<PAGE>

                                   FORM 10-KSB/A


                       SECURITIES AND EXCHANGE COMMISSION

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               FOR THE TRANSITION PERIOD FROM ________ TO ________

                          COMMISSION FILE NO. 000-26909

                                 EDENTIFY, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                       <C>
                    Nevada                                      98-0179013
        (State or other jurisdiction of                      (I.R.S. Employer
        incorporation or organization)                    Identification Number)
</TABLE>


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<S>                                                             <C>
74 West Broad Street, Suite 350, Bethlehem, PA                     18018
   (Address of principal executive offices)                     (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (610) 814-6830

           Securities registered pursuant to Section 12(b) of the Act:

                          Common Stock, $.001 par value

Securities registered pursuant to Section 12(g) of the Act:

     (Title of Each Class)
              NONE

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of Common Stock held by non-affiliates at February
28, 2006, was approximately $4,991,495. For purposes of this calculation, it was
assumed that all Common Stock is valued at the closing price as of such date of
$0.67 per share.

The number of shares of the registrant's Common Stock outstanding as of February
28, 2006 was 24,851,425

DOCUMENTS INCORPORATED BY REFERENCE: None.

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                                TABLE OF CONTENTS

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PART I
Item 1.  Business .......................................................     2
         Risk Factors ...................................................    11
Item 2.  Properties .....................................................    15
Item 3.  Legal Proceedings ..............................................    15
Item 4.  Submission of Matters to a Vote of Security Holders ............    15

PART II
Item 5.  Market for the Registrant's Common Equity, Related Stockholder
            Matters and Issuer Purchases of Equity Securities ...........    15
Item 6.  Selected Financial Data ........................................    16
Item 7.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations .........................    17
Item 7A. Quantitative and Qualitative Disclosure About
            Market Risk .................................................    22
Item 8.  Financial Statements and Supplementary Data ....................    22
Item 9.  Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure .........................    22
Item 9A. Controls and Procedures ........................................    23
Item 9B. Other Information ..............................................    23

PART III
Item 10. Directors and Executive Officers of the Registrant .............    23
Item 11. Executive Compensation .........................................    25
Item 12. Security Ownership of Certain Beneficial Owners
            and Management and Related Stockholder Matters ..............    27
Item 13. Certain Relationships and Related Transactions .................    28
Item 14. Principal Accountant Fees and Services .........................    29

PART IV
Item 15. Exhibits, Financial Statement Schedules ........................    30
</TABLE>

<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our Forward Looking Statement

Certain statements in this Annual Report on Form 10-K (the "Form 10-K"),
including statements under "Item 1. Business," "Item 3. Legal Proceedings" and
"Item 7. Management's Discussion and Analysis of Financial Condition and Result
of Operations," constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995 (collectively, the "Reform Act"). Certain, but not
necessarily all, of such forward-looking statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. All statements other than statements of historical fact included
in this Form 10-K regarding our financial position, business strategy and plans
or objectives for future operations are forward-looking statements. Without
limiting the broader description of forward-looking statements above, we
specifically note that statements regarding our ability to manufacture and sell
any products, market acceptance or our ability to earn a profit from sales or
licenses of any software or services or our ability to create new software or
services in the future are all forward-looking in nature.

Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Edentify, Inc. and its subsidiaries (collectively, the
"Company", "we or "us") to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements and other factors referenced in this Form 10-KSB. We do not undertake
and specifically declines any obligation to publicly release the results of any
revisions which may be made to any forward-looking statement to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

                                     PART I

ITEM 1. BUSINESS.

GENERAL

     Edentify, Inc. ("Edentify") was formed in August 2004 with the objective of
becoming a leader in the development and deployment of data analysis
technology-based solutions for the prevention of identity theft and fraud. It is
currently a later development-stage company and expects shortly to begin a
period of increased growth. Edentify will seek to fulfill its goals by analyzing
the means by which identity crimes are perpetrated and through the development
of new technologies and procedures to assist corporations, the government and
consumers in the fight against identity fraud and related crime.

     Edentify owns the intellectual property rights to two strategic approaches
for the detection and prevention of identity fraud. They are (1) an
information-based data analysis and monitoring approach and (2) a biometric
technology-based approach.

     The first approach, the operations of which are carried our through our
wholly-owned subsidiary, Edentify, Inc. (Delaware), is a patented
information-based approach that analyzes identity data information for
individuals in large databases and is capable of detecting and scoring
incidences of identity manipulation and potential theft (Identity Quotient
Index(TM)). The forerunner of this technology is currently used in screening
identities used for new checking account applications at nearly every major bank
in the U.S. Edentify will continue to market this technology to other areas of
the financial services industry, as well as to large healthcare organizations
and local, state and federal governments.

     The second approach is a biometric technology that will be marketed through
and is named after our wholly-owned subsidiary, InMotion Biometrics, Inc.
("IMB"). This novel set of algorithms combines face and voice recognition
techniques for authenticating the identity of an individual. The IMB technology
is licensed from face2face, Inc., a leading character animation company that was
spun off from Lucent Technologies, Inc. in 2000. The core capability of this
technology is its facial analysis system that contains highly evolved algorithms
for obtaining the inner lip contour, which can accurately measure for optimal
visual speech recognition performance. Additionally, the system is designed as a
multi-modal platform capable of combining the reading of two or more biometric
technologies simultaneously

<PAGE>

     Edentify currently markets its data analysis technology directly and
through channel partners. The biometric technology is currently under
development and, upon completion will be marketed through strategic partners as
OEMs or value added resellers. Future plans include the development of an
integrated product that combines our information-based ID manipulation detection
capability with IMB's face recognition technology, thereby enabling a
defensively-robust enrollment and subsequent identity protection system.

REORGANIZATION

     On February 29, 2005, BudgetHotels Networks, Inc. ("Budget") signed an
Agreement to acquire all of the issued and outstanding shares of Edentify, Inc.,
a Delaware corporation ("Edentify") in exchange for issuance of 21,000,000
shares of the Company's common stock and Share Rights Certificates entitling the
former stockholder of Edentify to receive the balance of the shares upon
consummation of a reverse split or other corporate action making new shares
available for issuance, so that ultimately the former Edentify stockholder and
nominees will own a total of 88.2% of the outstanding common stock of Budget
(hereinafter, the foregoing transaction being the "Acquisition"). Pursuant to
the Agreement, Edentify deposited $75,000 into an escrow account for the benefit
of Budget in conjunction with the execution of the letter of intent, and was
required to pay an additional $75,000 to Budget (with such amount to be assigned
to InfoCenters, Inc.) on or before July 31, 2005. Both amounts were paid to
Budget in July 2005.

     The Company subsequently effected a 1-for-10 reverse split of our capital
stock (the "Reverse Split"). Upon the Reverse Split becoming effective in July,
2005, we issued a total of 19,510,255 shares of its common stock to the former
stockholder of Edentify and his nominees associated with the Share Rights
Certificate in order for such persons to hold approximately 88.2% of the
outstanding common stock of the Company. After the Reverse Split and subsequent
issuance under the Share Rights Certificates, Edentify, formerly Budget, had a
total of approximately 24,501,000 shares of common stock issued and outstanding.

     Prior to the Closing Date of the Acquisition, Budget executed a
Distribution Agreement with its subsidiary InfoCenter, Inc., through which
Budget carried on its then-current operating business activities, pursuant to
which Budget will agree to distribute the shares of InfoCenter, Inc., to the
stockholders of record of Budget as of a record date immediately prior to the
Closing Date of the transaction with Edentify. Distribution of the shares of
InfoCenter, Inc. is intended but not required to be made through the filing of a
registration statement with the U.S. Securities and Exchange Commission by
InfoCenter, Inc. Under the terms of the Agreement, and the subsequent amendment
thereof on January 30. 2006, the distribution is required to be completed on or
before August 31, 2006.

     The operations regarding our subsidiary, InfoCenter, Inc. have been
accounted for as discontinued operations in accordance with accounting
principles generally accepted within the United States of America.

     The acquisition resulted in the owners and management of Edentify having
effective operating control of the combined entity after the Acquisition, with
the existing Budget shareholders continuing as only minority shareholders.

     Under accounting principles generally accepted in the United States (US
GAAP), the above noted acquisition is considered to be a capital transaction in
substance, rather than a business combination. That is, the acquisition is
equivalent to the issuance of stock by Edentify for the net monetary assets of
Budget, accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the acquisition is identical
to that resulting from a reverse acquisition, except that no goodwill intangible
is recorded. Under reverse takeover accounting, the post reverse-acquisition
comparative historical financial statements of the "legal acquirer" (Budget),
are those of the "legal acquiree" (Edentify) (i.e. the accounting acquirer).

EDENTIFY (DE) PRODUCTS

Our solutions all revolve around a core technology that is a set of data
analysis pattern recognition algorithms that is capable of detecting fraudulent
anomalous or suspicious behavior when compared to the historical use of
individual identity information, specifically name and social security number.
The process of deploying our technology includes the generation of encrypted
keys that contain the content of each individual name and social security number
from our customers' data as contained in their client database and a suite of
software-based solutions: IDAssess(TM), IDScreen(TM) and IDAlert(TM).


                                        3

<PAGE>

          IDASSESS(TM)

          Edentify's unique IDBenchmark process 1) proactively associates input
client records with all available historic variations of digital identity
records- including heretofore "anonymous" digital identity records-, 2)
separates "innocent" associated identity records from "suspicious" associated
identity records with 3) limited false responses.

          IDSCREEN(TM)

          Our IDScreen product compares the new applicant identity record to an
external reference data base and retrieves and scores all associated variations
of the new applicant data that reside in the reference database as determined by
Edentify's proprietary IDBENCHMARK advanced pattern recognition analytics. Each
score represents a certain risk profile for the each of associated variations as
they compare to the new applicant identity record. We then create a risk rating
for the entire group known as the Identity Quotient IndexTM that will drive the
identity management regimen deemed appropriate by the customer based on their
risk thresholds. The risk rating generally places the new applicant in one of 3
categories used to evaluate the information.

          IDALERT(TM)

          Our IDAlert product detects subsequent abuses in light of new identity
record feeds to the reference database of identity records and alerts either the
consumer or Edentify's client based on our client's wishes. As with automobiles,
identities are usually modified, damaged or used to commit a crime once they are
stolen. By continuously monitoring information related to a specific identity,
the owner of that identity or Edentify's client can be immediately notified if
it has been compromised. As identity fraud usually precedes other types of fraud
(such as credit card fraud), this type of proactive alert system is critical to
mitigating the extensive, and expensive, damage perpetrated after an identity is
stolen and manipulated. Given the considerable lag between when an identity is
compromised and when that event is discovered, this service is a critical
component of Edentify's services in defense against identity fraud.

INMOTION BIOMETRICS PRODUCTS

          The IMB Technology is still under development in accordance with the
agreements entered into between the Company and face2face animation, inc. (See
sections entitled "Material Agreements" below).

COMPETITION

RELATING TO EDENTIFY (DE) OPERATIONS

ID Analytics, Inc.

     ID Analytics, Inc. ("ID Analytics"), is a private company backed by two
venture capital firms - Canaan Partners and Trinity Ventures. It provides
advanced analytic solutions to manage identity risk and prevent identity fraud
throughout the customer lifecycle. The Company was established in March 2002 by
the President of HNC Software, Inc., (now Fair Isaac), the Group Vice
President at HNC Software and the Vice President (Business Development) at
Evoke Software.

     ID Analytics has developed technology products that are in use today by
consumer companies representing more than half the credit and retail card market
in the US along with large wireless, retail bank and online consumer finance
companies.


                                        4

<PAGE>

Fair Isaac, Inc.

     Founded in 1956, Fair Isaac, Inc. ("Fair Isaac"), has been a pioneer in
transaction analysis using regression analysis. Fair Isaac merged with HNC
Software in 2002, thereby strengthening its leadership in high-end analytics and
customer strategy and decision management systems across various industries.
Most of their revenues come from Strategy Machine solutions, a group of decision
automation tools and services. These solutions combine predictive models and
strategy optimization expertise with decision management systems and services,
enabling businesses to form and manage profitable customer relationships
throughout the customer lifecycle.

     Fair Isaac also delivers risk-scoring solutions to various
telecommunications, government and financial agencies to identify credit fraud
and identity theft and minimize associated losses. Other business segments
include consulting services and analytic software tools.

     More than 2,500 businesses in over 60 countries use Fair Isaac's products
and services. Fair Isaac's proprietary FICO Scores and Falcon Fraud Manager are
used by several businesses to monitor the health of their accounts and minimize
the losses from identity risk and credit frauds.

RELATING TO INMOTION BIOMETRICS BUSINESS

Viisage Technology

     Viisage Technology offers technology-based identity solutions that are used
for instantaneous identification (using images in a database), access, and
surveillance applications. These solutions are aimed at reducing identity theft,
providing access control, protecting personal privacy, etc. The Company's main
customers are the government agencies, law enforcement departments and
enterprises that are concerned with providing security. Viisage accounts for
more than 30 million government issued ID cards per year at more than 2000
locations.

     Viisage operates in two main segments: secure credentials and biometrics.
Secure credentials involve the development and implementation of software and
hardware solutions that utilizes face recognition and other biometric
technologies. The major applications of Viisage's solutions include driver's
licenses, passports, voter registrations, ID cards, etc.

     Viisage recently merged with Identix, Inc. Identix Inc. focuses on
fingerprint, facial and skin biometric solutions that are used in several
security and individual identification applications. These solutions are used to
prevent fraud and identity theft, identify criminals, enroll individuals in
identification programs, control physical access, authorize financial
transactions, assist in job applicant screening, etc.

     Identix's major customers include several law enforcement agencies, the
Department of Homeland Security, the IRS, the Department of Motor Vehicles
(DMV), several financial institutions and others in the healthcare sector. The
US government accounts for about 14% of Identix's revenue, while foreign
customers contributed to 12%.

     Identix focuses on three biometric segments - fingerprint, face and skin.

     -    Fingerprint biometrics is powered by Identix's BioEngine algorithm
          that contains fingerprint matching and recognition capabilities that,
          in turn, allows customers to create custom one-to-one verification and
          one-to-many identification applications, such as time and attendance,
          physical access, information security, etc.

     -    Face biometrics uses Identix's FaceIt engine that combines facial
          images with skin biometrics, thereby giving higher levels of quality.

     Identix's skin biometrics uses an algorithm called Surface Texture
Analysis, by which the surface of the skin is analyzed for random features and a
skinprint (skin template) is taken. This skin print can either be used on its
own or clubbed with traditional face or fingerprint recognition technologies.

     The combined company is ranked #2 in the U.S. Driver's license market with
13 states (23% of licensed drivers) using its products. Digimarc is #1 ranked
with 32 states (68% of licensed drivers), including the District of Columbia. In
passports, Viisage has an exclusive contract for the production of 7 million
U.S. passports per year. Viisage's facial recognition solutions are incorporated
into driver's licensing in six states to prevent fraud. Currently, 13 US states
have incorporated the facial recognition technology, of which Digimarc (which
licenses third party technology from Identix and Cognitec) caters to six.


                                        5
<PAGE>

MATERIAL AGREEMENTS

DEVELOPMENT AND SERVICE AGREEMENT WITH SEISINT

          The Company entered into a Master Services Agreement (the "Services
Agreement") with Seisint, Inc. ("Seisint"), a wholly-owned subsidiary of
Lexis-Nexis, effective October 3, 2005. This Services Agreement provides for
Seisint to provide certain services and for Edentify to perform certain duties
as outlined in a separate Scope of Work ("SOW") all in connection with
supporting our ongoing efforts to assist our customers in the areas of detection
and prevention of identity fraud. The Master Services Agreement also provides
that a fee will be paid to Seisint as specified in a separate SOW. The term of
the Master Services Agreement begins as of the Effective Date and continues
until December 31, 2008, renewable for successive one-year terms unless the
non-renewing party notifies the other in writing of such non-renewal at least 90
days prior to the expiration of the respective term. Upon expiration of the
term, all licenses granted pursuant to the Agreement or any SOW will terminate.
The Master Services Agreement also provides for an indemnification by each of
the parties of the other party under conditions set forth in detail in the
Master Services Agreement. Except with respect to the indemnification
obligations of the parties, liability under the Master Services Agreement is
limited to the amount payable under the Master Services Agreement. This
agreement also provides for confidentiality with respect to the information and
technology being exchanged and developed. The Master Services Agreement further
requires us to maintain general liability insurance with coverage of no less
than $1,000,000 per claim and $2,000,000 aggregate.

          In consideration for the development and implementation of the
Company's database server, assessment server(s), and required operating
infrastructure within Seisint, and the initial run of the Company's key
generation and update service and identity assessment processing service, the
Company agreed to pay to Seisint a fee (the "Implementation Fee"). Such
Implementation Fee is payable in two equal installments, with the first payment
delivered on the effective date of the agreement, and the second payment
delivered on or before 30 days from the date of the December 31, 2005 invoice
from Seisint. Pursuant to the agreement, the Company paid the amount due upon
execution of the agreement and recorded the second payment due as an accrued
liability as of December 31, 2005. The Company recorded the entire fee as a
prepaid expense as of December 31, 2005 and will amortize these costs over the
three year term of the contract as research and development. In consideration
for the ongoing services provided to the Company, including the maintenance of
the Company's database server and assessment server(s) and all subsequent runs
of the Company's key generation and update service and identity assessment
processing services, the Company agreed to pay to Seisint fees for 2006, 2007
and 2008, respectively.

          Pursuant to the first SOW ("SOW 1"), executed simultaneously with the
Master Services Agreement, Seisint is to provide all hardware, operating
software (excluding certain assessment modules provided by Edentify) and data
center needs necessary for the development, implementation and maintenance of
servers that shall perform identification fraud detection services to our
customers. Edentify is to provide the assessment modules for processing to
develop a key that will allow for the detection of identification fraud. The
term of SOW 1 begins as of the Effective Date and continues until December 31,
2008, renewable for successive one year terms unless the non-renewing party
notifies the other in writing of such non-renewal at least 90 days prior to the
expiration of the respective term. Edentify also grants to Seisint a revocable
(to the extent that SOW 1 is terminable), world-wide, non-transferable,
royalty-free restricted license without the right to sublicense to use the
assessment modules and key generation modules solely for the purpose of
performing the services contemplated by SOW 1. SOW 1 also sets forth a schedule
of fees payable by Edentify to Seisint, increasing annually for each of the
three years of the term and a revenue sharing formula, whereby Seisint receives
a percentage of the gross revenue derived from the sale by Edentify of the
product developed from the services performed under SOW 1 based on a stepped
rate over the three year initial term of the agreement. SOW 1 also provides that
the parties will cooperate on product development and shall negotiate in good
faith on rights to resell the products jointly developed. Each party retains
their respective rights in the intellectual property originated by such party
and used in conjunction with the performance of the services contemplated by the
agreement.

          Pursuant to the second SOW ("SOW 2") also, executed simultaneously
with the Master Services Agreement, Edentify is to be compensated a percentage
of receipts from sales of Seisint services for which Edentify originated the
customer lead and was a procuring cause. The term of SOW 2 begins as of the
Effective Date and continues until December 31, 2008, renewable for successive
one year terms unless the non-renewing party notifies the other in writing of
such non-renewal at least 90 days prior to the expiration of the respective
term.


                                       6

<PAGE>

DEVELOPMENT AND SERVICE AGREEMENT WITH FACE2FACE ANIMATION

     On August 29, 2005, the Company's wholly-owned subsidiary, InMotion
Biometrics, Inc. ("InMotion") entered into a license, development and share and
warrant issuance agreement with face2face animation, inc. ("face2face") on
August 29, 2005. The Company was granted an exclusive worldwide license
("License Agreement") to make, use, import and sell certain patents, hardware,
software and other technology related to the identification of persons and
facial recognition. InMotion also has limited right to sub-license the
technology and requires face2face to pay InMotion any royalties or fees due to
third parties that are related to the technology.

     As consideration for the license agreement, the Company was required to
issue shares of common stock and warrants pursuant to a share and warrant
issuance agreement as described further below. The term of the license is
perpetual.

     As part of the same transaction, InMotion also entered into a non-exclusive
Development Agreement ("Development Agreement") with face2face for the joint
development of hardware and software to be used for advanced acoustical and
visual speech recognition and facial recognition. The term of the agreement is
twelve months from the date of execution with an option to renew for an
additional six months. InMotion paid face2face $1,000 upon execution of the
development agreement and also provided other assurances regarding minimum
capitalization required for face2face to obtain grant funding from certain state
agencies.

