**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**








(Mark
      One)





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





For
      the
      quarterly period ended September 30, 2006.





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





For
      the
      transition period from ________ to _________.





Commission
      File Number: 0-29963





**FINDEX.COM,
      INC.**





(Exact
      name of small business issuer as specified in its charter)





Nevada
            88-0379462(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)




11204
                Davenport Street, Suite 100, Omaha, Nebraska 68154(Address
                of principal executive offices)





(402)
      333-1900


(Issuer’s
      telephone number)





N/A





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








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





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








**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
      YEARS**





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court.  **Yes
      [_] No [_]**






**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 50,038,317 common shares as of November
      17,
      2006.





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





**TABLE
      OF CONTENTS**





**Page
                Number****PART
                I - FINANCIAL INFORMATION**ITEM
                1. Financial Statements.
            F-1ITEM
                2. Management’s Discussion and Analysis or Plan of
                Operation.
            1ITEM
                3. Controls and Procedures.
            16**PART
                II - OTHER INFORMATION**ITEM
                1. Legal Proceedings.
            17ITEM
                2. Unregistered Sales of Equity Securities and
                Use of Proceeds.
            17ITEM
                3. Defaults Upon Senior
                Securities.
            17ITEM
                4. Submission of Matters to a Vote of Security
                Holders.
            17ITEM
                5. Other Information.
            17ITEM
                6. Exhibits.
            18











Table
          of Contents


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS.**





**Findex.com,
                Inc.****CONDENSED
                CONSOLIDATED BALANCE SHEETS****(Unaudited)****September
                30, 2006**
            
            
            December
                31, 2005**Assets**Current
                assets:Cash
                and cash equivalents
            
            **$**
            **992**
            
            $
            119,560Accounts
                receivable, trade, net
            
            
            **270,209**
            
            
            405,380Inventory
            
            
            **151,013**
            
            
            214,604Other
                current assets
            
            
            **235,887**
            
            
            128,206Total
                current assets
            
            
            **658,101**
            
            
            867,750Property
                and equipment, net
            
            
            **79,985**
            
            
            114,191Software
                license, net
            
            
            **1,384,645**
            
            
            1,762,276Capitalized
                software development costs, net
            
            
            **518,216**
            
            
            707,067Other
                assets
            
            
            **276,568**
            
            
            253,001Total
                assets
            
            **$**
            **2,917,515**
            
            $
            3,704,285**Liabilities
                and stockholders’ equity**Current
                liabilities:Note
                payable
            
            **$**
            **75,000**
            
            $
            ---Accounts
                payable, trade
            
            
            **712,411**
            
            
            556,042Accrued
                royalties
            
            
            **574,129**
            
            
            472,548Derivative
                liabilities
            
            
            **952,914**
            
            
            2,062,462Other
                current liabilities
            
            
            **551,991**
            
            
            802,395Total
                current liabilities
            
            
            **2,866,445**
            
            
            3,893,447Long-term
                obligations
            
            
            **156,961**
            
            
            52,891Commitments
                and contingencies (Note 8)Stockholders’
                equity:Common
                stock
            
            
            **49,558**
            
            
            48,620Paid-in
                capital
            
            
            **7,595,437**
            
            
            7,461,424Retained
                (deficit)
            
            
            **(7,750,886**
            **)**
            
            (7,752,097
            )Total
                stockholders’ equity
            
            
            **(105,891**
            **)**
            
            (242,053
            )Total
                liabilities and stockholders’ equity
            
            **$**
            **2,917,515**
            
            $
            3,704,285*See
                accompanying notes.*


F-1
 Table
            of Contents


**Findex.com,
                Inc.****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS****(Unaudited)****Three
                Months Ended**
            **Nine
                Months Ended****September
                30,**
            **September
                30,****2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Revenues,
                net of reserves and allowances
            
