporated by reference to the Company's Form 10-KSB
                  for the transition period ended June 30, 2000 which was filed
                  on September 28, 2000.)

                                       21
<PAGE>

   10.21          Amendment to Heartsoft, Inc. Common Share Purchase Warrant by
                  and between Heartsoft, Inc. and Hi-Tel Group, Inc. dated
                  September 27, 2000 (Incorporated by reference to the Company's
                  Form 10-KSB for the transition period ended June 30, 2000,
                  which was filed on September 28, 2000.)

   10.22          Original Equipment Manufacturing (OEM) Licensing Agreement by
                  and between Heartsoft, Inc. and International Academy of
                  Science dated April 28, 2000. (Incorporated by reference to
                  the Company's Form 10-QSB for the period ended September 30,
                  2000, which was filed on November 14, 2000.)

   10.23          Co-Branding License Agreement by and between Heartsoft Inc and
                  Merriam-Webster, Incorporated dated August 14, 2000.
                  (Incorporated by reference to the Company's Form 10-QSB for
                  the period ended September 30, 2000, which was filed on
                  November 14, 2000.)

   10.24          Promissory Note dated August 18, 2000 between Heartsoft, Inc.
                  and Hi-Tel Group, Inc. (Incorporated by reference to the
                  Company's Form 10-QSB for the period ended September 30, 2000,
                  which was filed on November 14, 2000.)

   10.25          Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
                  dated July 31, 2000. (Incorporated by reference to the
                  Company's Form 10-QSB for the period ended September 30, 2000,
                  which was filed on November 14, 2000.)

   10.26          Trademark License Agreement by and between Heartsoft, Inc. and
                  Ask Jeeves dated September 8, 2000. (Incorporated by reference
                  to the Company's Form 10-QSB for the period ended September
                  30, 2000, which was filed on November 14, 2000.)

   10.27          Letter Agreement granting Benjamin Shell, CEO of Heartsoft,
                  Inc., a non-exclusive license to use the Yahooligans logo
                  dated September 19, 2000. (Incorporated by reference to the
                  Company's Form 10-QSB for the period ended September 30, 2000,
                  which was filed on November 14, 2000.)

   10.28          Amendment to Promissory Note between Heartsoft, Inc. and
                  Hi-Tel Group, Inc. dated November 8, 2000. (Incorporated by
                  reference to the Company's Form 10-QSB for the period ended
                  September 30, 2000, which was filed on November 14, 2000.)

                                       22
<PAGE>

   10.29          Promissory Note dated November 9, 2000 between Heartsoft, Inc.
                  and Alan W. Carlton Revocable Living Trust. (Incorporated by
                  reference to the Company's Form 10-QSB for the period ended
                  September 30, 2000, which was filed on November 14, 2000.)

   10.30          Letter Agreement dated November 9, 2000 between Heartsoft,
                  Inc. and Alan W. Carlton Revocable Living Trust. (Incorporated
                  by reference to the Company's Form 10-QSB for the period ended
                  September 30, 2000, which was filed on November 14, 2000.)

   10.31          Promissory Note dated November 9, 2000 between Heartsoft, Inc.
                  and June Limited Partnership. (Incorporated by reference to
                  the Company's Form 10-QSB for the period ended September 30,
                  2000, which was filed on November 14, 2000.)

   10.32          Letter Agreement dated November 9, 2000 between Heartsoft,
                  Inc. and June Limited Partnership. (Incorporated by reference
                  to the Company's Form 10-QSB for the period ended September
                  30, 2000, which was filed on November 14, 2000.)

   10.33          Joint Security Agreement dated November 9, 2000 between
                  Heartsoft, Inc., Benjamin Shell, Alan W. Carlton Revocable
                  Living Trust, and June Limited Partnership. (Incorporated by
                  reference to the Company's Form 10-QSB for the period ended
                  September 30, 2000, which was filed on November 14, 2000.)

   10.34          Amended and Restated Engagement Agreement by and between
                  Heartsoft, Inc. and Juanita Seng dated September 7, 1999.

   10.35          Employment Agreement by and between Heartsoft, Inc. and Rodger
                  Graham dated August 28, 2000.

   10.36          Amended and Restated Engagement Agreement by and between
                  Heartsoft, Inc. and Dana Swift dated October 6, 2000.

   10.37          Promissory Note by and between Benjamin P. Shell and
                  Heartsoft, Inc., dated November 13, 2000.

   10.38          Electronic Agreement Summary dated November 14, 2000 granting
                  Heartsoft, Inc. permission to use Binney & Smith's Crayola
                  logo and link to it's web sight.

                                       23
<PAGE>

   10.39          Equipment Lease with Auto & Equipment Leasing by Flex, Inc.
                  dated November 15, 2000.

   10.40          Letter Agreement dated November 20, 2000 granting Heartsoft,
                  Inc., a non-exclusive license to use CBS Sportsline.com (SPLN)
                  logos.

   10.41          Electronic Agreement Summary dated November 27, 2000 granting
                  Heartsoft, Inc. permission to use Timeforkids.com's logo and
                  link to it's web sight.

   10.42          Non-Qualified Stock Option Agreement by and between Heartsoft,
                  Inc. and Rodger Graham dated December 4, 2000.

   10.43          Non-Qualified Stock Option Agreement by and between Heartsoft,
                  Inc. and Juanita Seng dated December 4, 2000.

   10.44          Non-Qualified Stock Option Agreement by and between Heartsoft,
                  Inc. and Dana Swift dated December 4, 2000.

   10.45          Letter Agreement by and between Heartsoft, Inc., and The Glenn
                  A. Chalker Revocable Trust dated January 24, 2001.

   10.46          Security Agreement by and between Heartsoft, Inc. and The
                  Glenn A. Chalker Revocable Trust dated January 24, 2001.

   10.47          Convertible Promissory Note by and between Heartsoft, Inc. and
                  The Glenn A. Chalker Revocable Trust dated January 24, 2001.

   10.48          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.)

   10.49          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.)

   21.1           Subsidiaries of Heartsoft. (Incorporated by reference to the
                  Company's Form 10-KSB/A for the period ended March 31, 1999,
                  which was filed on January 22, 2000.)

(b)        Reports on Form 8-K:

      No reports on Form 8-K were filed during the three-month period ended
December 31, 2000.

                                       24
<PAGE>

SIGNATURES

In accordance with the requirements 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:    7/13/01                      /s/  Benjamin P. Shell
      -------------                   -----------------------------------------
                                      Benjamin P. Shell, Chairman of the Board,
                                      President, and Chief Executive Officer
                                      (Principal Executive Officer)




Date:    7/13/01                      /s/ Rodger Graham
      -------------                   -----------------------------------------
                                      Rodger Graham, Chief Financial Officer
                                      (Principal Financial Officer)














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