     As part of the consideration for the License Agreement and the Development
Agreement described above, the Company, on August 29, 2005 also closed on a
Share and Warrant Issuance Agreement (the "Issuance Agreement") with face2face.
The Issuance Agreement was entered into as a condition precedent to the
performance obligations of the parties to each of the License Agreement and the
Development Agreement. As part of the consideration for face2face entering into
the License Agreement and the Development Agreement, The Company issued in the
name of face2face a total of 7,500,000 shares of our common stock (the "Shares")
which shall be delivered to face2face as follows: 2,500,000 Shares at closing,
2,500,000 Shares upon acceptance of the Product by the Company under the
Development Agreement, and 2,500,000 Shares upon the closing of a sublicense or
other agreement between the Company and a customer relating to the Product. The
Company also issued a warrant, at closing, to face2face to purchase 1,000,000
shares of the Company's common stock at an exercise price of $1.00 per share.

MARKETING/DISTRIBUTION

          Edentify markets each technology directly and through channel partners
in each specific vertical. Future plans include the development of an integrated
product that combines our information-based ID manipulation detection capability
with IMB's face recognition technology, thereby enabling a foolproof enrollment
and subsequent identity protection system.

          In December, 2005, we entered into a Scoring Services Agreement with
MyPublicInfo ('MPI") whereby MPI will provide us with identity information from
their proprietary database for the purpose of having us utilize proprietary
databases, processes and information developed by us and/or obtained from third
parties to produce an "Identity Score". We will provide MPI with a license to
use the "Identity Score" derived utilizing our proprietary scoring methodology,
which measures the level of suspicious identity manipulation activity and
potential fraud associated with each identity record provided by the Client.

          In December 2005, we entered into an agreement with  Seisint, a
wholly-owned subsidiary of LexisNexis, a leading provider of legal, news,
business information and risk management services, to jointly develop and market
identity fraud detection solutions. We will be added to the LexisNexis Risk
Management Channel Partner Group and will have access to their industry-leading
partner solutions. Our addition to this group will enable us to provide
financial service companies, health care organizations and government agencies a
more enhanced and streamlined solution capable of assessing, detecting and
preventing identity fraud. Under the terms of agreement, we and the risk
management unit of LexisNexis will jointly develop and market identity fraud
detection solutions that integrate our proprietary advanced identity fraud
assessment, detection, and prevention technology with LexisNexis content. We
will jointly market certain complimentary products and services to our
respective customers.

          We hired additional sales and marketing staff during the second half
of 2005. We will focus our efforts to establish an internal marketing and sales
infrastructure to support the sales of our products in the United States. We
also intend to expand our marketing/sales programs during the coming year.


                                       7

<PAGE>

INTELLECTUAL PROPERTY

          Currently, Edentify owns the IP rights to two strategic approaches for
detecting and preventing identity fraud. One is a patented information-based
approach that analyzes identity information of individuals in large corporate
databases and is capable of detecting and scoring incidents of identity
manipulation and potential theft (Identity Quotient Index(TM)). The forerunner
of this technology is currently used in screening new checking account
applications at nearly every major bank in the U.S. and Edentify will continue
to market the current version to other areas of the financial services industry,
as well as to large healthcare organizations and local, state and federal
governments. The second approach is a biometric technology marketed through and
named after our wholly-owned subsidiary, InMotion Biometrics, Inc. ("IMB"), that
combines face and voice recognition technologies for authenticating the identity
of an individual. The IMB technology is licensed from face2face, Inc., a leading
character animation company that was spun-off from Lucent Technologies, Inc. in
2000. The core capability of this technology is its facial analysis system that
contains highly evolved algorithms for obtaining the inner lip contour, which
can accurately measure for optimal visual speech recognition performance.
Claiming high levels of performance and reliability, the InMotion Biometrics
technology offers significantly improved recognition capabilities of existing
biometric technologies, eliminates the possibility of deception by using
challenge response and reduces the inconvenience to the user.

          We have filed for registration on the primary register with the U.S.
Patent and Trademark Office for our service mark:

                                (EDENTIFY LOGO)

GOVERNMENT REGULATION

          Our business model and technology do not require us to collect,
aggregate, and retain data in order to provide the services we do. As a result,
we are not currently subject to certain privacy laws and regulations that are
aimed at protecting consumer information. Many of our business partners, who
deal directly with individual consumer information, however, are subject to
such laws and regulation. Since this area of the law changes rapidly and is
regularly fluctuating, however, this could change at any time.

HUMAN RESOURCES

     As of February 28, 2006, our total headcount was 12, consisting of 11 full
time employees ('FTE') and 1 part-time employee. Part time personnel are paid on
a per diem or monthly basis. Three FTEs are engaged in our sales and marketing
effort and four FTEs perform general administration, including financial and
investor relations functions. We have no union employees and we believe our
relationship with our employees is good.

RECENT FINANCINGS

     On December 31, 2004, the Company issued an aggregate of $300,000 in
principal amount of 8% senior convertible debentures due on December 31, 2006,
and warrants to receive an aggregate of 2,000,000 shares of common stock of the
Company in a private placement for aggregate proceeds of $300,000. The debenture
is one of a series of 8% senior secured convertible debentures. Interest is due
quarterly at a rate of 8% per annum on the outstanding principal. Each debenture
is convertible into shares of common stock at the option of the holder equal to
the principal amount converted divided by $0.15. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.15 per share at
any time commencing on December 31, 2004 through December 31, 2009. The
convertible debenture was issued with a $300,000 discount due to the fair value
ascribed to the detachable warrants utilizing the Black-Scholes method. The
discount is being amortized as financing costs over the two year life of the
debenture. On December 10, 2005, the debenture holders exercised 2,000,000
warrants for which the Company received gross proceeds of $300,000.

     On April 21, 2005, we issued an aggregate of $600,000 in principal amount
of 8% senior convertible debentures due on April 21, 2007, and warrants to
receive an aggregate of 1,875,000 shares of common stock of the Company in a
private placement for aggregate proceeds of $600,000. The debenture is one of a
series of 8% senior secured convertible debentures. Interest is due quarterly at
a rate of 8% per annum on the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.32. The warrants are to acquire an
aggregate of 1,875,000 shares of common stock at a price of $0.32 per share at
any time commencing on April 21, 2005 through April 21 2010. The convertible
debenture was


                                       8

<PAGE>

issued with a $600,000 discount due to the fair value ascribed to the detachable
warrants utilizing the Black Scholes method. The discount is being amortized as
financing costs over the two year life of the debenture.

     On August 29, 2005, we issued an aggregate of $1,000,000 in principal
amount of 6% senior convertible debentures due on August 29, 2007, and warrants
to receive an aggregate of 2,000,000 shares of common stock of the Company in a
private placement for aggregate proceeds of $1,000,000. The debenture is one of
a series of 6% senior secured convertible debentures. Interest is due quarterly
at a rate of 6% per annum on the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.50. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.50 per share at
any time commencing on August 29, 2005 through August 29, 2010. The convertible
debenture was issued with a $1,000,000 discount due to the fair value ascribed
to the detachable warrants utilizing the Black Scholes method. The discount is
being amortized as financing costs over the two year life of the debenture.

     As of December 10, 2005, we issued an aggregate of $ 1,050,000 in principal
amount of 6% senior convertible debentures due on December 10, 2007, and
warrants to receive an aggregate of 2,100,000 shares of common stock of the
Company in a private placement. Interest is due quarterly at a rate of 6% per
annum on the outstanding principal. The debenture is convertible into shares of
common stock at the option of the holder equal to the principal amount converted
divided by $0.50. The warrants are to acquire an aggregate of 2,100,000 shares
of common stock at a price of $0.50 per share at any time commencing on December
10, 2005 through December 10, 2010. The convertible debenture was issued with a
$1,050,000 discount due to the fair value ascribed to the detachable warrants
utilizing the Black Scholes method. The discount is being amortized as financing
costs over the two year life of the debenture.

     The convertible debentures noted above were accounted for in accordance
with EITF 98-5: Accounting for convertible securities with beneficial conversion
features or contingency adjustable conversion and with EITF No. 00-27:
Application of issue No. 98-5 to certain convertible instruments. The Company
determined the fair values to be ascribed to detachable warrants issued with the
convertible debentures utilizing the Black-Scholes method.

     On April 28, 2005 we issued an aggregate of $260,000 in principal amount of
a 10% note payable to an individual due on March 31, 2006. The Company prepaid
interest in the amount of $26,000 to the lender. The lender has the right to
convert the unpaid principal amount into shares of Company's common stock at a
price per share of $1.00 on a post-Reverse Split basis. The lender cannot
convert less than $25,000 at one time unless there remains less than $25,000
due.

     In connection with the Company's purchase of software and verification
technology, the Company, in September 2005, entered into a note agreement with a
financial institution in the principal amount of $127,000. The note matures on
September 7, 2006, and the Company is required to make interest only payments
initiating on December 7, 2005. Interest is payable at the Prime rate of
interest (6.75% as of September 30, 2005). The company was required to pay
$127,000 into a cash collateral account as required by the terms of the note
agreement. The Company has accounted for this amount as an other asset as of
December 31, 2005.

ASSET ACQUISITIONS

     On March 31, 2005 the Company entered into an agreement to purchase
software and verification technology for cash, debt, and securities. The
aggregate consideration to be paid for the technology will be $100,000 cash plus
4.767% of the issued and outstanding shares of common stock, warrants to
purchase an additional 41.67% of the number of shares issued to such recipients
of the stock (representing 4.767% of the issued and outstanding common stock of
the surviving corporation), an assumption of debt totaling $127,000 (See Note
7), and a convertible note agreement for $260,000 as more fully described in
Note 7. At December 31, 2005, all amounts due in respect hereof were paid in
full. The Company valued total consideration for the software as follows:

<TABLE>
<S>                   <C>
Cash                  $  100,000
Stock valuation          805,522
Debt assumption          127,000
Convertible note         260,000
Warrants                     560
                      ----------
Total consideration   $1,293,082
                      ==========
</TABLE>

     On August 29, 2005, the Company's wholly-owned subsidiary, InMotion
Biometrics, Inc. ("InMotion") entered into a license, development and share and
warrant issuance agreement with face2face animation, inc. ("face2face") on
August 29, 2005. The


                                       9

<PAGE>

Company was granted an exclusive worldwide license ("License Agreement") to
make, use, import and sell certain patents, hardware, software and other
technology related to the identification of persons and facial recognition.
InMotion also has limited right to sub-license the technology and requires
face2face to pay InMotion any royalties or fees due to third parties that are
related to the technology.

     As consideration for the license agreement, the Company was required to
issue shares of common stock and warrants pursuant to a share and warrant
issuance agreement as described further below. The term of the license is
perpetual.

     As part of the same transaction, InMotion also entered into a non-exclusive
Development Agreement ("Development Agreement") with face2face for the joint
development of hardware and software to be used for advanced acoustical and
visual speech recognition and facial recognition. The term of the agreement is
twelve months from the date of execution with an option to renew for an
additional six months. InMotion paid face2face $1,000 upon execution of the
development agreement and also provided other assurances regarding minimum
capitalization required for face2face to obtain grant funding from certain state
agencies.

     As part of the consideration for the License Agreement and the Development
Agreement described above, the Company, on August 29, 2005 also closed on a
Share and Warrant Issuance Agreement (the "Issuance Agreement") with face2face.
The Issuance Agreement was entered into as a condition precedent to the
performance obligations of the parties to each of the License Agreement and the
Development Agreement. As part of the consideration for face2face entering into
the License Agreement and the Development Agreement, The Company issued in the
name of face2face a total of 7,500,000 shares of our common stock (the "Shares")
which shall be delivered to face2face as follows: 2,500,000 Shares at closing,
2,500,000 Shares upon acceptance of the Product by the Company under the
Development Agreement, and 2,500,000 Shares upon the closing of a sublicense or
other agreement between the Company and a customer relating to the Product. The
Company also issued a warrant, at closing, to face2face to purchase 1,000,000
shares of the Company's common stock at an exercise price of $1.00 per share.

     Under EITF 96-18 Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or Services,
the Company recorded the issuance and delivery of the 2,500,000 shares of the
Company's common stock and 1,000,000 warrants as an investment in the licensed
technology as the performance criteria of executing the agreement were met as of
December 31, 2005. The Company will record the remaining delivery of 5,000,000
shares of common stock as follows: 1) 2,500,000 shares upon acceptance of the
product by the Company at the fair value of the Company's stock at the date of
acceptance 2) 2,500,000 shares upon the closing of sublicense or other
agreement between the Company and a customer relating to the product at the fair
value of the Company's common stock at the date this requirement is met.
Accordingly, the Company has recorded this licensed technology of $2,545,806
under the caption "Intangibles" as of December 31, 2005.

     After further development of this technology, and/or at the commencement of
sales of products using this technology, the Company will begin to amortize,
under FASB Statement No. 142. Goodwill and Other Intangible Assets, over the
period which the asset is expected to contribute directly or indirectly to the
future cash flows of the technology.

     The Company valued total consideration for the software as follows:

<TABLE>
<S>                   <C>
Common Stock          $1,875,000
Warrants                 670,806
                      ----------
Total Consideration   $2,545,806
                      ==========
</TABLE>

     The Company determined the fair values to be ascribed to detachable
warrants issued with the convertible debentures utilizing the Black-Scholes
method. The carrying amount of intangibles is reviewed for recoverability when
events or changes in circumstances occur that indicate that the carrying value
of the assets may not be recovered.

     We had approximately $1,242,225 in cash and cash equivalents as of December
31, 2005. These funds should be sufficient to meet our operating cash
requirements including debt service for the near term. However, we may need to
raise additional funds through additional equity or debt financing or from other
sources in order to develop, market and sell our software and verification
products.

     Because of our long-term capital requirements, we may seek to access the
public equity market whenever conditions are favorable, even if we do not have
an immediate need for additional capital at that time. Any additional funding
may result in significant dilution and could involve the issuance of securities
with rights, which are senior to those of existing stockholders. We may also
need additional funding earlier than anticipated, and our cash requirements, in
general, may vary materially from those now planned, for reasons including, but
not limited to, changes in our development and sales and marketing efforts,
competitive and technological advances and higher than anticipated expenses and
lower than anticipated revenues from the sale of our products.

     There can be no assurances that we will raise adequate funds from these or
other sources, which may have a material adverse effect on our ability to
develop, market and sell our products.


                                       10

<PAGE>

                                  RISK FACTORS

The following cautionary statements identify important factors that could cause
our actual result to differ materially from those projected in the
forward-looking statements made in this Form 10-K. Among the key factors that
have a direct bearing on our results of operations are:

WE HAVE NOT YET COMMENCED SIGNIFICANT OPERATIONS AND MAY CONTINUE TO INCUR
SUBSTANTIAL LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN

Significant operations have not yet commenced. As of December 31, 2005, the
Company had $556 in earned revenue and our accumulated deficit was approximately
$3,905,866. We have not yet generated significant revenues from our products and
may incur substantial and increased losses in the future. The timing of the
deployment and integration of our data analysis solutions depends heavily on the
time and resources available from our customers and delays caused thereby may
impact the timing of our receipt of revenue. We cannot give any assurance that
we will ever achieve significant revenues from product sales or become
profitable. We require, and will continue to require, the commitment of
substantial financial and personnel resources to develop, market and sell our
products. The cost of obtaining outside financing to continue operations is very
costly. We cannot give any assurance that our product development, marketing and
selling efforts will be successfully completed or be profitable.

WE MAY REQUIRE ADDITIONAL FINANCING WHICH MAY NOT BE AVAILABLE

The development, marketing and sales of our products will require the commitment
of substantial resources to bring software products to market. As of December
31, 2005, we had approximately $1,242,225 in cash and cash equivalents. These
funds should be sufficient to meet our operating cash requirements including
debt service for the near term. However, we may need to raise additional funds
through additional equity or debt financing or from other sources in order to
successfully develop, market and sell our software products. Additional debt
financing will be very costly and additional equity financing may substantially
dilute existing shareholders. Moreover, there can be no assurances that we will
be able to raise adequate funds, and this may have a material adverse effect on
our ability to develop, market and sell our products and to continue operations.

WE HAVE RELATIONSHIPS WITH KEY VENDORS WHO HAVE PERMISSIBLE USE OF DATA WITHOUT
WHICH WE CANNOT PROVIDE OUR SERVICES

The services and products we provide to customers require the use of large
amounts of data for analysis purposes. Each score result that we generate for a
customer on any one identity requires a scan of billions of records and it is
important that we maintain relationships with certain key data providers and
technology solution providers in the industry that are an integral part of our
solutions given regulation of use of consumer data and the number of vendors
with permissible use of such data, in accordance with current federal and state
privacy laws and regulations. Although they are reasonably interchangeable and
replacement of a current key vendor with a competitor would not impact the
quality of our product or services, the investment of time and financial
resources necessary to do such replacement would significantly impact our
ability to generate sales and, in the interim, would suspend our ability to
generate sales.

WE HAVE A RELATIONSHIP WITH A KEY VENDOR WHO PROVIDES HOSTING SERVICES FOR OUR
DATA CENTER

The services and products we provide for our customers requires an automated
analysis of individual identity information in a secure data center. We have
contracted with a vendor who maintains data center on our behalf on a contract
basis and is responsible for maintaining the data center in adherence with the
highest security standards. Although the vendor maintains a similar data center
on behalf of itself and other customers, there is no guarantee that they will
not be susceptible to breaches of security, which could greatly impact the
relations we have with our customers.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE

Based on our business and industry, we expect to experience significant
fluctuations in our future quarterly operating results due to a variety of
factors, many of which are outside our control. Factors that may adversely
affect our quarterly operating results include:

     -    our ability to attract new customers at a steady rate and maintain
          customer satisfaction,

     -    the ability to manage a long and unpredictable sales cycle


                                       11

<PAGE>

     -    the demand for the products and services we intend to market,

     -    the amount and timing of capital expenditures and other costs relating
          to the expansion of our operations,

     -    the introduction of new or enhanced services by us or our competitors,
          and

     -    economic conditions specific to the Technology, Internet, e-commerce
          or all or a portion of the technology market.

AS A TECHNOLOGY-BASED COMPANY, WE DEPEND UPON THE ABILITY OF OUR SOLUTIONS TO
WITHSTAND CONSTANT BREAKTHROUGHS IN TECHNOLOGY THAT MAY CAUSE OUR SOLUTIONS TO
BECOME OBSOLETE

The software industry is highly competitive, and has few barriers to entry.
Although there are few competitors who offer the same or similar services of the
type we offer, we can provide no assurance that additional competitors will not
enter markets that we intend to serve, particularly since the identity fraud
detection and prevention industry is one that is burgeoning and critical to
needs in the financial industry with regulatory agencies and present-day
commerce.

We believe that our ability to compete depends on many factors both within and
beyond our control, including the following:

     -    the timing and market acceptance of our business model,

     -    our competitors' ability to gain market control,

     -    the success of our marketing efforts,

     -    acquisitions of companies with new technology,

     -    using current relations to extend all business sales and marketing,

     -    consumer dissatisfaction with, or problems caused by, the performance
          of our products and solutions, and

     -    changes in governmental regulation of use of consumer data.

WITH PRESENT LIMITED COMPANY SIZE, WE DEPEND ON CERTAIN KEY EMPLOYEES TO
CONTINUE OPERATIONS

Our future performance will depend significantly on the continued service and
performance of our director and Chief Executive Officer, Terrence DeFranco, our
Chief Operating Officer, Thomas Harkins, and our Senior V.P. of Technology,
Christopher Williams. The loss of the services of any of these individuals could
seriously impair our ability to operate our business, compete in our industry
and improve our products and services.

AS WE EXPAND OUR OPERATIONS, WE MAY NEED THE SERVICES OF A FULLTIME CHIEF
FINANCIAL OFFICER, OTHERWISE IT MAY LEAD TO DIFFICULTY IN COMPLYING WITH
APPLICABLE REGULATIONS

We presently rely on the services of an independent contractor who is a
certified public accountant, in conjunction with our Controller, who is a
fulltime employee to ensure that our financials accurately recorded, processed,
summarized and reported within the time periods specified by U.S. Securities and
Exchange Commission rules and regulations. As we expand our operations, we may
need the services of a fulltime Chief Financial Officer. If we are not able to
retain a fulltime Chief Financial Officer for any reason, it will become much
more difficult for us to comply with the applicable securities regulations.