            **$**
            **826,127**
            
            $
            1,023,609
            
            **$**
            **2,586,197**
            
            $
            3,978,019Cost
                of sales
            
            
            **391,771**
            
            
            450,413
            
            
            **1,361,157**
            
            
            1,410,191Gross
                profit
            
            
            **434,356**
            
            
            573,196
            
            
            **1,225,040**
            
            
            2,567,828Operating
                expenses:Sales
                and marketing
            
            
            **193,223**
            
            
            562,868
            
            
            **580,684**
            
            
            1,297,836General
                and administrative
            
            
            **385,658**
            
            
            212,261
            
            
            **1,310,340**
            
            
            1,419,057Other
                operating expenses
            
            
            **133,146**
            
            
            152,336
            
            
            **424,567**
            
            
            466,553Total
                operating expenses
            
            
            **712,027**
            
            
            927,465
            
            
            **2,315,591**
            
            
            3,183,446Loss
                from operations
            
            
            **(277,671**
            **)**
            
            (354,269
            )
            
            **(1,090,551**
            **)**
            
            (615,618
            )Other
                expenses, net
            
            
            **(47,898**
            **)**
            
            (5,234
            )
            
            **(57,929**
            **)**
            
            (12,009
            )Registration
                rights penalties
            
            
            **---**
            
            
            (158,792
            )
            
            **(49,314**
            **)**
            
            (277,792
            )Gain
                (loss) on valuation adjustment of derivatives
            
            
            **237,009**
            
            
            (328,121
            )
            
            **1,109,548**
            
            
            (874,992
            )Loss
                before income taxes
            
            
            **(88,560**
            **)**
            
            (846,416
            )
            
            **(88,246**
            **)**
            
            (1,780,411
            )Income
                tax (provision) benefit
            
            
            **114,909**
            
            
            (111,976
            )
            
            **89,457**
            
            
            187,182Net
                income (loss)
            
            **$**
            **26,349**
            
            $
            (958,392
            )
            
            **1,211**
            
            
            (1,593,229
            )Retained
                deficit at beginning of year
            
            **(7,752,097**
            **)**
            
            (6,170,830
            )Retained
                deficit at end of period
            
            
            **$**
            **(7,750,886**
            **)**
            $
            (7,764,059
            )Net
                income (loss) per share:Basic
            
            **$**
            **0.00**
            
            $
            (0.02
            )
            **$**
            **0.00**
            
            $
            (0.03
            )Diluted
            
            **$**
            **0.00**
            
            $
            (0.02
            )
            **$**
            **0.00**
            
            $
            (0.03
            )Weighted
                average shares outstanding:Basic
            
            
            **49,558,317**
            
            
            48,619,855
            
            
            **49,294,214**
            
            
            48,619,855Diluted
            
            
            **51,167,410**
            
            
            48,619,855
            
            
            **51,660,240**
            
            
            48,619,855*See
                accompanying notes.*


F-2
 Table
            of Contents


**Findex.com,
                Inc.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)****Nine
                Months Ended September 30**
            
            
            **2006**
            
            
            2005Cash
                flows from operating activities:Cash
                received from customers
            
            **$**
            **2,683,215**
            
            $
            4,049,153Cash
                paid to suppliers and employees
            
            
            **(2,375,960**
            **)**
            
            (3,565,309
            )Other
                operating activities, net
            
            
            **(16,204**
            **)**
            
            (3,910
            )Net
                cash provided by operating activities
            
            
            **291,051**
            
            
            479,934Cash
                flows from investing activities:Software
                development costs
            
            
            **(412,108**
            **)**
            
            (766,151
            )Other
                investing activities, net
            
            
            **(12,955**
            **)**
            
            15,300Net
                cash (used) by investing activities
            
            
            **(425,063**
            **)**
            
            (750,851
            )Cash
                flows from financing activities:Proceeds
                from note payable, net
            
            
            **75,000**
            
            
            ---Payments
                made on long-term notes payable
            
            
            **(59,556**
            **)**
            
            (30,604
            )Net
                cash provided (used) by financing activities
            
            
            **15,444**
            
            
            (30,604
            )Net
                (decrease) in cash and cash equivalents
            
            
            **(118,568**
            **)**
            
            (301,521
            )Cash
                and cash equivalents, beginning of year
            
            
            **119,560**
            
            
            341,359Cash
                and cash equivalents, end of period
            
            **$**
            **992**
            
            $
            39,838Reconciliation
                of net income (loss) to cash flows from operating
                activities:Net
                income (loss)
            
            **$**
            **1,211**
            
            $
            (1,593,229
            )Adjustments
                to reconcile net income (loss) to net cashprovided
                by operating activities:Software
                development costs amortized
            