WE MUST CONTINUE TO ATTRACT, TRAIN, MOTIVATE AND RETAIN PERSONNEL WITH TECHNICAL
EXPERTISE AND WITH EXPERIENCE IN THE REGULATED USE OF CUSTOMER DATA

In order to be successful, especially given the highly competitive nature of our
industry, we must attract, train, motivate and retain highly qualified personnel
skilled in technology and the regulated use of consumer information,
particularly in the areas of sales and marketing. Because the competition for
qualified employees is intense, hiring, training, motivating, retaining and
managing employees


                                       12

<PAGE>

with the strategic and technical skills we need is both time-consuming and
expensive. If we fail to attract, train and retain key personnel, we may
experience delays in marketing and commercialization of our products and
services.

BECAUSE OUR PRODUCTS RELY ON TECHNOLOGY THAT WE OWN, OUR BUSINESS WILL SUFFER IF
WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS TO THAT TECHNOLOGY AGAINST
INFRINGEMENT BY COMPETITORS

To protect our intellectual property rights, we rely on a combination of
copyright and trade secret laws and restrictions on disclosure. Despite our
efforts to protect our proprietary rights, unauthorized parties may copy or
otherwise obtain and use our technology and solutions. Monitoring unauthorized
use of our solutions is difficult and the steps we have taken may not prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect our proprietary results as fully as in the United States.
If we fail to protect our intellectual property from infringement, other
companies may use our intellectual property to offer competitive products at
lower prices. If we fail to compete effectively against these companies, we
could lose customers and experience a decline in sales of our solutions and
revenues.

EFFORTS TO PROTECT OUR INTELLECTUAL PROPERTY OR OUR POTENTIAL INFRINGEMENT OF
THE INTELLECTUAL PROPERTY OF OTHERS MAY CAUSE US TO BECOME INVOLVED IN COSTLY
AND LENGTHY LITIGATION

Although we are not currently involved in any intellectual property litigation,
we may become party to litigation in the future either to protect our
intellectual property or as a result of an alleged infringement by us of the
intellectual property of others. These claims and any resulting litigation could
subject us to significant liability or invalidate our ownership rights in the
technology used in our solutions. Litigation, regardless of the merits of the
claim or outcome, could consume a great deal of our time and money and would
divert management time and attention away from our core business.

Any potential intellectual property litigation could also force us to do one or
more of the following:

     -    stop using the challenged intellectual property or selling our
          products or services that incorporate it

     -    obtain a license to use the challenged intellectual property or to
          sell products or services that incorporate it, which could be costly
          or unavailable

     -    redesign those products or services that are based on or incorporate
          the challenged intellectual property, which could be costly and time
          consuming or could adversely affect the functionality and market
          acceptance of our products

If we must take any of the foregoing actions, we may be unable to sell our
solutions, which would substantially reduce our revenues.

WE MUST DEVELOP, PRODUCE AND ESTABLISH NEW PRODUCTS AND SERVICES THAT KEEP UP
WITH RAPID TECHNOLOGICAL CHANGE

The market for Internet services, business-to-business e-commerce, and risk
management solutions is characterized by rapid technological changes, frequent
software changes, frequent new products and service introductions and evolving
industry standards. The introduction of services embodying new processes and
technologies and the emergence of new industry standards can rapidly render
existing services obsolete and unmarketable. Our success in adjusting to rapid
technological change will depend on our ability to:

     -    develop and introduce new services that keep pace with technological
          developments and emerging industry standards; and

     -    address the increasingly sophisticated and varied needs of customers.

Due to inadequate technical expertise, insufficient finances or other reasons,
we may be unable to accomplish these tasks. Such failure would have a material
adverse effect on our operating results and financial condition.


                                       13

<PAGE>

THE REGULATORY ENVIRONMENT FOR COMPANIES THAT PROCESS CONSUMER IDENTITY
INFORMATION MAY CREATE ADDITIONAL COSTS THAT MAY IMPACT OUR ABILITY TO GENERATE
REVENUE

Because of the importance of protecting privacy and the ever increasing
regulatory restrictions placed on use (and re-use) of the data that we utilize
in processing our solutions, as well as the continual changes in such
restrictions, it is difficult to predict how such changes or additional
restrictions may impact our operating costs. These costs include, among others,
legal and administrative costs as well as additional or increased fees to
license the use of information as a result of sources of such information
becoming more limited as a result of regulatory restrictions. At present, the
management of such costs is permits commercially viable operations as
contemplated by our management. There is no assurance, however, that dramatic or
unexpected changes in such costs may not impact our ability to generate profit
or even permit our operations to generate revenue. Management is constantly
vigilant with respect to remaining current with respect to changes in law and
regulations that affect our business.

THE VOLATILITY OF THE PRICE OF OUR SECURITIES MAY INCREASE

The market price of our common stock has in the past been, and may in the future
continue to be, volatile. A variety of events may cause the market price of our
common stock to fluctuate significantly, including:

     -    quarter-to-quarter variations in operating results,

     -    adverse news announcements,

     -    the introduction of new products and services, and

     -    our common stock is listed for quotation on the Over-The-Counter (OTC)
          Bulletin Board.

For the 12-month period ended December 31, 2005, the closing price of our common
stock has ranged from $0.26 to $1.02 per share on a post-Reverse Split basis. We
expect the price of our common stock to remain volatile. The average daily
trading volume of our common stock varies significantly. Our relatively low
average volume and low average number of transactions per day may affect the
ability of our stockholders to sell their shares in the public market at
prevailing prices and a more active market may never develop.

In addition, the stock market in recent years has experienced significant price
and volume fluctuations that have particularly affected the market prices of
equity securities of many companies in our business and that often have been
unrelated to the operating performance of such companies. These market
fluctuations may adversely affect the price of our common stock.

THE "PENNY STOCK RULE" COULD MAKE IT CUMBERSOME FOR BROKERS AND DEALERS TO TRADE
IN OUR COMMON STOCK, WHICH WOULD MAKE THE MARKET FOR SAME LESS LIQUID AND CAUSE
THE PRICE OF OUR COMMON STOCK TO DECLINE

Trading in our securities is conducted on the OTC Bulletin Board. As long as our
Common Stock is not quoted on NASDAQ or a national exchange or at any time that
we have less than $2,000,000 in net tangible assets, trading in our Common Stock
is covered by Rule 15g-9 under the Securities Exchange Act of 1934 for
non-NASDAQ and non-exchange listed securities. Under that rule, broker-dealers
who recommend covered securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are exempt from this rule if the market price is at
least $5.00 per share.

The U.S. Securities Exchange Commission has adopted regulations which generally
define a penny stock to be any equity security which has a market price of less
than $5.00 per share, subject to certain exemptions. Such exemptions include an
equity security listed on NASDAQ and an equity security issued by an issuer
which has (i) net tangible assets of at least $2,000,000, if such issuer has
been in continuous operation for three (3) years; (ii) net tangible assets of at
least $5,000,000, if such issuer has been in continuous operation for less than
three (3) years; or (iii) average revenue of at least $6,000,000 for the
proceeding three (3) years. Unless such an exemption is available, the
regulations require the delivery of a disclosure schedule explaining the penny
stock market and the risks associated therewith prior to any transaction
involving a penny stock. Our Common Stock is considered to be a penny stock and
is subject to the regulations on penny stocks. The fact that our Common Stock is
currently a penny stock could have a material adverse effect on the market
liquidity of our Common Stock due to the limitations on the ability of
broker-dealers to sell our Common Stock in the public market which could cause
the price of our stock to decline.


                                       14

<PAGE>

WE WILL CONTINUE TO INCUR INCREASED COSTS RESULTING FROM FEDERAL, STATE AND
MARKETPLACE REGULATION

As a public company, we will continue to incur significant legal, accounting and
other expenses. We also anticipate that we will continue to incur legal and
administrative costs associated with corporate governance requirements,
including requirements under the Sarbanes-Oxley Act of 2002, as well as new
rules implemented by the Securities and Exchange Commission and NASDAQ. We
expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time-consuming and costly. We
also expect these rules and regulations may make it more difficult and more
expensive for us to obtain director and officer liability insurance and we may
be required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. As a result, it may be more
difficult for us to attract and retain qualified individuals to serve on our
board of directors or as executive officers. We are currently evaluating and
monitoring developments with respect to these new rules, and we cannot predict
or estimate the amount of additional costs we may incur or the timing of such
costs.

Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for us to predict which will arise. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

ITEM 2. PROPERTIES.

          Edentify leases approximately 2,819 square feet of space for its
headquarters at 74 West Broad Street, Suite 350, Bethlehem, Pennsylvania. The
lease is for a term of three years with monthly payments of rent and a
proportionate share of building operating expenses. Both the rent amount and the
operating expense payments have provisions for increases which are pro-rated per
month for the remaining months on the lease.

ITEM 3. LEGAL PROCEEDINGS

          There are no existing or threatened legal proceedings involving the
Company or our subsidiaries.

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

          No matters were submitted to a vote of the security holders during the
last quarter of the year ended December 31, 2005.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

          In 2005, we issued 2,350,000 shares of common stock consisting of 1)
2,000,000 shares upon exercising or warrants related to a convertible
debentures; 2) 350,000 shares in payment of services rendered.

          The foregoing issuances of securities were private transactions and
exempt from registration under section 4(2) of the Securities Act and/or
regulation D rule 506 promulgated under the Securities Act. These securities
have been or will be registered with the SEC.

          Our Common Stock is presently quoted, under the symbol "EDFY" on the
OTC Bulletin Board. Prior to July 2005, our symbol was "BUDH". In July 2005, the
symbol was changed as a result of our name change. Set forth below are the high
and low closing bid quotations for our common stock for each quarter of the last
two full fiscal years and a portion of the current year, as reflected on the
electronic bulletin board. The quotations listed below represent prices between
dealers and do not include retail mark-up, markdown or commission, and there can
be no assurance that they represent actual transactions.


                                       15
<PAGE>

<TABLE>
<CAPTION>
    FISCAL YEAR 2005
-----------------------
Quarter    High    Low
-------   -----   -----
<S>       <C>     <C>
  1st     $0.81   $0.25
  2nd     $0.75   $0.42
  3rd     $1.18   $0.41
  4th     $0.75   $0.56
</TABLE>

<TABLE>
<CAPTION>
    FISCAL YEAR 2004
-----------------------
Quarter    High    Low
-------   -----   -----
<S>       <C>     <C>
  1st     $1.10   $0.60
  2nd     $0.90   $0.40
  3rd     $0.65   $0.25
  4th     $0.59   $0.26
</TABLE>

     As of February 28, 2006, there were approximately 77 holders of record of
our common stock. Because a substantial portion of our shares are held by a
depository company in nominee name, we believe the number of beneficial owners
of the securities is substantially greater than this number.

     On February 28, 2006, the last sale price for our common stock on the OTC
BB was $0.60 per share.

     We have not paid any dividends on our common stock. Our notes prohibit the
payment of dividends. There are no plans to declare dividends in the immediate
future.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                               Cumulative through
                                           Year ended Dec.   Year ended Dec.     the Year ended
                                               31, 2004          31, 2005         Dec. 31, 2005
                                           ---------------   ---------------   ------------------
<S>                                        <C>               <C>               <C>
Net Sales                                    $        --      $        556        $        556
Cost of Sales                                         --             8,483               8,483
Total Operating Expenses                          14,478         1,436,644           1,451,392
Interest Expense and Financing Costs                  --           665,146             665,146
Income (loss) from Continuing Operations         (14,478)       (2,108,137)         (2,122,885)
Income (loss) from Continuing Operations          ($0.00)           ($0.09)             ($0.09)
per Share
Shares used in computing basic and            24,501,425        24,596,217          24,572,519
diluted net loss per share

BALANCE SHEET DATA:
Working Capital                                ($250,086)     $    197,402        $    197,402
Total Assets                                      99,775         6,282,227           6,282,227
Total Long Term obligations (1)              $   100,000           410,417        $    410,417
Stockholders' (Deficit) Equity                  (250,086)        4,578,274           4,578,274

OTHER CASH FLOW DATA:
Cash used in Operating Activities               ($22,725)      ($1,037,340)        ($1,060,065)
Cash provided by Financing Activities            100,000         3,537,160           3,637,160
</TABLE>

(1)  In accounting for the December 31, 2004, April 21, 2005, August 29, 2005,
     and December 10 ,2005 issuances of 8%, 8%, 6% and 6% (respectively) Senior
     Convertible Debentures in the principal amounts of $300,000, $600,000,
     $1,000,000 and $1,050,000, respectively, and related embedded conversion
     features and warrant issuances, we recorded debt discounts of approximately
     $2,950,000 which, in effect, reduced the carrying value of the debt to $0.
     For additional information refer to Note 7 to our consolidated financial
     statements for the year ended December 31, 2005.


                                       16

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following discussion and analysis is related to our financial condition
and results of operations for the years ended December 31, 2005 and 2004. This
information should be read in conjunction with Item 6 - "Selected Financial
Data" and our consolidated financial statements and related notes thereto
beginning on F-1 of this Form 10-KSB.

STATEMENT OF FORWARD-LOOKING INFORMATION

     Certain statements in the section are "forward-looking statements." You
should read the information before Part I above, "Special Note" Regarding
Forward-Looking Statements" for more information about our presentation of
information.

COMPANY HISTORY

     Edentify, Inc. ("Edentify") was formed in August 2004 with the objective of
becoming the leading organization in the field of developing and deploying data
analysis technology solutions for preventing identity theft and fraud. It is
currently a later-stage development company and expects shortly to begin a
period of increased growth. Edentify will seek to fulfill its goals by analyzing
the means by which identity crimes are perpetrated and through the development
of new technologies and procedures to assist corporations, the government and
consumers in the fight against identity fraud and related crime.

     On February 29, 2005, BudgetHotels Networks, Inc. ("Budget") signed an
Agreement to acquire all of the issued and outstanding shares of Edentify, Inc.,
a Delaware corporation ("Edentify").

     [The operations regarding our subsidiary, InfoCenter, Inc. have been
accounted for as discontinued operations in accordance with accounting
principles generally accepted within the United States of America.

     The acquisition resulted in the owners and management of Edentify having
effective operating control of the combined entity after the acquisition, with
the existing Budget investors continuing as only passive investors.

     Under accounting principles generally accepted in the United States (US
GAAP), the above noted acquisition is considered to be a capital transaction in
substance, rather than a business combination. That is, the acquisition is
equivalent to the issuance of stock by Edentify for the net monetary assets of
Budget, accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the acquisition is identical
to that resulting from a reverse acquisition, except that no goodwill intangible
is recorded. Under reverse takeover accounting, the post reverse-acquisition
comparative historical financial statements of the "legal acquirer" (Budget),
are those of the "legal acquiree" (Edentify) (i.e. the accounting acquirer).]


RESTATEMENTS

     On July 19, 2006, after analyzing the views expressed by the Office of the
Chief Accountant of the Securities and Exchange Commission ("SEC"), it was
determined that the treatment regarding the acquisition of software technology
was inaccurately reflected within in the statement of cash flows included in our
Annual Report on Form 10-KSB for the year ended December 31, 2005, and our
Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2006,
and that, therefore, a restatement of the statement of cash flows for the
periods referenced above was required. The Company incorrectly included the fair
market value of our common stock issued as part of the consideration for that
acquisition.

     The effect of the restatements changed the amounts previously reported
under cash used in operating activities and the cash used in investing
activities by approximately $806,000 for both the year ended December 31, 2005
and the cumulative period August 27, 2004 through December 31, 2005,
respectively.

     As a result of the corrections of the errors described above, we have
restated our financial statements included in our Annual Report on Form 10-KSB
as follows:

                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                   For the Year                             For the Year
                                                                       Ended                                    Ended
                                                                  December 31, 2005     Adjustments         December 31, 2005
                                                                  -----------------     -----------        ------------------
                                                                    As Previously
                                                                      Reported                                 Restated
<S>                                                               <C>                   <C>                <C>
Cash flows from operating activities:
  Net loss from continuing operations                             $  (2,108,137)                             $ (2,108,137)
  Net (loss)/income from discontinued operations                  $      (6,705)                             $     (6,705)
Adjustments to reconcile net loss to net cash used
    in operating activities:
  Depreciation of property and equipment                                   3,554                                    3,554
  Amortization of deferred financing costs                               560,417                                  560,417
  Common stock issued for services                                       255,150                                  255,150
  Options and Warrants issued for services provided                       86,164                                   86,164
  Common stock issued for software technology                            806,082           (806,082)(a)                 -
Changes in assets and liabilities:
  Prepaids                                                            (1,009,419)                              (1,009,419)
  Other current assets                                                  (130,961)                                (130,961)
  Accounts payable, trade                                                  8,984                                    8,984
  Payroll tax payable                                                     19,660                                   19,660
Deferred revenue                                                          19,444                                   19,444
Dividend payable                                                        (165,046)                                (165,046)
  Other liabilities and accrued expenses                                 623,473 (b)                              623,473
                                                                  ---------------                          ---------------
  Net cash used in operating activities                               (1,037,340)          (806,082)           (1,843,422)
                                                                  ---------------                          ---------------
Cash flows from investing activities:
  Purchase of software and verification technology                    (1,293,082)           806,082 (a)          (487,000)
  Purchase of property and equipment, net                                (36,445)                                 (36,445)
                                                                  --------------                           --------------
  Net cash used in investing activities                           $   (1,329,527)           806,082        $     (523,445)
                                                                  --------------                           --------------
Cash flows from financing activities:
  Proceeds from borrowings                                        $    3,237,160                           $    3,237,160
  Proceeds from exercising of warrants                                   300,000                                  300,000
                                                                  --------------                           --------------
  Net cash provided by financing activities                            3,537,160                                3,537,160
                                                                  --------------                           --------------
  Net decrease (increase) in cash and cash equivalents                 1,170,293                                1,170,293
Cash and cash equivalents at beginning of period                          71,932                                   71,932
                                                                  --------------                           --------------
Cash and cash equivalents at end of period                        $    1,242,225                           $    1,242,225
                                                                  ==============                           ==============
Supplemental disclosures of cash flow information:
  Acquisition of intangible                                       $    6,295,806                           $    6,295,806
                                                                  ==============                           ==============
  Common stock issued for acquisition of software technology      $      806,082                           $      806,082
                                                                  ==============                           ==============
  Common stock issued in disposition of debt                      $            -                           $            -
                                                                  ==============                           ==============
  Common stock issued for services                                $      255,150                           $      255,150
                                                                  ==============                           ==============
</TABLE>

(a)  Includes restatement adjustments for the cash flow effect of the
     acquisition of software technology, as described above.

(b)  This amount was included in total acquisition cost of $1,060,065 as
     originally reported; however, the line item was omitted inadvertently from
     the statement. This amount was inserted into the "As Previously Reported"
     column as this was technically reported in the total.


                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   Cumulative Period                        Cumulative Period
                                                                    August 27, 2004                          August 27, 2004
                                                                  (inception) through                      (inception) through
                                                                     December 31,       Adjustments           December 31,
                                                                  ----------------      -----------        ---------------
                                                                         2005                                    2005
                                                                         ----                                    ----
                                                                    As Previously
                                                                       Reported                                Restated
<S>                                                               <C>                   <C>                 <C>
Cash flows from operating activities:
  Net loss from continuing operations                               $   (2,122,885)                        $   (2,122,885)
  Net (loss)/income from discontinued operations                    $       (6,705)                        $       (6,705)
Adjustments to reconcile net loss to net cash used in
   operating activities:
  Depreciation of property and equipment                                     3,554                                  3,554
  Amortization of deferred financing costs                                 560,417                                560,417
  Common stock issued for services                                         255,150                                255,150
  Warrants issued for services provided                                     86,164 (b)                             86,164
  Common stock issued for software technology                              806,082           (806,082)(a)              -
Changes in assets and liabilities:
  Prepaids                                                              (1,031,919)                            (1,031,919)
  Other current assets                                                    (130,961)                              (130,961)
  Accounts payable, trade                                                   18,508                                 18,508
  Payroll tax payable                                                       19,660                                 19,660
Deferred revenue                                                            19,444                                 19,444
Dividend payable                                                          (160,046)                              (160,046)
  Other liabilities and accrued expenses                                   623,473 (b)                            623,473
                                                                    --------------                         --------------
  Net cash used in operating activities                                 (1,060,065)          (806,082)         (1,866,147)
                                                                    ---------------                        ---------------
Cash flows from investing activities:
  Purchase of software and verification technology                      (1,293,082)            806,082 (a)       (487,000)
  Purchase of property and equipment, net                                  (41,788)                               (41,788)
                                                                    --------------                         --------------
  Net cash used in investing activities                                 (1,334,870)            806,082     $     (528,788)
                                                                    --------------                         --------------
Cash flows from financing activities:
  Proceeds from borrowings                                               3,337,160                         $    3,337,160
  Proceeds from exercising of warrants                                     300,000                                300,000
                                                                    --------------                         --------------
  Net cash provided by financing activities                              3,637,160                              3,637,160
                                                                    --------------                         --------------
  Net decrease (increase) in cash and cash equivalents                   1,242,225                              1,170,293
Cash and cash equivalents at beginning of period                                 -                                 71,932
                                                                    --------------                         --------------
Cash and cash equivalents at end of period                          $    1,242,225                         $    1,242,225
                                                                    ==============                         ==============
Supplemental disclosures of cash flow information:
  Acquisition of intangible                                         $    6,295,806                         $    6,295,806
                                                                    ==============                         ==============
  Common stock issued for acquisition of software technology        $      806,082                         $      806,082
                                                                    ==============                        ==============
  Common stock issued in disposition of debt                        $       10,000                         $       10,000
                                                                    ==============                         ==============
  Common stock issued for services                                  $      255,150                         $      255,150
                                                                    ==============                         ==============
</TABLE>

(a)  Includes restatement adjustments for the cash flow effect of the
     acquisition of software technology, as described above.