            
            **600,959**
            
            
            524,989(Gain)
                loss on fair value adjustment of derivatives
            
            
            **(1,109,548**
            **)**
            
            874,992Bad
                debts (benefit) provision
            
            
            **(11,216**
            **)**
            
            29,650Depreciation
                & amortization
            
            
            **435,783**
            
            
            436,903Noncash
                operating expenses
            
            
            **69,997**
            
            
            ---Loss
                on disposal of property and equipment
            
            
            **1,746**
            
            
            1,869Change
                in assets and liabilities:Decrease
                in accounts receivable
            
            
            **146,387**
            
            
            71,786Decrease
                in inventories
            
            
            **63,591**
            
            
            22,231Decrease
                in refundable taxes
            
            
            **5,764**
            
            
            7,164(Increase)
                decrease in prepaid expenses
            
            
            **(7,603**
            **)**
            
            55,509Increase
                in accrued royalties
            
            
            **101,581**
            
            
            40,831Increase
                in accounts payable
            
            
            **164,327**
            
            
            65,858Increase
                in income taxes payable
            
            
            **---**
            
            
            180(Decrease)
                in deferred taxes
            
            
            **(89,457**
            **)**
            
            (187,362
            )(Decrease)
                increase in other liabilities
            
            
            **(82,471**
            **)**
            
            128,563Net
                cash provided by operating activities
            
            **$**
            **291,051**
            
            $
            479,934*See
                accompanying notes.*


F-3
 Table
            of Contents




**Findex.com,
      Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**September
      30, 2006**


**(Unaudited)**





**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**BASIS
      OF PRESENTATION**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with Generally Accepted Accounting Principles for interim
      financial information and with the instructions to Form 10-QSB and Item 310
      of
      Regulation S-B. Accordingly, they do not include all of the information and
      footnotes required by Generally Accepted Accounting Principles for complete
      financial statements. The accompanying unaudited condensed consolidated
      financial statements reflect all adjustments that, in the opinion of management,
      are considered necessary for a fair presentation of the financial position,
      results of operations, and cash flows for the periods presented. The results
      of
      operations for such periods are not necessarily indicative of the results
      expected for the full fiscal year or for any future period. The accompanying
      financial statements should be read in conjunction with the audited consolidated
      financial statements of Findex.com, Inc. included in our Form 10-KSB for the
      fiscal year ended December 31, 2005.





**USE
      OF ESTIMATES**





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





**INVENTORY**





Inventory,
      including out on consignment, consists primarily of software media, manuals
      and
      related packaging materials and is recorded at the lower of cost or market
      value, determined on a first-in, first-out, and adjusted on a per-item, basis.





**ACCOUNTING
      FOR LONG-LIVED ASSETS**





We
      review
      property and equipment and intangible assets for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. Recoverability is measured by comparison of our carrying amount
      to future net cash flows the assets are expected to generate. If such assets
      are
      considered to be impaired, the impairment to be recognized is measured by the
      amount by which the carrying amount of the asset exceeds its fair market value.
      Property and equipment to be disposed of are reported at the lower of the
      carrying amount or fair value less costs to sell.





**INTANGIBLE
      ASSETS**





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, *Goodwill
      and Other Intangible Assets* ,
      intangible assets with an indefinite useful life are not amortized. Intangible
      assets with a finite useful life are amortized on the straight-line method
      over
      the estimated useful lives. Our software license is amortized over a ten-year
      useful life.





F-4
 Table
          of Contents


**SOFTWARE
      DEVELOPMENT COSTS**





In
      accordance with SFAS No. 86, *Accounting
      for the Costs of Computer Software to Be Sold, Leased, or Otherwise
      Marketed* ,
      software development costs are expensed as incurred until technological
      feasibility and marketability has been established, generally with release
      of a
      beta version for customer testing. Once the point of technological feasibility
      and marketability is reached, direct production costs (including labor directly
      associated with the development projects), indirect costs (including allocated
      fringe benefits, payroll taxes, facilities costs, and management supervision),
      and other direct costs (including costs of outside consultants, purchased
      software to be included in the software product being developed, travel
      expenses, material and supplies, and other direct costs) are capitalized until
      the product is available for general release to customers. We amortize
      capitalized costs on a product-by-product basis. Amortization for each period
      is
      the greater of the amount computed using (i) the straight-line basis over the
      estimated product life (generally from 12 to 18 months), or (ii) the ratio
      of
      current revenues to total projected product revenues. Total cumulative
      capitalized software development costs were $2,973,151, less accumulated
      amortization of $2,454,935 at September 30, 2006.





Capitalized
      software development costs are stated at the lower of amortized costs or net
      realizable value. Recoverability of these capitalized costs is determined at
      each balance sheet date by comparing the forecasted future revenues from the
      related products, based on management’s best estimates using appropriate
      assumptions and projections at the time, to the carrying amount of the
      capitalized software development costs. If the carrying value is determined
      not
      to be recoverable from future revenues, an impairment loss is recognized equal
      to the amount by which the carrying amount exceeds the future revenues. To
      date,
      no capitalized costs have been written down to net realizable
      value.





SFAS
      No.
      2, *Accounting
      for Research and Development Costs* ,
      established accounting and reporting standards for research and development.
      In
      accordance with SFAS No. 2, costs we incur to enhance our existing products
      after general release to the public (bug fixes) are expensed in the period
      they
      are incurred and included in research and development costs. Research and
      development costs incurred prior to determination of technological feasibility
      and marketability and after general release to the public and charged to expense
      were $131,013 and $130,407 for the nine months ended September 30, 2006 and
      2005, respectively, included in general and administrative
      expenses.





We
      capitalize costs related to the development of computer software developed
      or
      obtained for internal use in accordance with the American Institute of Certified
      Public Accountants Statement of Position (“SOP”) 98-1, *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use* .
      Software obtained for internal use has generally been enterprise level business
      and finance software that we customize to meet our specific operational needs.
      We have not sold, leased, or licensed software developed for internal use to
      our
      customers and have no intention of doing so in the future.





We
      capitalize costs related to the development and maintenance of our website
      in
      accordance with Financial Accounting Standard Board’s (“FASB’s”) Emerging Issues
      Task Force (“EITF”) Issue No. 00-2, *Accounting
      for Website Development Costs* .
      Under
      EITF Issue No. 00-2, costs expensed as incurred are as follows:





▪
            planning
                the website,▪
            developing
                the applications and infrastructure until technological feasibility
                is
                established,▪
            developing
                graphics such as borders, background and text colors, fonts, frames,
                and
                buttons, and▪
            operating
                the site such as training, administration and
                maintenance.





Capitalized
      costs include those incurred to:





▪
            obtain
                and register an Internet domain name,▪
            develop
                or acquire software tools necessary for the development
                work,▪
            develop
                or acquire software necessary for general website
                operations,▪
            develop
                or acquire code for web applications,▪
            develop
                or acquire (and customize) database software and software to integrate
                applications such as corporate databases and accounting systems into
                web
                applications,▪
            develop
                HTML web pages or templates,▪
            install
                developed applications on the web server,▪
            create
                initial hypertext links to other websites or other locations within
                the
                website, and▪
            test
                the website applications.





F-5
 Table
          of Contents


We
      amortize website development costs on a straight-line basis over the estimated
      life of the site, generally 36 months. Total cumulative website development
      costs, included in other assets on our condensed consolidated balance sheets,
      were $111,034, less accumulated amortization of $67,921 at September 30,
      2006.





**NET
      REVENUE**





We
      derive
      revenues from the sale of packaged software products, product support and
      multiple element arrangements that may include any combination of these items.
      We recognize software revenue for software products and related services in
      accordance with SOP 97-2, *Software
      Revenue Recognition* ,
      as
      modified by SOP 98-9, *Modification of SOP 97-2, With Respect to Certain Transactions* .
      We
      recognize revenue when persuasive evidence of an arrangement exists (generally
      a
      purchase order), we have delivered the product, the fee is fixed or determinable
      and collectibility is probable.





In
      some
      situations, we receive advance payments from our customers. We defer revenue
      associated with these advance payments until we ship the products or offer
      the
      support.





In
      accordance with EITF Issue No. 01-9, *Accounting
      for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s
      Product* ,
      we
      generally account for cash considerations (such as sales incentives - rebates
      and coupons) that we give to our customers as a reduction of revenue rather
      than
      as an operating expense.





***Product
      Revenue***





We
      typically recognize revenue from the sale of our packaged software products
      when
      we ship the product. We sell some of our products on consignment to a limited
      number of resellers. We recognize revenue for these consignment transactions
      only when the end-user sale has occurred. Revenue for software distributed
      electronically via the Internet is recognized when the customer has been
      provided with the access codes that allow the customer to take immediate
      possession of the software on its hardware and evidence of the arrangement
      exists (web order).