(b)  This amount was included in total acquisition cost of $1,060,065 as
     originally reported; however, the line item was omitted inadvertently from
     the statement. This amount was inserted into the "As Previously Reported"
     column as this was technically reported in the total.

     Management has discussed the above errors and adjustments with our board of
directors and our current independent registered public accounting firm and have
determined that a restatement is necessary for the periods described above.


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2005 VERSUS YEAR ENDED DECEMBER 31, 2004.

     Prior to the Reverse Acquisition, the primary operations of the Company
were conducted through its wholly-owned subsidiary, InfoCenter, Inc. and its
current operations, which differ significantly from those of InfoCenter, Inc.
are conducted through its new wholly-owned subsidiary, Edentify, Inc., a
Delaware corporation, and its subsidiary, InMotion Biometrics, Inc., a Delaware
corporation. Therefore, comparisons herein to the prior period may not present
an accurate view of the financial condition of the Company.

NET LOSS

     Our net loss in continued operations was $2,108,137 and $14,748 for the
years ended December 31, 2005 and 2004, respectively. As minimal income was
generated for each of these periods and we are in the development stage of our
operations, the loss was primarily due to three factors: 1) general and
administrative expenses of approximately $1,266,000, 2) costs associated with
the development of our fraud detection service totaling $83,333 and 3)
financing costs and interest expense associated with our convertible debentures
and note payable balances in the current period of approximately $665,000. Our
net loss in discontinued operations was approximately $7,000 for the year ended
December 31, 2005 primarily due to the discontinued operations of our
InfoCenter, Inc. subsidiary. Net loss per share in continued operations were
$(.09) for the current period versus $(.00) in the same period 2004 while the
net loss per share in discontinued operations was $(.00) for both periods.


                                       17

<PAGE>

REVENUE

     Revenue for the years ended December 31, 2005 and 2004 were approximately
$600 and $0, respectively.

     In December, 2005, we entered into a Scoring Services Agreement with
MyPublicInfo ('MPI") whereby MPI will provide us with identity information from
their proprietary database for the purpose of having us utilize proprietary
databases, processes and information developed by us and/or obtained from third
parties to produce an "Identity Score". We will provide MPI with a license to
use the "Identity Score" derived utilizing our proprietary scoring methodology,
which measures the level of suspicious identity manipulation activity and
potential fraud associated with each identity record provided by the Client.

     For grant of the license, MPI undertook to pay us a fee, in two parts: (1)
upon execution of the agreement and (2) upon the completion of the 60-day
acceptance period which represents the time period allotted to provide a secure
interface between the two parties. The Client is entitled to a partial refund of
the license fee in the event acceptance is not met. In addition, MPI will pay a
fee per month for the scoring service commencing on the date of acceptance and
continuing for the term of the agreement. Upon execution of the agreement, the
entire license fee was recorded by us as deferred revenue. The non-refundable
portion of the up-front fee will be recognized as income ratably over the
service agreement term. Upon acceptance of the product or service, the remaining
balance of the license fee will also be recognized ratably over the term of the
agreement. As of December 31, 2005, we had received the amount due upon
execution of the agreement.

     Also, in December 2005, we entered into an agreement with LexisNexis, a
leading provider of legal, news, business information and risk management
services, to jointly develop and market identity fraud detection solutions. We
will be added to the LexisNexis Risk Management Channel Partner Group and will
have access to their industry-leading partner solutions. Our addition to this
group will enable us to provide financial service companies, health care
organizations and government agencies a more enhanced and streamlined solution
capable of assessing, detecting and preventing identity fraud. Under the terms
of agreement, we and the risk management unit of LexisNexis will jointly develop
and market identity fraud detection solutions that integrate our proprietary
advanced identity fraud assessment, detection, and prevention technology with
LexisNexis content. We will jointly market certain complimentary products and
services to our respective customers.

RESEARCH AND DEVELOPMENT EXPENSE

     Research and development expense amounted to $83,333 during the current
period. There were no research and development costs incurred in 2004. These
costs are mainly due to the development, implementation and maintenance services
provided by key vendors on database and assessment servers, as well as costs
incurred on the required operating infrastructure within key vendor's facility.
In addition, we incurred costs for the initial run of our key generation and
update service and identity assessment processing service on these databases for
the purpose of providing identification fraud detection services to our
customers.

SELLING EXPENSES

     Selling expenses amounted to approximately $84,000 in the current year.
There were no selling costs incurred in 2004. These costs primarily relate to
the hiring of a sales and marketing manager-level staff in the second half of
2005. We will continue to market our technology directly and through channel
partners. Our future plans include the development of an integrated product that
combines our information-based ID manipulation detection capability with IMB's
face recognition technology, thereby enabling a defensibly-robust enrollment and
subsequent identity protection system.

GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expense for the years ended December 31, 2005
and 2004 was approximately $1,266,000 and $14,748, respectively. General and
administrative expenses consist mainly of salaries and wages, consulting fees,
and professional fees Any remaining costs were from general operations.


                                       18

<PAGE>

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization expense for the years ended December 31, 2005
and 2004 was $3,554 and $0, respectively. Depreciation and amortization expense
increased during this period primarily as a result of the additions of computer
equipment, computer software, and furniture and fixtures during 2005.

FINANCING COSTS

     Non-cash financing costs were approximately $560,000 for the year ended
December 31, 2005 versus $0 in charges for the same period a year ago. Non-cash
financing costs represent the amortization of discount taken on our convertible
debentures. These charges are reflected in the Consolidated Statements of
Operations under the caption "Financing Costs." These discounts are amortized
over the life of the debentures. Please see Note 7 in the consolidated financial
statements contained herein for more details on these transactions.

INTEREST EXPENSE

     Interest expense for the year ended December 31, 2005 was approximately
$105,000 versus $0 a year ago. Interest expense for this period represents
interest incurred on both our convertible debentures and note payable balances
in 2005.

NET INCOME / LOSS ON DISCONTINUED OPERATIONS

     The loss on discontinued operations for the year ended December 31, 2005
was approximately $7,000. This loss represents the loss incurred on our
subsidiary, InfoCenter, Inc., through which Budget carried on its operating
business activities in the current period. Pursuant to the terms of the
Distribution Agreement noted above, the distribution of the InfoCenter, Inc.
subsidiary is required to be completed on or before January 31, 2006. On January
30, 2006, we amended our Distribution Agreement with our subsidiary InfoCenter,
Inc. to change the date on which the requirement of filing a registration
statement for the distribution of such shares from "January 31, 2006" to "August
31, 2006.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2005, our principal source of liquidity consisted of
approximately $1,242,000 in cash and cash equivalents. These funds should be
sufficient to meet our operating cash requirements including debt service for
the near term. However, we may need to raise additional funds through
additional equity or debt financing or from other sources in order to develop,
market and sell our software and verification products.

     On February 29, 2005, Budget signed an agreement (the "Exchange Agreement")
to acquire all of the issued and outstanding shares of Edentify, Inc., a
Delaware corporation ("Edentify") in exchange for issuance of 21,000,000 shares
of the Company's common stock and Share Rights Certificates entitling the former
stockholder of Edentify to receive the balance of the shares upon consummation
of a reverse 1-for 10 split of our common stock (the "Reverse Split") or other
corporate action making new shares available for issuance. The agreement was
effective on April 29, 2005 subject only to the approval of the Reverse Split.
Pursuant to the Exchange Agreement, Edentify deposited $75,000 into an escrow
account for the benefit of Budget in conjunction with the execution of the
letter of intent, and paid an additional $75,000 to Budget (with such amount to
be assigned to InfoCenters, Inc.) on July 19, 2005. The Reverse Split became
effective on July 13, 2005 and an additional 19,510,255 shares of our common
stock was then issuable to the former sole stockholder of Edentify and his
nominees associated with the Share Rights Certificate in order for such persons
to hold approximately 88.2%, in the aggregate of the outstanding common stock of
the Company at that time.

     As a result of the Exchange, we became the successor to Edentify's
obligations under agreements entered into prior to the Exchange. The primary
obligations assumed were those obligations resulting from the issuance of
convertible debentures by Edentify in December 31, 2004 and in April, 2005 as
part of private offerings completed by Edentify and the purchase of software and
verification technology for cash, debt, and securities from Edentification, Inc.
("Edentification"). Part of the obligations assumed in connection with the
Edentification acquisition included repayment of certain debts of Edentification
as set forth in the transaction documents.

     The aggregate consideration to be paid for the technology purchased from
Edentification was $100,000 cash plus 772,501 shares of common stock, warrants
to purchase an additional 160,873 shares of common stock of the Company (the
surviving corporation in


                                       19

<PAGE>

the Acquisition transaction) exercisable at $2.50 per share and 160,873 shares
of common stock of the Company exercisable at $5.00 per share; an assumption of
debt totaling $127,000; and a convertible note agreement for $260,000.
Edentification was one of the nominees of Mr. DeFranco designated to be issued
shares as part of the Acquisition by Budget. In connection with our purchase of
software and verification technology from Edentification, in September 2005, we
entered into a note agreement with a financial institution in the principal
amount of $127,000. The note matures on September 7, 2006, and we are required
to make interest only payments initiating on December 7, 2005. Interest is
payable at the Prime rate of interest (6.75% as of September 30, 2005). We were
required to pay $127,000 into a cash collateral account as required by the terms
of the note agreement.

     To finance the repayment of the debts incurred pursuant to the
Edentification acquisition agreements, on April 28, 2005, Edentify issued an
aggregate of $260,000 in principal amount of a 10% note payable to an individual
due on March 31, 2006 and prepaid interest to this lender. As a result of the
assumption of this obligation from Edentify, the lender has the right to convert
the unpaid principal amount into shares of our common stock at a price per share
of $1.00 on a post-Reverse Split basis. The lender cannot convert less than
$25,000 at one time unless there remains less than $25,000 due.

     The December 2004, issuance by Edentify of convertible debentures in
principal amount of 8% senior convertible debentures due on December 31, 2006,
and warrants to receive an aggregate of 2,000,000 shares of our common stock (as
a result of the Acquisition) in a private placement, resulted in aggregate
proceeds to the Company of $300,000.The debenture is one of a series of 8%
senior secured convertible debentures. Interest is due quarterly at 8% of the
outstanding principal. Each debenture is convertible into shares of common stock
at the option of the holder equal to the principal amount converted divided by
$0.15. The warrants are to acquire an aggregate of 2,000,000 shares of common
stock at a price of $0.15 per share at any time commencing on December 31, 2004
through December 31, 2009. In December 2005, the debenture holders exercised
2,000,000 warrants for which the Company received gross proceeds of $300,000.
The convertible debenture was issued with a $300,000 discount due to the fair
value ascribed to the detachable warrants utilizing the Black Scholes method.
The discount is being amortized as financing costs over the two year life of the
debenture.

     The April 2005, issuance by Edentify of convertible debentures in principal
amount of 8% senior convertible debentures due on April 21, 2007, and warrants
to receive an aggregate of 1,875,000 shares of our common stock (as a result of
the Acquisition) in a private placement, resulted in aggregate proceeds to the
Company of $600,000. The debenture is one of a series of 8% senior secured
convertible debentures. Interest is due quarterly at 8% of the outstanding
principal. The debenture is convertible into shares of common stock at the
option of the holder equal to the principal amount converted divided by $0.32.
The warrants are to acquire an aggregate of 1,875,000 shares of common stock at
a price of $0.32 per share at any time commencing on April 21, 2005 through
April 21 2010. The convertible debenture was issued with a $600,000 discount due
to the fair value ascribed to the detachable warrants utilizing the Black
Scholes method. The discount is being amortized as financing costs over the two
year life of the debenture.

     Our August 2005 issuance of convertible debentures in principal amount of
6% senior convertible debentures due on August 29, 2007, and warrants to receive
an aggregate of 2,000,000 shares of common stock of the Company in a private
placement, resulted in aggregate proceeds to the Company of $1,000,000. The
debenture is one of a series of 6% senior secured convertible debentures.
Interest is due quarterly at 6% of the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.50. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.50 per share at
any time commencing on August 29, 2005 through August 29, 2010. The convertible
debenture was issued with a $1,000,000 discount due to the fair value ascribed
to the detachable warrants utilizing the Black Scholes method. The discount is
being amortized as financing costs over the two year life of the debenture.

     As a result of the transaction with face2face (See section entitled "Asset
Acquisitions" above), InMotion paid face2face $1,000 upon execution of the
Development Agreement and also provided other assurances regarding minimum
capitalization required for face2face to obtain grant funding from certain state
agencies and we became bound by an agreement to issue in the name of face2face a
total of 7,500,000 shares of our common stock (the "Shares") to be delivered to
face2face as follows: 2,500,000 Shares at closing of the transaction, 2,500,000
Shares upon acceptance by us of the product under the Development Agreement, and
2,500,000 Shares upon the closing of a sublicense or other agreement between us
and a customer relating to the product. We also were required to issue a
warrant, at closing, to face2face to purchase 1,000,000 shares of our common
stock at an exercise price of $1.00 per share.

     Under EITF 96-18 Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring or in Conjunction with, Selling Goods or Services,
the Company recorded the issuance and delivery of the 2,500,000 shares of the
Company's common stock and 1,000,000 warrants as an investment in the licensed
technology as the performance criteria of executing the agreement were met as of
December 31,2005. The Company will record the remaining delivery of 5,000,000
shares of common stock as follows: 1) 2,500,000 shares upon acceptance of the
product by the Company at the fair value of the Company's stock at the date of
acceptance 2) 2,500,000 shares upon the closing of s sublicense or other
agreement between the Company and a customer relating to the product at the fair
value of the Company's common stock at the date this requirement is met.
Accordingly, the Company has recorded this licensed technology of $2,545,806
under the caption "Intangibles" as of December 31, 2005.

     After further development of this technology, and/or at the commencement
of sales of products using this technology, the Company will begin to amortize,
under FASB Statement No. 142. Goodwill and Other Intangible Assets, over the
period which the asset is expected to contribute directly or indirectly to the
future cash flows of the technology.


     In conjunction with a consulting agreement entered into by us with Redwood
Consultants, LLC in September 2005, we agreed to issue 700,000 shares of our
common stock with the initial 350,000 shares being issued within ten (10)
business days of the date of the executed agreement and the remaining 350,000
issued not later than six (6) months from the date of the executed agreement
unless terminated earlier.


                                       20

<PAGE>

     Our December 2005 issuance of convertible debentures in principal amount of
6% senior convertible debentures due on December 10, 2007, and warrants to
receive an aggregate of 2,100,000 shares of common stock of the Company in a
private placement, resulted in aggregate proceeds to the Company of $1,050,000.
Interest is due quarterly at a rate of 6% per annum on the outstanding
principal. The debenture is convertible into shares of common stock at the
option of the holder equal to the principal amount converted divided by $0.50.
The warrants are to acquire an aggregate of 2,100,000 shares of common stock at
a price of $0.50 per share at any time commencing on December 10, 2005 through
December 10, 2010. The convertible debenture was issued with a $1,050,000
discount due to the fair value ascribed to the detachable warrants utilizing the
Black Scholes method. The discount is being amortized as financing costs over
the two year life of the debenture.

     As of February 28, 2006, the debenture holders and lenders had not
converted any portion of their note or debentures.

     Please see "Recent Financing and Asset Acquisitions" in Item 1. Business
above and Note 5 - "Software and Verification Technology Purchase"; Note 6 -
"Other Intangible Assets, and Note 7 - "Debt" in the consolidated financial
statements contained herein for more details on our acquisition of assets and
debenture and stock financings.

     Because of our long-term capital requirements, we may seek to access the
public equity market whenever conditions are favorable, even if we do not have
an immediate need for additional capital at that time. Any additional funding
may result in significant dilution and could involve the issuance of securities
with rights, which are senior to those of existing stockholders. We may also
need additional funding earlier than anticipated, and our cash requirements, in
general, may vary materially from those now planned, for reasons including, but
not limited to, changes in our development and sales and marketing efforts,
competitive and technological advances and higher than anticipated expenses and
lower than anticipated revenues from the sale of our products.

     There can be no assurances that we will raise adequate funds from these or
other sources, which may have a material adverse effect on our ability to
develop, market and sell our products.

                          CONTRACTUAL CASH OBLIGATIONS

<TABLE>
<CAPTION>
                                  OBLIGATIONS EXPIRING BY PERIOD
                                   (DOLLAR AMOUNTS IN THOUSANDS)
                                  ------------------------------
                          TOTAL          2006   2007-2008
                         ------          ----   ---------
<S>                      <C>      <C>           <C>
Operating Leases         $  104          $ 41   $   63
Notes Payable               387           387       --
Convertible Debentures    2,950           300    2,650
                         ------          ----   ------
Total                    $3,441          $728   $2,713
                         ======          ====   ======
</TABLE>

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003 the FASB issued interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements. Interpretation 46 establishes
accounting guidance for consolidation of variable interest entities that
function to support the activities of the primary beneficiary. Interpretation 46
applies to any business enterprise both private and public that has a
controlling interest, contractual relationship or other business relationship
with a variable interest entity. The Company has no investment in or contractual
relationship or other business relationship with a variable interest entity and
therefore the adoption did not have any impact on the Company's consolidated
financial position, results of operations or cash flows.

On April 30, 2003 the FASB issued Statement No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities. Statement 149 is intended
to result in more consistent reporting of contracts as either freestanding
derivative instruments subject to Statement 133 in its entirety, or as hybrid
instruments with debt host contracts and embedded derivative features. In
addition, Statement 149 clarifies the definition of a derivative by providing
guidance on the meaning of initial net investments related to derivatives.
Statement 149 is effective for contracts entered into or modified after June 30,
2003. The adoption of Statement 149 did not have any effect on the Company's
consolidated financial position, results of operations or cash flows.

On May 15, 2003 the FASB issued Statement No. 150, Accounting For Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
Statement 150 establishes standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. Statement 150 represents a
significant change in practice in the accounting for a number of financial
instruments, including mandatory redeemable equity instruments and certain
equity derivatives that frequently are used in connection with share repurchase
programs. Statement 150 is effective for all financial instruments created or
modified after May 31, 2003 and to other instruments as of September 1, 2003.
The Company's reporting of convertible debt is in compliance with this
statement.

In 2004, FASB issued a revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. This Statement supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and its related implementation
guidance. This revised pronouncement requires that all stock options and
warrants be accounted for using the Fair Value Method. This pronouncement will
impact on the Company, as the Company currently accounts for all options and
warrants using the Intrinsic Value Method.

FIN 46(R), Consolidation of Variable Interest Entities, applies at different
dates to different types of enterprises and entities, and special provisions
apply to enterprises that have fully or partially applied Interpretation 46
prior to issuance of Interpretation 46(R). Application of Interpretation 46 or
Interpretation 46(R) is required in financial statements of public entities that
have interests in variable interest entities or potential variable interest
entities commonly referred to as special-purpose entities for periods ending
after December 15, 2003. Application by public entities (other than small
business issuers) for all other types of entities is required in financial
statements for periods ending after March 15, 2004. Application by small
business issuers to entities other than special-purpose entities and by
non-public entities is required at various dates in 2004 and 2005. There is no
impact on the Company=s financial statements.