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





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





We
      reduce
      product revenue for estimated returns and price protections that are based
      on
      historical experience and other factors such as the volume and price mix of
      products in the retail channel, trends in retailer inventory and economic trends
      that might impact customer demand for our products. We also reduce product
      revenue for the estimated redemption of end-user rebates on certain current
      product sales. Our rebate reserves are estimated based on the terms and
      conditions of the specific promotional rebate program, actual sales during
      the
      promotion, the amount of redemptions received and historical redemption trends
      by product and by type of promotional program. We did not offer any rebate
      programs to our customers during the three and nine months ended September
      30,
      2006 and 2005 and maintain a reserve for rebate claims remaining unpaid from
      2000 and 2001.





***Service
      Revenue***





We
      offer
      several technical support plans and recognize support revenue over the life
      of
      the plans, generally one year.





F-6
 Table
          of Contents


***Multiple
      Element Arrangements***





We
      also
      enter into certain revenue arrangements for which we are obligated to deliver
      multiple products or products and services (multiple elements). For these
      arrangements, which include software products, we allocate and defer revenue
      for
      the undelivered elements based on their vendor-specific objective evidence
      (“VSOE”) of fair value. VSOE is generally the price charged when that element is
      sold separately.





In
      situations where VSOE exists for all elements (delivered and undelivered),
      we
      allocate the total revenue to be earned under the arrangement among the various
      elements, based on their relative fair value. For transactions where VSOE exists
      only for the undelivered elements, we defer the full fair value of the
      undelivered elements and recognize the difference between the total arrangement
      fee and the amount deferred for the undelivered items as revenue (residual
      method). If VSOE does not exist for undelivered items that are services, we
      recognize the entire arrangement fee ratably over the remaining service period.
      If VSOE does not exist for undelivered elements that are specified products,
      we
      defer revenue until the earlier of the delivery of all elements or the point
      at
      which we determine VSOE for these undelivered elements.





We
      recognize revenue related to the delivered products or services only if (i)
      the
      above revenue recognition criteria are met, (ii) any undelivered products or
      services are not essential to the functionality of the delivered products and
      services, (iii) payment for the delivered products or services is not contingent
      upon delivery of the remaining products or services, and (iv) we have an
      enforceable claim to receive the amount due in the event that we do not deliver
      the undelivered products or services.





***Shipping
      and Handling Costs***





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





***Customer
      Service and Technical Support***





Customer
      service and technical support costs include the costs associated with performing
      order processing, answering customer inquiries by telephone and through
      websites, email and other electronic means, and providing technical support
      assistance to our customers. In connection with the sale of certain products,
      we
      provide a limited amount of free technical support assistance to customers.
      We
      do not defer the recognition of any revenue associated with sales of these
      products, since the cost of providing this free technical support is
      insignificant. The technical support is provided within one year after the
      associated revenue is recognized and free product enhancements (bug fixes)
      are
      minimal and infrequent. We accrue the estimated cost of providing this free
      support upon product shipment and include it in cost of sales.





**INCOME
      TAXES**





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





**EARNINGS
      PER SHARE**





We
      follow
      SFAS No. 128, *Earnings
      Per Share* ,
      to
      calculate and report basic and diluted earnings per share (“EPS”). Basic EPS is
      computed by dividing income available to common shareholders by the weighted
      average number of shares of common stock outstanding for the period. Diluted
      EPS
      is computed by giving effect to all dilutive potential shares of common stock
      that were outstanding during the period. For us, dilutive potential shares
      of
      common stock consist of the incremental shares of common stock issuable upon
      the
      exercise of stock options and warrants for all periods, convertible notes
      payable and the incremental shares of common stock issuable upon the conversion
      of convertible preferred stock.





F-7
 Table
          of Contents


When
      discontinued operations, extraordinary items, and/or the cumulative effect
      of an
      accounting change are present, income before any of such items on a per share
      basis represents the “control number” in determining whether potential shares of
      common stock are dilutive or anti-dilutive. Thus, the same number of potential
      shares of common stock used in computing diluted EPS for income from continuing
      operations is used in calculating all other reported diluted EPS amounts. In
      the
      case of a net loss, it is assumed that no incremental shares would be issued
      because they would be anti-dilutive. In addition, certain options and warrants
      are considered anti-dilutive because the exercise prices were above the average
      market price during the period. Anti-dilutive shares are not included in the
      computation of diluted EPS, in accordance with SFAS No. 128.