In December 2004, the FASB issued SFAS Statement No. 153, Exchanges of
Non-monetary Assets.@ The statement is an amendment of APB Opinion No. 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. The Company believes that the adoption of
this standard will have no material impact on its financial statements.

In May 2005, FASB issued SFAS Statement No 154 Accounting Changes and Error
Corrections requiring retrospective application to prior periods financial
statements of a change in an accounting policy.  The company believes that the
adoption of this standard will have no material impact on its financial
statements.

CRITICAL ACCOUNTING POLICIES

     Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our significant accounting policies are described in the
Notes to the Consolidated


                                       21

<PAGE>

Financial Statements. The significant accounting policies that we believe are
most critical to aid in fully understanding our reported financial results are
the following:

REVENUE RECOGNITION

     We recognize revenue in accordance with Statement of Position 97-2,
Software Revenue Recognition whereby: persuasive evidence of arrangement exists,
delivery of the product or service has occurred, the fee is fixed and
determinable, acceptance has occurred and collectibility is probable.

     We may enter into service agreements with its clients whereby we will
receive up-front license fees for granting use of the Company's proprietary
software. Any non-refundable portion of these license fees received upon
execution of these agreements would be recognized ratably over the service
agreement term. The remaining portion of the up-front license fee would also be
recognized ratable over the term of the agreement only after acceptance has
occurred. In the event the contract term is infinite, the up-front fee would be
recognized systematically over the period in respect of which fees are estimated
to be earned.

INTANGIBLES

     Intangible assets are stated at cost. Amortization is provided using the
straight-line method, under FASB Statement No. 142, Goodwill and Other
Intangible Assets, over the period which the asset is expected to contribute
directly or indirectly to the future cash flows of the technology. Amortization
will initiate upon the commencement of sales of products using our technology.
The carrying amount of intangibles is reviewed for recoverability when events or
changes in circumstances occur that indicate that the carrying value of the
assets may not be recovered.

CONVERTIBLE SECURITIES WITH BENEFICIAL CONVERSION FEATURES

     The debenture issuances and related embedded conversion features and
warrants issuances were accounted for in accordance with EITF 98-5: Accounting
for convertible securities with beneficial conversion features or contingency
adjustable conversion and with EITF No. 00-27: Application of issue No. 98-5 to
certain convertible instruments. The Company determined the fair values to be
ascribed to detachable warrants issued with the convertible debentures utilizing
the Black-Scholes method. Any discount derived from determining the fair value
of the warrants is amortized to financing costs over the remaining life of the
debenture. The unamortized discount upon the conversion of the debentures is
expensed to financing cost on a pro-rata basis.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We had approximately $1,242,000 in cash and cash equivalents at December
31, 2005. To the extent that our cash and cash equivalents exceed our near term
funding needs, we may invest the excess cash in three to six month high quality
interest bearing financial instruments. We employ established conservative
policies and procedures to manage any risks with respect to investment exposure.

     We have not entered into, and do not expect to enter into, financial
instruments for trading or hedging purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated balance sheets as of December 31, 2005, and 2004, and our
consolidated statements of operations, changes in stockholders' equity and
comprehensive loss and cash flows for the years ended December 31, 2005 and
2004, together with the report of Cinnamon Jang Willoughby & Company,
independent registered public accountants, are included at the end of this
report. Reference is made to the "Index to Financial Statements and Financial
Statement Schedule" on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

None.


                                       22

<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES.

Internal Controls Over Financial Reporting

     Our management, including the Chief Executive Officer, in conjunction with
our Controller and Chief Legal Officer are responsible for establishing and
maintaining adequate internal controls over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The
Company employs an accounting consultant who is a certified public accountant,
familiar with the requirements set forth in Rule 13a-15 and 15d-15 of the
Exchange Act, to review our controls on a quarterly basis. At such intervals,
this accounting consultant confers with our Controller and Chief Legal Officer
and reports directly to our Chief Executive Officer with respect to his findings
on the sufficiency and accuracy of these records and further assists in the
preparation of our financial statements for inclusion in our reports filed on
Form 10-QSB and Form 10-KSB.

Effectiveness of Controls and Procedures


     Our principal executive officer, who, is at present, also acting in the
capacity of principal financial officer, has evaluated the effectiveness of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as of the end of the period covered
by this report. Based on this evaluation, our principal executive officer, who,
at present, is also acting in the capacity of principal financial officer, has
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this report.


     During the fourth quarter and for the fiscal year covered by this report,
we have made no change in our internal controls over financial reporting that
has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION.

None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                   MANAGEMENT

The current officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME                 AGE                      POSITION
----                 ---                      --------
<S>                  <C>   <C>
Terrence DeFranco     39   Chairman, Chief Executive Officer, Director
Thomas J. Harkins     48   Chief Operating Officer
Kenneth R. Vennera    39   Chief Legal Officer/General Counsel, Secretary
Michael Preston       60   Director
Eric Gertler          43   Director
</TABLE>


                                       23

<PAGE>

Terrence M. DeFranco
Chairman and Chief Executive Officer

Terrence DeFranco is currently the Chairman, Chief Executive Officer and founder
of Edentify, Inc. Prior to founding Edentify, Inc., Mr. DeFranco was Chairman
and CEO of Titan International Partners, a merchant banking and research firm
focused on providing corporate and strategic advisory services and equity and
debt financing to small-cap and middle market companies.

His background is primarily in the area of corporate finance, previously serving
as head of investment banking for Baird, Patrick & Co., Inc., a 50-year old NYSE
Member firm and head of investment banking and founding partner of Burlington
Securities Corp., a New York based investment banking and institutional equity
trading firm.

Mr. DeFranco began his career on Wall Street in 1991 with PaineWebber, Inc., now
UBS PaineWebber. Mr. DeFranco has been an active principal investor, senior
manager and advisor to many early-stage companies and has extensive experience
in dealing with issues related to the management and operations of small public
companies. Mr. DeFranco is a graduate of the University of North Carolina at
Chapel Hill with a BA in Economics, has completed coursework toward the Masters
in Business Administration and Economic Crime and Fraud Management at Utica
College in New York, home of the Economic Crime Institute, and is an Associate
Member of the Association of Certified Fraud Examiners.

Thomas J. Harkins
Chief Operating Officer

Prior to his employment with Edentify, Inc. as Chief Operating Officer, Mr.
Harkins was the Vice President of Security and Risk Management at MasterCard
International, Inc., an international credit card company.

While at MasterCard International, Inc., Mr. Harkins developed and implemented
the global Risk Assessment Management Program to improve member profitability
and decreased fraud losses. This program defined key metrics, established
stretch improvement standards and outlined change initiatives to drive results.
It is recognized as an industry benchmark. Prior to his promotion to Vice
President at MasterCard International, Mr. Harkins held the positions of Finance
and Risk Management Officer and Director of Risk Management.

Mr. Harkins began his career at Citibank, N.A. with a series of assignments
involving finance, risk management and marketing. Mr. Harkins is a graduate of
Fordham University with a BS in Finance and Economics and is a prior Board
Member of the National Foundation for Consumer Credit.

Kenneth R. Vennera
Chief Legal Officer/General Counsel/Secretary

Mr. Vennera has been General Counsel to the firm since January of 2006. He has
been a practicing attorney since 1994 and is admitted to the bar in
Pennsylvania, New Jersey, Washington, DC and New York. He holds a Juris Doctor
degree from Widener University School of Law, 1994, where he was a Research
Editor for the Delaware Journal of Corporate Law and a member of the Moot Court
Honor Society. He also holds a Master of Laws in Taxation from Villanova School
of Law, 1997. Mr. Vennera graduated from the Wharton School of the University of
Pennsylvania with a Bachelor of Science degree in Economics in 1989.

Prior to joining the Company, Mr. Vennera was a senior associate with the law
firm of Flamm, Boroff & Bacine, P.C. in Blue Bell, Pennsylvania for over a year.
Prior to this, Mr. Vennera was a senior associate with Reed Smith, LLP in the
Corporate and Securities Department of their Manhattan office. Mr. Vennera also
worked for PricewaterhouseCoopers in their Tax Consulting Department prior to
joining ReedSmith.

Michael D. Preston
Director

Mr. Preston is a principal of Alberdale & Co., a corporate finance company
regulated by the Financial Services Authority in the United Kingdom, Chief
Executive Officer of Image Innovations Holdings, Inc., a publicly-traded sports
and entertainment art and


                                       24

<PAGE>

collectibles business in the USA, and a Director of Phosphagenics Limited, a
biotechnology company whose shares are traded on the Australian and UK stock
markets.

Prior to becoming a principal of Alberdale, Mr. Preston held senior management
positions with several middle market and small capitalization companies, several
of which he was a founder, with particular focus on corporate strategy and
finance. Mr. Preston became a Fellow of the Institute of Chartered Accountants
in England and Wales while employed at PriceWaterhouse & Co. in England.
Additionally, Mr. Preston is a graduate of Oxford University.

Eric J. Gertler
Director

Mr. Gertler is the Chief Executive Officer of BlackBook Media Corporation, the
publisher of BlackBook Magazine and the BlackBook List guides to New York, Los
Angeles, San Francisco and Miami and is also the Managing Partner of EJG
Enterprises, a consulting firm to media companies and banks in the area of
privacy and individual personal security.

Mr. Gertler is the author of Prying Eyes: Protect Your Privacy From Those That
Sell To You, Snoop on You, and Steal from You, July 2004, The Random House
Information Group. Previously, Mr. Gertler served as President and Chief
Executive Officer of Privista, a credit management and identity theft protection
company, and was President of U.S. News & World Report, Fast Company, and The
Atlantic Monthly.

Mr. Gertler is a graduate of Brown University with an AB in International
Relations and Economics, received a graduate degree in Political Science from
Institut D'Etudes Politiques, Paris, France, received a graduate law degree in
international law from La Sorbonne, Universite de Paris, Paris, France and
received a JD from American University.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than ten percent of a registered class of equity
securities, to file reports with the Securities and Exchange Commission
reflecting their initial position of ownership on Form 3 and changes in
ownership on Form 4 or Form 5. Based solely on a review of the copies of such
Forms received by us, we believe that, during the fiscal year ended December 31,
2005, all of our officers, directors and ten percent stockholders complied with
all applicable Section 16(a) filing requirements on a timely basis.

AUDIT COMMITTEE

     Presently, the Board of Directors acts as the Audit Committee as permitted
by the rules of the Securities & Exchange Commission. We plan to establish an
Audit Committee consisting of three independent directors as soon as practical
as the board is expanded.

CODE OF ETHICS

     On March 10, 2006, the Company adopted a Code of Business Conduct and
Ethics that applies to all employees, including the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.

ITEM 11. EXECUTIVE COMPENSATION.

     The summary compensation table below sets forth the aggregate compensation
paid or accrued by us for the fiscal year ended December 31, 2005, to our Chief
Executive Officer, Chief Operating Officer and Chief Legal Officer/General
Counsel who were serving as executive officers at the end of the last completed
fiscal year and whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Executives"). The summary of the employment agreements
with our executives are described below.


                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                         LONG-TERM COMPENSATION
                                                    --------------------------------
                                      ANNUAL                AWARDS
                                   COMPENSATION     ----------------------
                                 ----------------   RESTRICTED
        NAME AND                  SALARY               STOCK
   PRINCIPAL POSITION     YEAR      ($)     BONUS     AWARDS      OPTIONS    PAYOUTS
-----------------------   ----   --------   -----   ----------   ---------   -------
<S>                       <C>    <C>        <C>     <C>          <C>         <C>
Terrence M. DeFranco,
Chief Executive Officer   2005   $117,500    -0-        n/a      416,667(1)    n/a

Thomas J. Harkins,
Chief Operating Officer   2005   $ 75,000    -0-        n/a      208,333(2)    n/a

Kenneth R. Vennera,
General Counsel/
Chief Legal Officer       2005        -0-    -0-        -0-          -0-       -0-
</TABLE>

Notes

(1)  1/3 exercisable at $0.75 per share, 1/3 exercisable at $2.00 per share and
     1/3 exercisable at $5.00 per share.

(2)  Exercisable at $0.75 per share.

EMPLOYMENT AGREEMENTS

          Effective April 29, 2005, we assumed the employment contract with
Terrence DeFranco, who was appointed by our Board as the Chief Executive Officer
and Chairman effective upon the closing of the Acquisition. The term of the
agreement is for a period of three years and is terminable for cause. In
connection with his employment, Mr. DeFranco was granted options to purchase a
total of 1,250,000 shares of our common stock, at exercise prices varying from
$0.75 to $5.00 per share vesting over a period of three years at a rate of
1/36th per month, with all options being fully vested in 36 months. and is
eligible for such benefits as are provided to other executives of the Company.
Pursuant to the terms of his employment agreement with the Company, Mr. DeFranco
may not engage in any competitive activity for a period of two years following
the termination of his employment with the Company.

          On July 29, 2005, we entered into an employment agreement with Thomas
Harkins to be our Chief Operating Officer. Edentify agrees to pay Mr. Harkins
$12,500 per month plus any increases or bonuses as determined by the Company. In
connection with his employment, Mr. Harkins was granted options to purchase a
total of 1,250,000 shares of our common stock at exercise prices varying from
$0.75 to $5.00 per share, vesting at a rate of 1/36th of the amount granted per
month, with all options being fully vested in 36 months. In the event Mr.
Harkins' employment is terminated for any reason other than for cause, Edentify
will continue to pay Mr. Harkins' salary and other employee benefits for a three
month severance period. Pursuant to the terms of his employment agreement with
the Company, Mr. Harkins may not engage in any competitive activity for a period
of two years following the termination of his employment with the Company.

          On January 1, 2006, we entered into an employment agreement to engage
Kenneth Vennera as general counsel for the Company with the title of Chief Legal
Officer. The term of the agreement is for a period of three years and is
terminable for cause. In connection with his employment, Mr. Vennera was issued
stock and granted options to purchase a total of 1,000,000 shares of our common
stock, at exercise prices varying from $0.75 to $4.00 per share, vesting over a
period of two years at a rate of 1/24th per month, with all options being fully
vested in 24 months. and is eligible for such benefits as are provided to other
executives of the Company. Mr. Vennera was also appointed by the Board of
Directors as Secretary of the Company by the Board of Directors.

COMPENSATION TO THE BOARD OF DIRECTORS

As of December 31, 2005, the Board of Directors of the Company served without
compensation.


                                       26

<PAGE>

COMPENSATION COMMITTEE

          Presently, the Board of Directors acts as the Compensation Committee
as permitted by the rules of the Securities & Exchange Commission. We plan to
establish a Compensation Committee consisting of three independent directors as
soon as practical as the board is expanded.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

          The following table sets forth--

          -    each person who is known by us to be the owner of record or
               beneficial owner of more than 5% of its outstanding Common Stock;

          -    each of our directors and each of our executive officers;

          -    all of our directors and executive officers as a group; and

          -    the number of shares of Common Stock beneficially owned by each
               such person and such group and the percentage of the outstanding
               shares owned by each such person and such group.

          As used in the table below and elsewhere in this Form 10KSB, the term
beneficial ownership with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote and/or sole or
shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the next 60 days following the date of this Memorandum. Except
as otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.

          Except as otherwise noted below, the address of each of the persons in
the table is c/o 74 West Broad Street, Bethlehem, PA 18018.

<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER                      NUMBER OF SHARES (3)   PERCENT OWNED
------------------------                      --------------------   -------------
<S>                                           <C>                    <C>
Terrence DeFranco (1,2)                             8,262,754            22.46%
Face2face, Inc.                                     7,500,000            20.39%

All of our directors and executive officers
   as a group (1 person)                            8,262,754            22.46%
</TABLE>

----------
(1)  Executive Officer

(2)  Director

(3)  Reflects exercise of warrants to purchase shares of Common Stock and
     conversion of debentures into Common Stock.

(4)  Each of Bushido Capital Master Fund, L.P., Gamma Capital Opportunity
     Partners, L.P., Class A, Gamma Capital Opportunity Partners, L.P., Class C,
     and Whalehaven Capital, L.P. own convertible debentures and warrants of the
     Company that contain provisions that prohibit the conversion or exercise of
     such debenture or warrant, if such conversion or exercise would cause any
     of them to own 4.99% or more of the outstanding shares of our common stock.
     As a result, none of the foregoing beneficially own more than 5% of our
     shares of common stock.


                                       27

<PAGE>

DESCRIPTION OF SECURITIES

GENERAL

          At the date hereof the Company is authorized by our certificate of
incorporation to issue an aggregate of 50,000,000 shares of Common Stock, par
value $.001.

COMMON STOCK

          Holders of Common Stock are entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders. There is
cumulative voting for the election of directors. Subject to the prior rights of
any class or series of preferred stock which may from time to time be
outstanding, if any, holders of Common Stock are entitled to receive ratably,
dividends when, as, and if declared by our board of directors out of funds
legally available for that purpose and, upon our liquidation, dissolution, or
winding up, are entitled to share ratably in all assets remaining after payment
of liabilities and payment of accrued dividends and liquidation preferences on
the preferred stock, if any. Holders of Common Stock have no preemptive rights
and have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is validly authorized and issued, fully-paid and
nonassessable.

WARRANTS

     The Company has issued warrants for 7,975,000 shares of Common Stock in
connection with offerings of convertible debentures to investors, of which
2,000,000 have been exercised as of February 28, 2006.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The acquisition of Edentify, Inc. by Budgethotels Network, Inc. by
means of a share exchange (the "Acquisition") as described above was effective
as of March 29, 2005. As a result of the Acquisition, certain institutional
investors of Edentify in the offerings described below became our shareholders.

          The December, 2004 issuance of securities (assumed from Edentify,
Inc.) consisted of the issuance of an aggregate of $300,000 in principal amount
of 8% senior convertible debentures due on December 31, 2006, and warrants to
receive an aggregate of 2,000,000 shares of common stock of the Company in a
private placement to two institutional investors. These warrants were exercised
for cash in December, 2005. The investors were granted registration rights for
the shares underlying their conversion of the debentures and the exercise of the
warrants.

          The April, 2005 issuance of securities (assumed from Edentify, Inc.)
consisted of an aggregate of $600,000 in principal amount of 6% senior
convertible debentures due on April 21, 2007, and warrants to receive an
aggregate of 1,875,000 shares of common stock of the Company in a private
placement to two institutional investors from the December, 2004 offering as
well as another institutional investor. Interest is due quarterly at 6% of the
outstanding principal. The debenture is convertible into shares of common stock
at the option of the holder equal to the principal amount converted divided by
$0.32. The warrants are to acquire an aggregate of 1,875,000 shares of common
stock at a price of $0.32 per share at any time commencing on April 21, 2005
through April 21, 2010. The investors were granted registration rights for the
shares underlying their conversion of the debentures and the exercise of the
warrants.

          These same institutional investors were also the most significant
investors in our August, 2005 private offering as well as participating in our
December, 2005 private offering.

          The August, 2005 issuance consisted of $1,000,000 in principal amount
of 6% senior convertible debentures due on August 29, 2007, and warrants to
receive an aggregate of 2,000,000 shares of common stock of the Company in a
private placement to the same institutional investors that invested in the
December 2004 offering (and who participated in the April 2005 offering).
Interest is due quarterly at 6% of the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.50. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.50 per share at
any time commencing on August 29, 2005 through August 29, 2010. The investors
were granted registration rights for the shares underlying their conversion of
the debentures and the exercise of the warrants.


                                       28

<PAGE>
          The December, 2005 issuance consisted of $1,050,000 in principal
amount of 6% senior convertible debentures due on December 10, 2007, and
warrants to receive an aggregate of 2,100,000 shares of common stock of the
Company in a private placement that included one of the institutional investors
from the December, 2004, April 2005 and August 2005 offerings. The other
investors were unrelated third party accredited investors. Interest is due
quarterly at 6% of the outstanding principal. The debenture is convertible into
shares of common stock at the option of the holder equal to the principal amount
converted divided by $0.50. The warrants are to acquire an aggregate of
2,100,000 shares of common stock at a price of $0.50 per share at any time
commencing on December 10, 2005 through December 10, 2010. The investors were
granted registration rights for the shares underlying their conversion of the
debentures and the exercise of the warrants.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          All audit and professional services provided by Cinnamon Jang
Willoughby & Company are approved by the Board of Directors. The total fees
billed by Cinnamon Jang Willoughby & Company were $31,000 in 2005. The
following table shows the aggregate fees billed to us by Cinnamon Jang
Willoughby & Company for professional services rendered during the years ended
December 31, 2005 and December 31, 2004.

<TABLE>
<CAPTION>
                          AMOUNT ($)
                      -----------------
DESCRIPTION OF FEES     2004      2005
-------------------   -------   -------
<S>                   <C>       <C>
Audit Fees            $ 9,636   $25,000
Audit-Related Fees    $ 5,300     3,500
Tax Fees                   --        --
All Other Fees        $23,015   $10,375
                      -------   -------
Total                 $37,951   $38,875
                      =======   =======
</TABLE>

Audit Fees

          Represents fees for professional services provided for the audit of
our annual financial statements and review of our financial statements included
in our quarterly reports and services in connection with statutory and
regulatory filings.

Audit-Related Fees

          Represents the fees for assurance and related services that are
reasonably related to the performance of the audit or review of our financial
statements.

          The Board of Directors has determined that Cinnamon Jang Willoughby &
Company rendering of these non-audit services is compatible with maintaining
auditor independence. The Board of Directors considers Cinnamon Jang Willoughby
& Company to be well qualified to serve as our independent public accountants.
The Board of Directors also approved the charges for services performed in 2005.

          The Board of Directors pre-approve all auditing services and the terms
thereof (which may include providing comfort letters in connection with
securities underwriting) and non-audit services (other than non-audit services
prohibited under Section 10A(g) of the Exchange Act or the applicable rules of
the SEC or the Public Company Accounting Oversight Board) to be provided to us
by the independent auditor; provided, however, the pre-approval requirement is
waived with respect to the provisions of non-audit services for us if the "de
minimus" provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied.
This authority to pre-approve non-audit services may be delegated to one or more
members of the Audit Committee, who shall present all decisions to pre-approve
an activity to the full Audit Committee at its first meeting following such
decision.


                                       29

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)(2)Financial Statements and Schedules - See index to financial statements
on page F-1 of this Annual Report.

(a)(3) Exhibits - See exhibit index below.

Unless otherwise indicated filed herewith are the following exhibits:

<TABLE>
<CAPTION>
Exhibit No.   Description of Document
-----------   -----------------------
<S>           <C>
2.1           Share Exchange Agreement by and between BudgetHotels Network, Inc.
              and Edentify, Inc. attached as an exhibit to the Company's 8-K
              filed on May 5, 2005

2.3           Asset Acquisition Agreement by and between Edentify, Inc. and
              Edentification, Inc. made as of March 31, 2005 filed as an exhibit
              to the Company's registration statement on Form SB-2 on January
              18, 2006

3.1(a)        Certificate of Incorporation attached as an exhibit to the
              Company's Form 10 filed with the Securities and Exchange
              Commission on March 24, 2000

3.1(b)        Certificate of Correction to Amendment to Certificate of
              Incorporation dated July 15, 2005 filed as an exhibit to the
              Company's registration statement on Form SB-2 on January 18, 2006

3.1(c)        Amendment to Certificate of Incorporation dated July 13, 2005
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006

3.1(d)        Amendment to Certificate of Incorporation dated August 14, 2001
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006

3.2           By-laws attached as an exhibit to the Company's Form 10 filed with
              the Securities and Exchange Commission on March 24, 2000

4.2           Form of Securities Purchase Agreement dated as of December 31,
              2004 filed as an exhibit to the Company's registration statement
              on Form SB-2 on January 18, 2006

4.3           Form of Convertible Debenture dated as of December 31, 2004 filed
              as an exhibit to the Company's registration statement on Form SB-2
              on January 18, 2006

4.4           Form of Warrant dated as of December 31, 2004 filed as an exhibit
              to the Company's registration statement on Form SB-2 on January
              18, 2006

4.5           Form of Registration Rights Agreement dated as of December 31,
              2004 filed as an exhibit to the Company's registration statement
              on Form SB-2 on January 18, 2006

4.6           Form of Security Agreement dated as of December 31, 2004 filed as
              an exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

4.7           Form of Securities Purchase Agreement dated as of April 21, 2005
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006

4.8           Form of Convertible Debenture dated as of April 21, 2005 filed as
              an exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

4.9           Form of Warrant dated as of April 21, 2005 filed as an exhibit to
              the Company's registration statement on Form SB-2 on January 18,
              2006

4.10          Form of Registration Rights Agreement dated as of April 21, 2005
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006

4.11          Form of Security Agreement dated as of April 21, 2005 filed as an
              exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

4.12          Form of Securities Purchase Agreement dated as of August 29, 2005
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006

4.13          Form of Convertible Debenture dated as of August 29, 2005 filed as
              an exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

4.14          Form of Warrant dated as of August 29, 2005 filed as an exhibit to
              the Company's registration statement on Form SB-2 on January 18,
              2006

4.15          Form of Registration Rights Agreement dated as of August 29, 2005
              filed as an exhibit to the Company's registration statement on
              Form SB-2 on January 18, 2006
</TABLE>


                                       30

<PAGE>


<TABLE>
<S>           <C>
4.16          Form of Security Agreement dated as of August 29, 2005 filed as an
              exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

4.17          Form of Securities Purchase Agreement dated as of December 10,
              2005 filed as an exhibit to the Company's registration statement
              on Form SB-2 on January 18, 2006

4.18          Form of Convertible Debenture dated as of December 10, 2005 filed
              as an exhibit to the Company's registration statement on Form SB-2
              on January 18, 2006

4.19          Form of Warrant dated as of December 10, 2005 filed as an exhibit
              to the Company's registration statement on Form SB-2 on January
              18, 2006

4.20          Form of Registration Rights Agreement dated as of December 10,
              2005 filed as an exhibit to the Company's registration statement
              on Form SB-2 on January 18, 2006

4.21          Form of Security Agreement dated as of December 10, 2005 filed as
              an exhibit to the Company's registration statement on Form SB-2 on
              January 18, 2006

10.1          Patent and Technology License Agreement, Development Agreement,
              and Share and Warrant Issuance Agreement by and between face2face
              animation, Inc. and the Company dated as of May 27, 2005 attached
              as an exhibit to the Company's Form 8-K filed with the Securities
              and Exchange Commission on August 30, 2005.

10.2          Master Services Agreement, Scope of Work 1 and Scope of Work 2
              entered into by and between the Company and Seisint, Inc. as of
              October 3, 2005 attached as an exhibit to the Company's Form 8-K
              filed with the Securities and Exchange Commission on October 27,
              2005.

10.3          Employment Agreements by and between the Company and Terrence
              DeFranco filed as an exhibit to the Company's registration
              statement on Form SB-2 on January 18, 2006

10.4          Employment Agreement by and between the Company and Thomas J.
              Harkins filed as an exhibit to the Company's registration
              statement on Form SB-2 on January 18, 2006

10.5          Employment Agreement by and between the Company and Kenneth R.
              Vennera filed as an exhibit to the Company's registration
              statement on Form SB-2 on January 18, 2006

14.1          Code of Ethics filed as exhibit to Annual Report on Form 10-KSB
              filed on March 30, 2006.

23.1          Consent of Cinnamon Jang Willoughby & Company to inclusion of
              December 31, 2005 audit

31.1          Certification pursuant to Section 302 of the Sarbanes-Oxley Act
              of 2002 from the Company's Chief Executive Officer/principal
              financial officer

32.1          Certification pursuant to Section 906 of the Sarbanes-Oxley Act
              of 2002 from the Company's Chief Executive Officer/principal
              financial officer
</TABLE>



                                       31

<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        Edentify, Inc.



Date: August 4, 2006                    /s/ Terrence DeFranco
                                        ----------------------------------------
                                        Terrence DeFranco
                                        Chief Executive Officer, Director



                                        /s/ Thomas Harkins
                                        ----------------------------------------
                                        Thomas Harkins
                                        Chief Operating Officer


                                        /s/ Craig DeFranco
                                        ----------------------------------------
                                        Craig DeFranco
                                        Controller


                                        /s/ Michael Preston
                                        ----------------------------------------
                                        Michael Preston
                                        Director


                                       32
<PAGE>

                         EDENTIFY, INC AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                              <C>
Report of Independent Registered Certified,
Public Accounting Firm. ......................................   F-2

Consolidated Balance Sheets at December 31, 2004 and 2005 ....   F-3

   Consolidated Statements of Operations for each of the years
   ended December 31, 2004 and 2005 ..........................   F-4

   Consolidated Statements of Changes in Stockholders' Equity
   and Comprehensive (Loss) for each of the years ended
   December 31, 2004 and 2005 ................................   F-5

   Consolidated Statements of Cash Flows for each of the years
   ended December 31, 2004 and 2005 ..........................   F-6

   Notes to Consolidated Financial Statements ................   F-7
</TABLE>


                                      F-1

<PAGE>
[HLB COMPANY LOGO] CINNAMON JANG WILLOUGHBY & COMPANY

Chartered Accountants
A PARTNERSHIP OF INCORPORATED PROFESSIONALS

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders of Edentify, Inc.:

     We have audited the consolidated balance sheet of Edentify, Inc. and the
consolidated statements of loss and deficit, amended cash flows and
stockholders' equity for the years ended December 31, 2005 and 2004. These
amended consolidated financial statements are the responsibility of management.
Our responsibility is to express an opinion on these amended consolidated
financial statements based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform an audit to obtain reasonable assurance whether these
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.

     In our opinion, these amended consolidated financial statements present
fairly, in all material respects, the financial position of the company as at
December 31, 2005 and 2004 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles in the United States.

     As described in note 14 to the amended consolidated financial statements,
the accompanying amended consolidated financial statements of Edentify, Inc. as
of December 31, 2005 have been restated. On March 21, 2006 (July 19, 2006 as to
the effects of the restatements described in note 14) we reported separately to
the stockholders of Edentify, Inc. on consolidated financial statements for the
same period, audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and prepared in accordance with
accounting principles generally accepted in the United States.



                                        /s/ "Cinnamon Jang Willoughby & Company"

                                                   Chartered Accountants



Burnaby, Canada
March 21, 2006 (July 19, 2006 as to the effects of the restatements described in
note 14)

MetroTower II - Suite 900 - 4720 Kingsway, Burnaby, BC Canada V5H 4N2.
Telephone: +1 604 435 4317. Fax: +1 604 435 4319.

HLB Cinnamon Jang Willoughby & Company is a member of HLB International. A
WORLD-WIDE ORGANIZATION OF ACCOUNTING FIRMS AND BUSINESS ADVISORS.

                                      F-2

<PAGE>

                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                    December 31,   December 31,
                                                        2004           2005
                                                    ------------   ------------
<S>                                                 <C>            <C>
                       ASSETS
Current assets:
   Cash                                             $    71,932     $ 1,242,225
   Accounts receivable                                       --              --
   Prepaid expenses                                      22,500       1,031,919
   Other assets                                              --         130,961
   Accounts receivable - related party                       --              --
                                                    -----------     -----------
      Total current assets                               94,432       2,405,105
                                                    -----------     -----------
Property and equipment, net                               5,343       1,331,316
                                                    -----------     -----------
Intangibles, net (Note 6)                                    --       2,545,806
                                                    ===========     ===========
      Total assets                                  $    99,775     $ 6,282,227
                                                    ===========     ===========
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:

   Accounts payable                                 $     9,523     $    18,507
   Notes payable (Note 7)                                    --         387,160
   Payroll taxes payable                                     --          19,660
   Related party payable
   Unearned revenue                                                      19,444
   Distribution payable                                 240,338          75,292
   Accrued expenses and other current liabilities            --         623,473
   Current portion of long-term debt                         --         150,000
                                                    -----------     -----------
   Total current liabilities                            349,861       1,293,536
                                                    -----------     -----------
   Long-Term debt (Note 7)                              100,000         410,417
Commitments and contingencies
Stockholders' equity:

   Common stock, $0.001 par value; 50,000,000
      shares authorized; 24,501,425 and
      24,851,425 shares issued and outstanding           24,501          24,851
   Additional paid-in capital                         1,516,437       8,459,289
   Accumulated deficit                               (1,791,024)     (3,905,866)
                                                    -----------     -----------
   Total liabilities & stockholders' equity         $    99,775     $ 6,282,227
                                                    ===========     ===========
</TABLE>

     SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-3

<PAGE>

                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                  Cumulative Period
                                                For The Year     For The Year      August 27, 2004
                                               Ended December   Ended December   (inception) through
                                                  31, 2004         31, 2005       December 31, 2005
                                               --------------   --------------   -------------------
<S>                                            <C>              <C>              <C>
Revenues:
Sales, net                                      $        --      $       556         $       556
                                                -----------      -----------         -----------
Total revenues:                                          --              556                 556
Cost of sales                                            --            8,483               8,483
                                                -----------      -----------         -----------
Gross profit                                             --           (7,927)             (7,927)
                                                -----------      -----------         -----------
Operating expenses:
Research & development                                   --           83,333              83,333
Selling expenses                                         --           83,583              83,583
General & administrative expenses                    14,748        1,266,174           1,280,922
Depreciation                                             --            3,554               3,554
Bad debt expense                                         --               --                  --
                                                -----------      -----------         -----------
Total operating expenses                             14,748        1,436,644           1,451,392
Other income/(expense):
Other income/(expense)                                   --             (162)               (162)
Financing costs                                                     (560,417)           (560,417)
Interest income                                          --            1,742               1,742
Interest expense                                         --         (104,729)           (104,729)
                                                -----------      -----------         -----------
Total other income/(expense)                             --         (663,566)           (663,566)
                                                -----------      -----------         -----------
Net loss from operations before income taxes        (14,748)      (2,108,137)         (2,122,885)
Income tax expense                                       --               --                  --
                                                -----------      -----------         -----------
Net loss from continuing operations             $   (14,748)     $(2,108,137)        $(2,122,885)
Discontinued Operations
(Loss)/income on discontinued operations of
   subsidiary                                            --           (6,705)             (6,705)
                                                -----------      -----------         -----------
Net Loss                                        $   (14,748)     $(2,114,842)        $(2,129,590)
                                                ===========      ===========         ===========
Basic and diluted loss per common share
   Continued Operations                         $      (.00)     $      (.09)        $      (.09)
   Discontinued Operations                      $      (.00)     $       .00         $      (.00)
                                                -----------      -----------         -----------
Net Loss                                        $      (.00)     $      (.09)        $      (.09)
                                                ===========      ===========         ===========
Weighted average shares outstanding              24,501,425       24,596,217          24,572,519
                                                ===========      ===========         ===========
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-4
<PAGE>

                                 EDENTIFY, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 FOR THE CUMULATIVE PERIOD AUGUST 27, 2004 (INCEPTION) THROUGH DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                                                                        Retained
                                                    Common Stock                           Accum.       Earnings        Total
                                                 -------------------    Additional     Comprehensive  (Accumulated  Stockholders'
                                                   Shares     Amount  paid-in-capital       Loss        Deficit)        Equity
                                                 ----------  -------  ---------------  -------------  ------------  -------------
<S>                                              <C>         <C>      <C>              <C>            <C>           <C>
Balance - August 27, 2004                             1,000  $    --   $     5,000                    $        --    $     5,000
Recapitalization for retroactive effect of
   reverse acquisition                           24,500,425   24,501     1,511,437                     (1,776,276)      (240,338)
Net income for the year ended December 31, 2004                                                           (14,748)       (14,748)
                                                 ----------  -------   -----------          ---       -----------    -----------
Balance - December 31, 2004                      24,501,425   24,501     1,516,437           --        (1,791,024)      (250,086)
                                                 ==========  =======   ===========          ===       ===========    ===========
Fair value ascribed to debenture beneficial
   conversion features and related warrants                               300,000                                        300,000
Fair value ascribed to debenture beneficial
   conversion features and related warrants                                600,000                                       600,000
Fair value ascribed to debenture beneficial
   conversion features and related warrants                              1,000,000                                     1,000,000
Fair value ascribed to debenture beneficial
   conversion features and related warrants                              1,050,000                                     1,050,000
Warrants exercised in connection with
   convertible debenture                                                   300,000                                       300,000
Fair value ascribed to software and
   verification technology purchased in
   conjunction with reverse acquisition                                    806,082                                       806,082
Fair value ascribed to license, development,
   and share and warrant issuance agreement
   with face2face                                                        2,545,806                                     2,545,806
Issuance of Common Stock for services provided      350,000      350       254,800                                       255,150
Warrants issued for services provided                                       86,164                                        86,164
Net loss for the year end December 31, 2005                                                            (2,114,842)    (2,114,842)
                                                 ----------  -------   -----------          ---       -----------    -----------
Balance as of December 31, 2005                  26,851,425   24,851     8,459,289           --        (3,905,866)     4,578,274
                                                 ==========  =======   ===========          ===       ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

                                      F-5
<PAGE>


                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (RESTATED)
                                 (See Note 14)


<TABLE>
<CAPTION>
                                                                                             Cumulative
                                                                                               Period
                                                                                          August 27, 2004
                                                           For the Year    For the Year     (inception)
                                                              Ended           Ended           through
                                                           December 31,   December 31,      December 31,
                                                               2004            2005            2005
                                                          -------------   -------------   ---------------
<S>                                                       <C>             <C>             <C>
Cash flows from operating activities:
   Net loss from continuing operations                      $(14,748)      $(2,108,137)    $  (2,122,885)
   Net (loss) / income from discontinued operations         $     --       $    (6,705)    $      (6,705)
Adjustments to reconcile net loss to net cash used
   in operating activities:
   Depreciation of property and equipment                         --             3,554             3,554
   Amortization of deferred financing costs                       --           560,417           560,417
   Common stock issued for services                               --           255,150           255,150
   Options and Warrants issued for services                       --            86,164            86,164
Changes in assets and liabilities:
   Prepaids                                                  (22,500)       (1,009,419)       (1,031,919)
   Other current assets                                           --          (130,961)         (130,961)
   Accounts payable, trade                                     9,523             8,984            18,507
   Payroll tax payable                                            --            19,660            19,660
   Deferred revenue                                               --            19,444            19,444
   Dividend payable                                            5,000          (165,046)         (160,046)
   Other liabilities and accrued expenses                         --           623,473           623,473
                                                            --------       -----------     -------------
   Net cash used in operating activities                     (22,725)       (1,843,422)       (1,866,147)
                                                            --------       -----------     -------------
Cash flows from investing activities:
   Purchase of software and verification technology               --          (487,000)         (487,000)
   Purchase of property and equipment, net                    (5,343)          (36,445)          (41,788)
                                                            --------       -----------     -------------
   Net cash used in investing activities                    $ (5,343)      $ (523,,445)         (528,788)
                                                            --------       -----------     -------------
Cash flows from financing activities:
   Proceeds from borrowings                                 $100,000       $ 3,237,160         3,337,160
   Proceeds from exercising of warrants                           --           300,000           300,000
                                                            --------       -----------     -------------
   Net cash provided by financing activities                 100,000         3,537,160         3,637,160
                                                            --------       -----------     -------------
   Net decrease (increase) in cash and cash equivalents       71,932         1,170,293         1,242,225
Cash and cash equivalents at beginning of period                  --            71,932                --
                                                            --------       -----------     -------------
Cash and cash equivalents at end of period                  $ 71,932       $ 1,242,225     $   1,242,225
                                                            ========       ===========     =============
Supplemental disclosures of cash flow information:
   Acquisition of intangible                                $     --       $ 6,295,806     $   6,295,806
                                                            ========       ===========     =============
   Options and Warrants issued for services                 $     --       $    86,164     $      86,164
                                                            ========       ===========     =============
   Common stock issued for acquisition of software
      technology                                            $     --       $   806,082     $     806,082
                                                            ========       ===========     =============
   Common stock issued in disposition of debt               $     --       $        --     $      10,000
                                                            ========       ===========     =============
   Common stock issued for services                         $     --       $   255,150     $     255,150
                                                            ========       ===========     =============
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      F-6

<PAGE>

                                  EDENTIFY, INC
                        (A DEVELOPMENT STAGE ENTERPRISE)
         Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1: COMPANY DESCRIPTION

     Edentify, Inc. ("Edentify") was formed in August 2004 with the
objective of becoming a leader in the development and deployment of data
analysis technology-based solutions for the prevention of identity theft and
fraud. It is currently a later development-stage company and expects shortly to
begin a period of increased growth. Edentify will seek to fulfill its goals by
analyzing the means by which identity crimes are perpetrated and through the
development of new technologies and procedures to assist corporations, the
government and consumers in the fight against identity fraud and related crime.