**RECLASSIFICATIONS**





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





**NOTE
      2 - INVENTORIES**





At
      September 30, 2006, inventories consisted of the following:





Raw
                materials
            
            **$**
            **95,366**Finished
                goods
            
            
            **55,647**Inventories
            
            **$**
            **151,013**





**NOTE
      3 - NOTE PAYABLE**




In
      July
      2006, we entered into a loan agreement with an individual for $150,000. The
      agreement bears interest at a rate of 10% per thirty-day period and carried
      an
      original due date of September 18, 2006. On September 19, 2006, for additional
      consideration of $750, we entered into a modification and extension agreement
      which extended the repayment term of the balance of the outstanding principal
      under the loan, as well as the interest payable thereon, until October 20,
      2006.
      The loan agreement is secured by a first priority security interest in all
      of
      our assets, including the intellectual property comprising the software products
      upon which we are dependent for revenue, and is convertible, together with
      any
      accrued interest thereon, into restricted shares of our common stock at a
      conversion price per share equal to $0.07 per share. In further consideration,
      we issued the lender a three-year common stock purchase warrant to acquire
      up to
      an aggregate of 100,000 restricted shares of common stock at an exercise price
      of $0.07 per share. See Note 6, Common Stock and Note 11, Subsequent
      Events.


**NOTE
      4 - DERIVATIVES**





At
      September 30, 2006, our derivative liability consisted of the
      following:





Warrant
                A
            
            **$**
            **12,544**Warrant
                B
            
            
            **488,717**Warrant
                C
            
            
            **451,653**Derivatives
            
            **$**
            **952,914**





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





F-8
 Table
          of Contents


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





**Warrant
                A**
            ****
            ****
            **Warrant
                B**
            ****
            ****
            **Warrant
                C**Expected
                term - years
            
            
            .58
            
            
            3.11
            
            
            3.11Stock
                price at September 30, 2006
            
            $
            0.05
            
            $
            0.05
            
            $
            0.05Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %Expected
                stock price volatility
            
            
            235
            %
            
            212
            %
            
            212
            %Risk-free
                interest rate
            
            
            4.83
            %
            
            4.50
            %
            
            4.50
            %





The
      warrants are revalued at each balance sheet date by using the parameters above,
      reducing the expected term to reflect the passing of time, and using the stock
      price at the balance sheet date. Net fair value adjustments included in other
      income and expenses on the consolidated statements of operations were income
      adjustments of $237,009 and $1,109,548 for the three and nine months ended
      September 30, 2006, and expense adjustments of ($328,121) and ($874,992) for
      the
      three and nine months ended September 30, 2005, respectively.





**NOTE
      5 - INCOME TAXES**





The
      provision (benefit) for taxes on net income for the three and nine months ended
      September 30, 2006 and 2005 consisted of the following:





**Three
                months ended September 30**
            **Nine
                months ended September 30****2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Current:Federal
            
            **$**
            **---**
            
            $
            ---
            
            **$**
            **---**
            
            $
            ---State
            
            
            ---
            
            
            ---
            
            
            **---**
            
            
            180---
            
            
            ---
            
            
            **---**
            
            
            180Deferred:Federal
            
            
            **(112,543**
            **)**
            
            116,472
            
            
            **(84,655**
            **)**
            
            (165,714
            )State
            
            
            **(2,366**
            **)**
            
            (4,496
            )
            
            **(4,802**
            **)**
            
            (21,648
            )**(114,909**
            **)**
            
            111,976
            
            
            **(89,457**
            **)**
            
            (187,362
            )Total
                tax provision (benefit)
            
            **$**
            **(114,909**
            **)**
            $
            111,976
            
            **$**
            **(89,457**
            **)**
            $
            (187,182
            )





**NOTE
      6 - STOCKHOLDERS’ EQUITY**





**COMMON
      STOCK**





In
      March
      2006, we committed to issue a total of 146,154 restricted shares of common
      stock
      to each of our then outside directors (a total of 438,462 shares), at the
      closing price as of March 30, 2006 ($0.13), in lieu of cash payments of amounts
      accrued for their services as members of our board from the period of September
      1, 2004 through March 31, 2006. This issuance was valued at
      $57,000.