     Edentify owns the intellectual property rights to two strategic approaches
for the detection and prevention of identity fraud. They are (1) an
information-based data analysis and monitoring approach and (2) a biometric
technology-based approach.

     The first approach, the operations of which are carried our through our
wholly-owned subsidiary, Edentify, Inc. (Delaware), is a patented
information-based approach that analyzes identity data information for
individuals in large databases and is capable of detecting and scoring
incidences of identity manipulation and potential theft (Identity Quotient
Index(TM)). The forerunner of this technology is currently used in screening
identities used for new checking account applications at nearly every major bank
in the U.S. Edentify will continue to market this technology to other areas of
the financial services industry, as well as to large healthcare organizations
and local, state and federal governments.

     The second approach is a biometric technology that will be marketed through
and is named after our wholly-owned subsidiary, InMotion Biometrics, Inc.
("IMB"). This novel set of algorithms combines face and voice recognition
techniques for authenticating the identity of an individual. The IMB technology
is licensed from face2face, Inc., a leading character animation company that was
spun off from Lucent Technologies, Inc. in 2000. The core capability of this
technology is its facial analysis system that contains highly evolved algorithms
for obtaining the inner lip contour, which can accurately measure for optimal
visual speech recognition performance. Additionally, the system is designed as a
multi-modal platform capable of combining the reading of two or more biometric
technologies simultaneously

     Edentify currently markets its data analysis technology directly and
through channel partners. The biometric technology is currently under
development and, upon completion will be marketed through strategic partners as
OEMs or value added resellers. Future plans include the development of an
integrated product that combines our information-based ID manipulation detection
capability with IMB's face recognition technology, thereby enabling a
defensively-robust enrollment and subsequent identity protection system.

NOTE 2: REORGANIZATION

     On February 29, 2005, BudgetHotels Networks, Inc. ("Budget") signed an
Agreement to acquire all of the issued and outstanding shares of Edentify, Inc.,
a Delaware corporation ("Edentify") in exchange for issuance of 21,000,000
shares of the Company's common stock and Share Rights Certificates entitling the
former stockholder of Edentify to receive the balance of the shares upon
consummation of a reverse split or other corporate action making new shares
available for issuance, so that ultimately the former Edentify stockholder and
nominees will own a total of 88.2% of the outstanding common stock of Budget
(hereinafter, the foregoing transaction being the "Acquisition"). Pursuant to
the Agreement, Edentify deposited $75,000 into an escrow account for the benefit
of Budget in conjunction with the execution of the letter of intent, and was
required to pay an additional $75,000 to Budget (with such amount to be assigned
to InfoCenters, Inc.) on or before July 31, 2005. Both amounts were paid to
Budget in July 2005.


                                      F-7

<PAGE>

     The Company subsequently effected a 1-for-10 reverse split of our capital
stock (the "Reverse Split"). Upon the Reverse Split becoming effective in July,
2005, we issued a total of 19,510,255 shares of its common stock to the former
stockholder of Edentify and his nominees associated with the Share Rights
Certificate in order for such persons to hold approximately 88.2% of the
outstanding common stock of the Company. After the Reverse Split and subsequent
issuance under the Share Rights Certificates, Edentify, formerly Budget, had a
total of approximately 24,501,000 shares of common stock issued and outstanding.

     Prior to the Closing Date of the Acquisition, Budget executed a
Distribution Agreement with its subsidiary InfoCenter, Inc., through which
Budget carried on its then-current operating business activities, pursuant to
which Budget will agree to distribute the shares of InfoCenter, Inc., to the
stockholders of record of Budget as of a record date immediately prior to the
Closing Date of the transaction with Edentify. Distribution of the shares of
InfoCenter, Inc. is intended but not required to be made through the filing of a
registration statement with the U.S. Securities and Exchange Commission by
InfoCenter, Inc. Under the terms of the Agreement, and the subsequent amendment
thereof on January 30. 2006, the distribution is required to be completed on or
before August 31, 2006.

     The operations regarding our subsidiary, InfoCenter, Inc. have been
accounted for as discontinued operations in accordance with accounting
principles generally accepted within the United States of America.

     The Acquisition resulted in the owners and management of Edentify having
effective operating control of the combined entity after the acquisition, with
the existing Budget investors continuing as only minority shareholders.

     Under accounting principles generally accepted in the United States (US
GAAP), the above noted acquisition is considered to be a capital transaction in
substance, rather than a business combination. That is, the acquisition is
equivalent to the issuance of stock by Edentify for the net monetary assets of
Budget, accompanied by a recapitalization, and is accounted for as a change in
capital structure. Accordingly, the accounting for the acquisition is identical
to that resulting from a reverse acquisition, except that no goodwill intangible
is recorded. Under reverse takeover accounting, the post reverse-acquisition
comparative historical financial statements of the "legal acquirer" (Budget),
are those of the "legal acquiree" (Edentify) (i.e. the accounting acquirer).

NOTE 3: BASIS OF PRESENTATION

     The above mentioned financial statements include the accounts of Edentify,
Inc., (the "Company") a Nevada corporation, and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

     In the opinion of management, all adjustments necessary for a fair
presentation of such consolidated financial statements have been included. Such
adjustments consist of normal recurring items. Interim results are not
necessarily indicative of results for a full year.

     These consolidated financial statements should be read in conjunction with
the Company's consolidated financial statements included in the Company's annual
report on Form 10-KSB for the fiscal year ended December 31, 2005, as filed with
the SEC.

NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

     The preparation of financial statements in conformity with Accounting
Principles Generally Accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the


                                      F-8

<PAGE>

financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

     The Company recognizes revenue in accordance with Statement of Position
97-2, Software Revenue Recognition whereby persuasive evidence of arrangement
exists, delivery of the product or service has occurred, the fee is fixed and
determinable, acceptance has occurred and collectibility is probable.

     The Company may enter into service agreements with its clients whereby the
Company will receive up-front license fees for granting use of the Company's
proprietary software. Any non-refundable portion of these license fees received
upon execution of these agreements would be recognized ratably over the service
agreement term. The remaining portion of the up-front license fee would also be
recognized ratable over the term of the agreement only after acceptance has
occurred. In the event the contract term is infinite, the up-front fee would be
recognized systematically over the period fees are estimated to be earned.

CASH & CASH EQUIVALENTS

     For purposes of cash flow, cash consists of unrestricted cash balances held
at area banks, and cash held in escrow.

PROPERTY AND EQUIPMENT

     Property and Equipment is stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful life of the
assets (5 to 10 years).

INTANGIBLES

     Intangible assets are stated at cost. Amortization is provided using the
straight-line method, under FASB Statement No. 142, Goodwill and Other
Intangible Assets, over the period which the asset is expected to contribute
directly or indirectly to the future cash flows of the technology.

INCOME TAXES

     Edentify, Inc. accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Under SFAS No. 109, deferred income tax assets and liabilities are determined
based on differences between the financial statement reporting and tax bases of
assets and Liabilities and are measured using the enacted tax rates and laws in
effect when the differences are expected to reverse. The measurement of deferred
income tax assets is reduced, if necessary, by a valuation allowance for any tax
benefits, which are not expected to be realized. The effect on deferred income
tax assets and liabilities of a change in tax rates is recognized in the period
that such tax rate changes are enacted.

     As of December 31, 2005, operations have not commenced. Deferred taxes, if
recorded, would be the difference between the amount of pre-organization costs
deferred until operations begin and the accumulated deficit at December 31,
2005.

STOCK BASED COMPENSATION

     The Company follows Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation." We chose to apply Accounting
Principal Board Opinion 25 and related interpretations in accounting for stock
options granted to our employees.

     The Company provides pro forma disclosures of compensation expense under
the fair market value method of SFAS No. 123, "Accounting for Stock-Based
Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure."


                                      F-9

<PAGE>

The weighted average assumptions used for the years presented are as follows:

<TABLE>
<CAPTION>
                                             2005
                                           --------
<S>                                        <C>
Risk-free interest rate                        4.37%
Expected dividend yield                          --
Expected lives                                3 yrs
Expected volatility                             196%

Weighted average market value of options
   and warrants issued in the year 2005    $297,000
</TABLE>

If compensation cost for the Company's option plan had been determined using the
fair value method at the grant dates, the effect on the Company's net loss and
loss per share for the years ended December 31, 2004, and 2005 would have been
as follows:

                    (In thousands except for per share data)

<TABLE>
<CAPTION>
                                                     December 31,   December 31,
For the years ended:                                     2004           2005
--------------------                                 ------------   ------------
<S>                                                  <C>            <C>
Net (loss)as reported                                   $  (15)       $(2,903)
Add: Stock based compensation included in net loss
as reported,
net of related tax effects                                  --             --
                                                        ------        -------
Deduct: Stock based compensation determined under
fair value based
method for all awards, net of related tax effects           --           (297)
                                                        ------        -------
Pro forma - net loss                                    $  (15)       $(3,200)
                                                        ======        =======
Basic and diluted loss
per share - as reported                                 $(0.00)       $ (0.12)
                                                        ------        -------
Basic and diluted loss
per share - pro forma                                   $(0.00)       $ (0.13)
                                                        ======        =======
</TABLE>

For stock warrants granted to non-employees, the Company measures fair value of
the equity instruments utilizing the Black-Scholes method if that value is more
reliably measurable than the fair value of the consideration or service
received. The Company amortizes such cost over the related period of service.

The exercise price of all stock warrants granted was equal to or greater than
the fair market value of the underlying common stock as defined by APB 25 on the
date of the grant.

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

The Company computes net income (loss) per share in accordance with FSAS No.
128 "Earnings per Share".  SFAS No. 128 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement.  Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period.  Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury method and convertible
preferred shares using the if converted method.  In computing diluted EPS, the
average shares price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or warrants.  Diluted
EPS excludes all dilutive potential shares if their effect is anti dilutive.

COMPREHENSIVE INCOME (LOSS)

SFAS No. 130 "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements.  As at December 31, 2005, the company has no items that represent a
Comprehensive loss in the financial statements.

FINANCIAL INSTRUMENTS

The fair values of cash, accounts receivable, other assets, accounts payable and
accrued liabilities, notes payable, related party payables, payroll taxes
payable and long-term debt approximate their carrying values due to the
immediate or short term maturity of these financial instruments.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

As per FIN 46(R), "Consolidation of Variable Interest", applies at different
dates to different types of enterprises and entities, and special provisions
apply to enterprises that have fully or partially applied Interpretation 46
prior to issuance of Interpretation 46(R). Application of Interpretation 46 or
Interpretation 46(R) is required in financial statements of public entities that
have interests in variable interest entities or potential variable interest
entities commonly referred to as special-purpose entities for periods ending
after December 15, 2003. Application by public entities (other than small
business issuers) for all other types of entities is required in financial
statements for periods ending after March 15, 2004. Application by small
business issuers to entities other than special-purpose entities and by
non-public entities is required at various dates in 2004 and 2005. There is no
impact on the Company's financial statements.

FOREIGN CURRENCY TRANSLATION

The functional and reporting foreign currency is the United States dollar.
Foreign currency transactions are occasionally undertaken in Canadian dollars
and are translated into United States dollars using exchange rates at the date
of the transaction.  Monetary assets and liabilities denominated in foreign
currencies are re measured at each balance sheet date at the exchange rate
prevailing at the balance sheet date.  Foreign currency exchange gains and
losses are charged to operations.  The Company has not entered into derivative
instruments to offset the impact of foreign currency fluctuations.

CONVERTIBLE SECURITIES WITH BENEFICIAL CONVERSION FEATURES

The debenture issuances and related embedded conversion features and warrants
issuances were accounted for in accordance with EITF 98-5: Accounting for
convertible securities with beneficial conversion features or contingency
adjustable conversion and with EITF No. 00-27: Application of issue No. 98-5 to
certain convertible instruments.  The Company determined the fair values to be
ascribed to detachable warrants issued with the convertible debentures utilizing
the Black-Scholes method.  Any discount derived from determining the fair value
of the warrants is amortized to financing costs over the remaining life of the
debenture. The unamortized discount upon the conversion of the debentures is
expensed to financing cost on a pro-rata basis.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003 the FASB issued interpretation No. 46, Consolidation of Variable
Interest Entities, an interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements. Interpretation 46 establishes accounting
guidance for consolidation of variable interest entities that function to
support the activities of the primary beneficiary. Interpretation 46 applies to
any business enterprise both private and public that has a controlling interest,
contractual relationship or other business relationship with a variable interest
entity. The Company has no investment in or contractual relationship or other
business relationship with a variable interest entity and therefore the adoption
did not have any impact on the Company's consolidated financial position,
results of operations or cash flows.

On April 30, 2003 the FASB issued Statement No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. Statement 149 is intended to
result in more consistent reporting of contracts as either freestanding
derivative instruments subject to Statement 133 in its entirety, or as hybrid
instruments with debt host contracts and embedded derivative features. In
addition, Statement 149 clarifies the definition of a derivative by providing
guidance on the meaning of initial net investments related to derivatives.
Statement 149 is effective for contracts entered into or modified after June 30,
2003. The adoption of Statement 149 did not have any effect on the Company's
consolidated financial position, results of operations or cash flows.

On May 15, 2003 the FASB issued Statement No. 150, Accounting For Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
Statement 150 establishes standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. Statement 150 represents a
significant change in practice in the accounting for a number of financial
instruments, including mandatory redeemable equity instruments and certain
equity derivatives that frequently are used in connection with share repurchase
programs. Statement 150 is effective for all financial instruments created or
modified after May 31, 2003 and to other instruments as of September 1, 2003.
The Company's reporting of convertible debt is in compliance with this
statement.

In 2004, FASB issued a revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. This Statement supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and its related implementation
guidance. This revised pronouncement requires that all stock options and
warrants be accounted for using the Fair Value Method. This pronouncement will
impact on the Company, as the Company currently accounts for all options and
warrants using the Intrinsic Value Method.

FIN 46(R), Consolidation of Variable Interest Entities, applies at different
dates to different types of enterprises and entities, and special provisions
apply to enterprises that have fully or partially applied Interpretation 46
prior to issuance of Interpretation 46(R). Application of Interpretation 46 or
Interpretation 46(R) is required in financial statements of public entities that
have interests in variable interest entities or potential variable interest
entities commonly referred to as special-purpose entities for periods ending
after December 15, 2003. Application by public entities (other than small
business issuers) for all other types of entities is required in financial
statements for periods ending after March 15, 2004. Application by small
business issuers to entities other than special-purpose entities and by
non-public entities is required at various dates in 2004 and 2005. There is no
impact on the Company's financial statements.

In December 2004, the FASB issued SFAS Statement No. 153, Exchanges of
Non-monetary Assets.@ The statement is an amendment of APB Opinion No. 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. The Company believes that the adoption of
this standard will have no material impact on its financial statements.

In May 2005, FASB issued SFAS Statement No 154 Accounting Changes and Error
Corrections requiring retrospective application to prior periods financial
statements of a change in an accounting policy.  The company believes that the
adoption of this standard will have no material impact on its financial
statements.

NOTE 5: SOFTWARE AND VERIFICATION TECHNOLOGY PURCHASE

     On March 31, 2005 the Company entered into an agreement to purchase
software and verification technology for cash, debt, and securities. The
aggregate consideration to be paid for the technology will be $100,000 cash plus
4.767% of the issued and outstanding shares of common stock, warrants to
purchase an additional 41.67% of the number of shares issued to such recipients
of the stock (representing 4.767% of the issued and outstanding common stock of
the surviving corporation), an assumption of debt totaling $127,000 (See Note
7), and a convertible note agreement for $260,000 as more fully described in
Note 7.


                                      F-10

<PAGE>

At December 31, 2005, all amounts due in respect hereof were paid in full. The
Company valued total consideration for the software as follows:

<TABLE>
<S>                   <C>
Cash                  $  100,000
Stock valuation          805,522
Debt assumption          127,000
Convertible note         260,000
Warrants                     560
                      ----------
Total consideration   $1,293,082
                      ==========
</TABLE>

NOTE 6: OTHER INTANGIBLE ASSETS

     On August 29, 2005, the Company's wholly-owned subsidiary, InMotion
Biometrics, Inc. ("InMotion") entered into a license, development and share and
warrant issuance agreement with face2face animation, inc. ("face2face") on
August 29, 2005. The Company was granted an exclusive worldwide license
("License Agreement") to make, use, import and sell certain patents, hardware,
software and other technology related to the identification of persons and
facial recognition. InMotion also has limited right to sub-license the
technology and requires face2face to pay InMotion any royalties or fees due to
third parties that are related to the technology.

     As consideration for the license agreement, the Company was required to
issue shares of common stock and warrants pursuant to a share and warrant
issuance agreement as described further below. The term of the license is
perpetual.

     As part of the same transaction, InMotion also entered into a non-exclusive
Development Agreement ("Development Agreement") with face2face for the joint
development of hardware and software to be used for advanced acoustical and
visual speech recognition and facial recognition. The term of the agreement is
twelve months from the date of execution with an option to renew for an
additional six months. InMotion paid face2face $1,000 upon execution of the
development agreement and also provided other assurances regarding minimum
capitalization required for face2face to obtain grant funding from certain state
agencies.

     As part of the consideration for the License Agreement and the Development
Agreement described above, the Company, on August 29, 2005 also closed on a
Share and Warrant Issuance Agreement (the "Issuance Agreement") with face2face.
The Issuance Agreement was entered into as a condition precedent to the
performance obligations of the parties to each of the License Agreement and the
Development Agreement. As part of the consideration for face2face entering into
the License Agreement and the Development Agreement, The Company issued in the
name of face2face a total of 7,500,000 shares of our common stock (the "Shares")
which shall be delivered to face2face as follows: 2,500,000 Shares at closing,
2,500,000 Shares upon acceptance of the Product by the Company under the
Development Agreement, and 2,500,000 Shares upon the closing of a sublicense or
other agreement between the Company and a customer relating to the Product. The
Company also issued a warrant, at closing, to face2face to purchase 1,000,000
shares of the Company's common stock at an exercise price of $1.00 per share.

     Under EITF 96-18 Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring or in Conjunction with, Selling Goods or Services,
the Company recorded the issuance and delivery of the 2,500,000 shares of the
Company's common stock and 1,000,000 warrants as an investment in the licensed
technology as the performance criteria of executing the agreement were met as of
December 31,2005. The Company will record the remaining delivery of 5,000,000
shares of common stock as follows: 1) 2,500,000 shares upon acceptance of the
product by the Company at the fair value of the Company's stock at the date of
acceptance 2) 2,500,000 shares upon the closing of a sublicense or other
agreement between the Company and a customer relating to the product at the fair
value of the Company's common stock at the date this requirement is met.
Accordingly, the Company has recorded this licensed technology of $2,545,806
under the caption "Intangibles" as of December 31, 2005.

     After further development of this technology, and/or at the commencement
of sales of products using this technology, the Company will begin to amortize,
under FASB Statement No. 142, Goodwill and Other Intangible Assets, over the
period which the asset is expected to contribute directly or indirectly to the
future cash flows of the technology.

The Company valued total consideration for the software as follows:

<TABLE>
<S>                   <C>
Common Stock          $1,875,000
Warrants                 670,806
                      ----------
Total Consideration   $2,545,806
                      ==========
</TABLE>


                                      F-11
<PAGE>

     The Company determined the fair values to be ascribed to detachable
warrants issued with the convertible debentures utilizing the Black-Scholes
method. The carrying amount of intangibles is reviewed for recoverability when
events or changes in circumstances occur that indicate that the carrying value
of the assets may not be recovered.

NOTE 7: DEBT

Long-term notes payable at December 31, 2005 consisted of the following:

<TABLE>
<S>                      <C>
Convertible Debentures   $ 2,650,000
Less Discounts            (2,239,583)
                         -----------
Total Long term debt     $   410,417
                         ===========
</TABLE>

     On December 31, 2004, the Company issued an aggregate of $300,000 in
principal amount of 8% senior convertible debentures due on December 31, 2006,
and warrants to receive an aggregate of 2,000,000 shares of common stock of the
Company in a private placement for aggregate proceeds of $300,000. The debenture
is one of a series of 8% senior secured convertible debentures. Interest is due
quarterly at a rate of 8% per annum on the outstanding principal. Each debenture
is convertible into shares of common stock at the option of the holder equal to
the principal amount converted divided by $0.15. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.15 per share at
any time commencing on December 31, 2004 through December 31, 2009. The
convertible debenture was issued with a $300,000 discount due to the fair value
ascribed to the detachable warrants utilizing the Black-Scholes method. The
discount is being amortized as financing costs over the two year life of the
debenture. On December 10, 2005, the debenture holders exercised 2,000,000
warrants for which the Company received gross proceeds of $300,000.

     On April 21, 2005, we issued an aggregate of $600,000 in principal amount
of 8% senior convertible debentures due on April 21, 2007, and warrants to
receive an aggregate of 1,875,000 shares of common stock of the Company in a
private placement for aggregate proceeds of $600,000. The debenture is one of a
series of 8% senior secured convertible debentures. Interest is due quarterly at
a rate of 8% per annum on the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.32. The warrants are to acquire an
aggregate of 1,875,000 shares of common stock at a price of $0.32 per share at
any time commencing on April 21, 2005 through April 21 2010. The convertible
debenture was issued with a $600,000 discount due to the fair value ascribed to
the detachable warrants utilizing the Black Scholes method. The discount is
being amortized as financing costs over the two year life of the debenture.

     On August 29, 2005, we issued an aggregate of $1,000,000 in principal
amount of 6% senior convertible debentures due on August 29, 2007, and warrants
to receive an aggregate of 2,000,000 shares of common stock of the Company in a
private placement for aggregate proceeds of $1,000,000. The debenture is one of
a series of 6% senior secured convertible debentures. Interest is due quarterly
at a rate of 6% per annum on the outstanding principal. The debenture is
convertible into shares of common stock at the option of the holder equal to the
principal amount converted divided by $0.50. The warrants are to acquire an
aggregate of 2,000,000 shares of common stock at a price of $0.50 per share at
any time commencing on August 29, 2005 through August 29, 2010. The convertible
debenture was issued with a $1,000,000 discount due to the fair value ascribed
to the detachable warrants utilizing the Black Scholes method. The discount is
being amortized as financing costs over the two year life of the debenture.

     As of December 10, 2005, we issued an aggregate of $ 1,050,000 in principal
amount of 6% senior convertible debentures due on December 10, 2007, and
warrants to receive an aggregate of 2,100,000 shares of common stock of the
Company in a private placement. Interest is due quarterly at a rate of 6% per
annum on the outstanding principal. The debenture is convertible into shares of
common stock at the option of the holder equal to the principal amount converted
divided by $0.50. The warrants are to acquire


                                      F-12

<PAGE>

an aggregate of 2,100,000 shares of common stock at a price of $0.50 per share
at any time commencing on December 10, 2005 through December 10, 2010. The
convertible debenture was issued with a $1,050,000 discount due to the fair
value ascribed to the detachable warrants utilizing the Black Scholes method.
The discount is being amortized as financing costs over the two year life of the
debenture.

     As of December 31, 2005, the debenture holders and lenders had not
converted any portion of their note or debentures.

     The convertible debentures noted above were accounted for in accordance
with EITF 98-5: Accounting for convertible securities with beneficial conversion
features or contingency adjustable conversion and with EITF No. 00-27:
Application of issue No. 98-5 to certain convertible instruments. The Company
determined the fair values to be ascribed to detachable warrants issued with the
convertible debentures utilizing the Black-Scholes method.

     On April 28, 2005 we issued an aggregate of $260,000 in principal amount of
a 10% note payable to an individual due on March 31, 2006. The Company prepaid
interest in the amount of $26,000 to the lender. The lender has the right to
convert the unpaid principal amount into shares of Company's common stock at a
price per share of $1.00 on a post-1-for-10 reverse split basis. The lender
cannot convert less than $25,000 at one time unless there remains less than
$25,000 due.

     In connection with the Company's purchase of software and verification
technology (See Note 5 above), the Company, in September 2005 entered into a
note agreement with a financial institution in the principal amount of $127,000.
The note matures on September 7, 2006, and the Company is required to make
interest only payments initiating on December 7, 2005. Interest is payable at
the Prime rate of interest (6.75% as of September 30, 2005). The company was
required to pay $127,000 into a cash collateral account as required by the terms
of the note agreement. The Company has accounted for this amount as an other
asset as of December 31, 2005.

NOTE 8: COMMITMENTS AND CONTINGENCIES

     The Company entered into an operating lease for office facilities that
expires over the next three years. The facilities were occupied on May 23, 2005,
and the lease expires on May 31, 2008. Future minimum rental payments required
under operating leases that have remaining lease terms in excess of one year as
of December 31, 2005 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
-------------------------
<S>                         <C>
2006.....................     41,293
2007.....................     42,327
2008.....................     20,524
2009.....................      1,665
2010.....................      1,328
                            --------
TOTAL....................   $107,137
                            ========
</TABLE>

NOTE 9: CONSULTING AGREEMENT

     On September 19, 2005, the Company entered into a one year consulting
agreement with Redwood Consultants, LLC to assist the Company with its investor
relations activities. Redwood Consultants is a full-service investor relations
firm headquartered in Novato, Calif., Redwood Consultants specializes in
creating credible awareness of its clients' corporate potential to the financial
community through communications with analysts, market makers, institutions,
retail stockbrokers, and individual investors nationwide. In consideration for
entering into this agreement, the Company agreed to issue 700,000 shares of its
common stock with the initial 350,000 shares being issued within ten (10)
business days of the date of the executed agreement and the remaining 350,000
issued not later than six (6) months from the date of the executed agreement.
The Company recorded the transaction as prepaid investor relations of $255,150


                                      F-13

<PAGE>

based upon the fair value of the Company's common stock upon the date of the
agreement and will incur expense ratably over the term of the agreement.

NOTE 10: EMPLOYMENT AGREEMENTS

     Effective on April 29, 2005, we assumed the employment contract with
Terrence DeFranco, who was appointed by our Board as the Chief Executive Officer
and Chairman effective upon the closing of the Acquisition. The term of the
agreement is for a period of three years and is terminable for cause. In
connection with his employment, Mr. DeFranco was granted options to purchase a
total of 1,250,000 shares of our common stock, at exercise prices varying from
$0.75 to $5.00 per share vesting over a period of three years at a rate of
1/36th per month , with all options being fully vested in 36 months.

     On July 29, 2005, Edentify, Inc. entered into an employment agreement with
Thomas Harkins to be our Chief Operating Officer. Under the terms of his
employment agreement, Mr. Harkins has agreed to devote his full time effort to
Edentify and will not engage in any competitive work for a period of two years.
Edentify agrees to pay Mr. Harkins $12,500 per month plus any increases or
bonuses as determined by the Company. In addition to a salary, Mr. Harkins will
receive options to purchase a total of 1,250,000 shares of the common stock of
the surviving company at varying exercise prices from $0.75 to $5.00 per share.
The options vest at a rate of 1.36 of the amount granted per month, with all
options being fully vested in 36 months.

NOTE 11: DEVELOPMENT AND SERVICE AGREEMENT

     The Company entered into a Master Services Agreement (the "Services
Agreement") with Seisint, Inc.("Seisint") effective October 3, 2005. This
Services Agreement provides for Seisint to provide certain services and for
Edentify to perform certain duties as outlined in a separate Scope of Work
("SOW") all in connection with supporting our ongoing efforts to assist our
customers in the areas of detection and prevention of identification fraud. The
Master Services Agreement also provides that a fee will be paid to Seisint as
specified in a separate SOW. The term of the Master Services Agreement begins as
of the Effective Date and continues until December 31, 2008, renewable for
successive one-year terms unless the non-renewing party notifies the other in
writing of such non-renewal at least 90 days prior to the expiration of the
respective term. Upon expiration of the term, all licenses granted pursuant to
the Agreement or any SOW will terminate. The Master Services Agreement also
provides for an indemnification by each of the parties of the other party under
conditions set forth in detail in the Master Services Agreement. Except with
respect to the indemnification obligations of the parties, liability under the
Master Services Agreement is limited to the amount payable under the Master
Services Agreement. This agreement also provides for confidentiality with
respect to the information and technology being exchanged and developed. The
Master Services Agreement further requires us to maintain general liability
insurance with coverage of no less than $1,000,000 per claim and $2,000,000
aggregate.

     In consideration for the development and implementation of the Company's
database server, assessment server(s), and required operating infrastructure
within Seisint, and the initial run of the Company's key generation and update
service and identity assessment processing service, the Company agreed to pay to
Seisint a fee (the "Implementation Fee"). Such Implementation Fee is payable in
two equal installments, with the first payment delivered on the effective date
of the agreement, and the second payment delivered on or before 30 days from the
date of the December 31, 2005 invoice from Seisint. Pursuant to the agreement,
the Company paid the amount due upon execution of the agreement and recorded the
second payment due as an accrued liability as of December 31, 2005. The Company
recorded the entire fee as prepaid expense as of December 31, 2005 and will
amortize these costs over the three year contract term as research and
development. In consideration for the ongoing services provided to the Company,
including the maintenance of the Company's database server and assessment
server(s) and all subsequent runs of the Company's key generation and update
service and identity assessment processing services, the Company agreed to pay
to Seisint fees for 2006, 2007 and 2008, respectively. As of December 31, 2005,
the Company's prepaid expense was $1,032,000 which included the transaction
above.

                                      F-14

<PAGE>
     Pursuant to the first SOW ("SOW 1"), executed simultaneously with the
Master Services Agreement, Seisint is to provide all hardware, operating
software (excluding certain assessment modules provided by Edentify) and data
center needs necessary for the development, implementation and maintenance of
servers that shall perform identification fraud detection services to our
customers. Edentify is to provide the assessment modules for processing to
develop a key that will allow for the detection of identification fraud. The
term of SOW 1 begins as of the Effective Date and continues until December 31,
2008, renewable for successive one year terms unless the non-renewing party
notifies the other in writing of such non-renewal at least 90 days prior to the
expiration of the respective term. Edentify also grants to Seisint a revocable
(to the extent that SOW 1 is terminable), world-wide, non-transferable,
royalty-free restricted license without the right to sublicense to use the
assessment modules and key generation modules solely for the purpose of
performing the services contemplated by SOW 1. SOW 1 also sets forth a schedule
of fees payable by Edentify to Seisint, increasing annually for each of the
three years of the term and a revenue sharing formula, whereby Seisint receives
a percentage of the gross revenue derived from the sale by Edentify of the
product developed from the services performed under SOW 1 based on a stepped
rate over the three year initial term of the agreement. SOW 1 also provides that
the parties will cooperate on product development and shall negotiate in good
faith on rights to resell the products jointly developed. Each party retains
their respective rights in the intellectual property originated by such party
and used in conjunction with the performance of the services contemplated by the
agreement.

     Pursuant to the second SOW ("SOW 2") also, executed simultaneously with the
Master Services Agreement, Edentify is to be compensated a percentage of
receipts from sales of Seisint services for which Edentify originated the
customer lead and was a procuring cause. The term of SOW 2 begins as of the
Effective Date and continues until December 31, 2008, renewable for successive
one year terms unless the non-renewing party notifies the other in writing of
such non-renewal at least 90 days prior to the expiration of the respective
term.

NOTE 12: LICENSE AGREEMENTS

     On December 9, 2005, we entered into a Scoring Services Agreement with
MyPublicInfo ("MPI") whereby MPI will provide us with identity information from
their proprietary database for the purpose of having us utilize proprietary
databases, processes and information developed by us and/or obtained from third
parties to produce an "Identity Score". We will provide MPI with a license to
use the "Identity Score" derived utilizing our proprietary scoring methodology,
which measures the level of suspicious identity manipulation activity and
potential fraud associated with each identity record provided by the Client.

     For grant of the license, MPI undertook to pay us a fee, in two parts: (1)
upon execution of the agreement and (2) upon the completion of the 60-day
acceptance period which represents the time period allotted to provide a secure
interface between the two parties. The Client is entitled to a partial refund of
the license fee in the event acceptance is not met. In addition, MPI will pay a
fee per month for the scoring service commencing on the date of acceptance and
continuing for the term of the agreement. Upon execution of the agreement, the
entire license fee was recorded by us as deferred revenue. The non-refundable
portion of the up-front fee will be recognized as income ratably over the
service agreement term. Upon acceptance of the product or service, the remaining
balance of the license fee will also be recognized ratably over the term of the
agreement. As of December 31, 2005, we had received the amount due upon
execution of the agreement.

NOTE 13: SUBSEQUENT EVENTS

     On January 1, 2006, the Company entered into an employment agreement to
engage Kenneth Vennera as general counsel for the Company with the title of
Chief Legal Officer. The term of the agreement is for a period of three years
and is terminable for cause. In connection with his employment, Mr. Vennera was
issued stock and granted options to purchase a total of 1,000,000 shares of our
common stock, at exercise prices varying from $0.75 to $4.00 per share, vesting
over a period of two years at a rate of 1/24th per month , with all options
being fully vested in 24 months. and is eligible for such benefits as are


                                      F-15

<PAGE>
provided to other executives of the Company. Mr. Vennera was also appointed by
the Board of Directors as Secretary of the Company by the Board of Directors.

     On January 30, 2006, the Company amended its Distribution Agreement with
our subsidiary InfoCenter, Inc. to change the date on which the requirement of
filing a registration statement for the distribution of such shares from
"January 31, 2006" to "August 31, 2006.


NOTE 14: RESTATEMENTS

     (a) On July 19, 2006, after analyzing the views expressed by the Office of
the Chief Accountant of the Securities and Exchange Commission ("SEC"), it was
determined that the treatment regarding the acquisition of software technology
was inaccurately reflected within in the statement of cash flows included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2005, and
its Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
2006, and that, therefore, a restatement of the statement of cash flows for the
periods referenced above was required. The Company incorrectly included the fair
market value of our common stock issued as part of the consideration for that
acquisition.

     The effect of the restatements changed the amounts previously reported
under cash provided from operating activities and the cash used for investing
activities by approximately $806,000 for both the year ended December 31, 2005
and the cumulative period August 27, 2004 through December 31, 2005,
respectively.

     As a result of the corrections of the errors described above, the Company
restated its financial statements included in this Annual Report on Form
10-KSB/A as follows:

                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                   For the Year                              For the Year
                                                                       Ended                                     Ended
                                                                  December 31, 2005     Adjustments         December 31, 2005
                                                                  -----------------     -----------        ------------------
                                                                    As Previously
                                                                       Reported                                Restated
<S>                                                               <C>                   <C>                <C>
Cash flows from operating activities:
  Net loss from continuing operations                             $   (2,108,137)                          $   (2,108,137)
  Net (loss)/income from discontinued operations                  $       (6,705)                          $       (6,705)
Adjustments to reconcile net loss to net cash used
    in operating activities:
  Depreciation of property and equipment                                   3,554                                    3,554
  Amortization of deferred financing costs                               560,417                                  560,417
  Common stock issued for services                                       255,150                                  255,150
  Options and Warrants issued for services provided                       86,164 (b)                               86,164
  Common stock issued for software technology                            806,082         (806,082)(a)                   -
Changes in assets and liabilities:
  Prepaids                                                            (1,009,419)                              (1,009,419)
  Other current assets                                                  (130,961)                                (130,961)
  Accounts payable, trade                                                  8,984                                    8,984
  Payroll tax payable                                                     19,660                                   19,660
Deferred revenue                                                          19,444                                   19,444
Dividend payable                                                        (165,046)                                (165,046)
  Other liabilities and accrued expenses                                 623,473 (b)                              623,473
                                                                  --------------                           --------------
  Net cash used in operating activities                               (1,037,340)        (806,082)             (1,843,422)
                                                                  ---------------                          ---------------
Cash flows from investing activities:
  Purchase of software and verification technology                    (1,293,082)        (806,082)(a)            (487,000)
  Purchase of property and equipment, net                                (36,445)                                 (36,445)
                                                                  --------------                           --------------
  Net cash used in investing activities                           $   (1,329,527)        (806,082)         $     (523,445)
                                                                  --------------                           --------------
Cash flows from financing activities:
  Proceeds from borrowings                                        $    3,237,160                           $    3,237,160
  Proceeds from exercising of warrants                                   300,000                                  300,000
                                                                  --------------                           --------------
  Net cash provided by financing activities                            3,537,160                                3,537,160
                                                                  --------------                           --------------
  Net decrease (increase) in cash and cash equivalents                 1,170,293                                1,170,293
Cash and cash equivalents at beginning of period                          71,932                                   71,932
                                                                  --------------                           --------------
Cash and cash equivalents at end of period                        $    1,242,225                           $    1,242,225
                                                                  ==============                           ==============
Supplemental disclosures of cash flow information:
  Acquisition of intangible                                       $    6,295,806                           $    6,295,806
                                                                  ==============                           ==============
  Common stock issued for acquisition of software technology      $      806,082                           $      806,082
                                                                  ==============                           ==============
  Common stock issued in disposition of debt                      $            -                           $            -
                                                                  ==============                           ==============
  Common stock issued for services                                $      255,150                           $      255,150
                                                                  ==============                           ==============
  </TABLE>


(a)  Includes restatement adjustments for the cash flow effect of the
     acquisition of software technology, as described above.

(b)  This amount was included in total acquisition cost of $1,060,065 as
     originally reported; however, the line item was omitted inadvertently from
     the statement. This amount was inserted into the "As Previously Reported"
     column as this was technically reported in the total.


                                 EDENTIFY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   Cumulative Period                      Cumulative Period
                                                                    August 27, 2004                        August 27, 2004
                                                                  (inception) through                    (inception) through
                                                                     December 31,       Adjustments          December 31,
                                                                  -------------------   -----------      -------------------
                                                                         2005                                    2005
                                                                         ----                                    ----
                                                                    As Previously
                                                                       Reported                                Restated
<S>                                                               <C>                   <C>              <C>
Cash flows from operating activities:
  Net loss from continuing operations                             $   (2,122,885)                          $   (2,122,885)
  Net (loss)/income from discontinued operations                  $       (6,705)                          $       (6,705)
Adjustments to reconcile net loss to net cash used
   in operating activities:
  Depreciation of property and equipment                                   3,554                                    3,554
  Amortization of deferred financing costs                               560,417                                  560,417
  Common stock issued for services                                       255,150                                  255,150
  Warrants issued for services provided                                   86,164 (b)                               86,164
  Common stock issued for software technology                            806,082         (806,082)(a)                   -
Changes in assets and liabilities:
  Prepaids                                                            (1,031,919)                              (1,031,919)
  Other current assets                                                  (130,961)                                (130,961)
  Accounts payable, trade                                                 18,507                                   18,507
  Payroll tax payable                                                     19,660                                   19,660
Deferred revenue                                                          19,444                                   19,444
Dividend payable                                                        (160,046)                                (160,046)
  Other liabilities and accrued expenses                                 623,473 (b)                              623,473
                                                                  --------------                           --------------
  Net cash used in operating activities                               (1,060,065)        (806,082)             (1,866,147)
                                                                  --------------                           --------------
Cash flows from investing activities:
  Purchase of software and verification technology                    (1,293,082)        (806,082)(a)            (487,000)
  Purchase of property and equipment, net                                (41,788)                                 (41,788)
                                                                  --------------                           --------------
  Net cash used in investing activities                               (1,334,870)        (806,082)         $     (528,788)
                                                                  --------------                           --------------
Cash flows from financing activities:
  Proceeds from borrowings                                             3,637,160                           $    3,637,160
  Proceeds from exercising of warrants                                   300,000                                  300,000
                                                                  --------------                           --------------
  Net cash provided by financing activities                            3,637,160                                3,637,160
                                                                  --------------                           --------------
  Net decrease (increase) in cash and cash equivalents                 1,242,225                                1,242,225
Cash and cash equivalents at beginning of period                               -                                        -
                                                                  --------------                           --------------
Cash and cash equivalents at end of period                        $    1,242,225                           $    1,242,225
                                                                  ==============                           ==============
Supplemental disclosures of cash flow information:
  Acquisition of intangible                                       $    6,295,806                           $    6,295,806
                                                                  ==============                           ==============
  Common stock issued for acquisition of software technology      $      806,082                           $      806,082
                                                                  ==============                           ==============
  Common stock issued in disposition of debt                      $       10,000                           $       10,000
                                                                  ==============                           ==============
  Common stock issued for services                                $      255,150                           $      255,150
                                                                  ==============                           ==============
  </TABLE>


(a)  Includes restatement adjustments for the cash flow effect of the
     acquisition of software technology, as described above.

(b)  This amount was included in total of $1,060,065; however, the line item was
     omitted inadvertently from the statement. This amount was inserted into the
     "As Previously Reported" column as this was technically reported previously
     in the total.


     Management has discussed the above errors and adjustments with its board of
directors and its current independent registered public accounting firm and have
determined that a restatement is necessary for the periods described above.







                                      F-16