In
      April
      2006, we committed to issue a total of 500,000 restricted shares of common
      stock
      to a company for investor relations services, at the closing price as of April
      2, 2006 ($0.13), in accordance with the terms of a twelve-month agreement.
      This
      issuance was valued at $65,000.





F-9
 Table
          of Contents


**COMMON
      STOCK WARRANTS**





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





In
      July
      2006, we issued a three-year warrant to purchase up to 100,000 restricted shares
      of our common stock, at a price of $0.07, to an individual, in connection with
      the issuance of a convertible note payable. This warrant was valued at $4,997
      based on the Black-Scholes method using a stock price of $0.05 per share,
      volatility of 196%, an annual dividend rate of 0% and a risk-free interest
      rate
      of 4.91%. The value was treated as a discount on debt issued with detachable
      stock purchase warrants, per APB No. 14, and amortized to interest expense
      over
      the original life of the note. See Note 3, Note Payable.





**NOTE
      7 - EARNINGS PER COMMON SHARE**





Earnings
      per common share are computed by dividing net income by the weighted average
      number of shares of common stock and common stock equivalents outstanding during
      the year. Common stock equivalents are the net additional number of shares
      that
      would be issuable upon the exercise of our outstanding common stock options
      and
      warrants, assuming that we reinvested the proceeds to purchase additional shares
      at market value.





The
      following table shows the amounts used in computing earnings per common share
      and the effect on income and the average number of shares of dilutive potential
      common stock:





**For
                the Three Months Ended September 30**
            
            
            **2006**
            
            
            2005Net
                income (loss)
            
            **$**
            **26,349**
            
            $
            (958,392
            )Preferred
                stock dividends
            
            
            **---**
            
            
            **---**Net
                income (loss) available to common shareholders
            
            **$**
            **26,349**
            
            $
            (958,392
            )Basic
                weighted average shares outstanding
            
            
            **49,558,317**
            
            
            48,619,855Dilutive
                effect of:Convertible
                debt
            
            
            **1,535,714**
            
            
            ---Stock
                options
            
            
            ---
            
            
            ---Warrants
            
            
            **73,379**
            
            
            ---Diluted
                weighted average shares outstanding
            
            
            **51,167,410**
            
            
            48,619,855





**For
                the Nine Months Ended September 30**
            
            
            **2006**
            
            
            2005Net
                loss
            
            **$**
            **1,211**
            
            $
            (1,593,229
            )Preferred
                stock dividends
            
            
            **---**
            
            
            **---**Net
                loss available to common shareholders
            
            **$**
            **1,211**
            
            $
            (1,593,229
            )Basic
                weighted average shares outstanding
            
            
            **49,294,214**
            
            
            48,619,855Dilutive
                effect of:Convertible
                debt
            
            
            **1,535,714**
            
            
            ---Stock
                options
            
            
            **676,043**
            
            
            ---Warrants
            
            
            **154,269**
            
            
            ---Diluted
                weighted average shares outstanding
            
            
            **51,660,240**
            
            
            48,619,855





**NOTE
      8 - COMMITMENTS AND CONTINGENCIES**





We
      are
      subject to legal proceedings and claims that arise in the ordinary course of
      our
      business. In the opinion of management, the amount of ultimate liability with
      respect to these actions will not materially affect our financial statements
      taken as a whole.





F-10
 Table
          of Contents


Our
      employment agreements with our management team each contain a provision for
      an
      annual bonus equal to 1% of our net income (3% total). We accrue this bonus
      on a
      quarterly basis. Our management team consists of our Chief Executive Officer
      (with a base annual salary of $150,000), our Chief Financial Officer (with
      a
      base annual salary of $110,000), and our Chief Technology Officer (with a base
      annual salary of $150,000). In addition to the bonus provisions and annual
      base
      salary, each employment agreement provides for payment of all accrued base
      salaries ($8,703 included in Other current liabilities at September 30, 2006),
      bonuses ($37,033 included in other current liabilities at September 30, 2006),
      and any vested deferred vacation compensation ($30,443 included in other current
      liabilities at September 30, 2006) for termination by reason of disability.
      The
      agreements also provide for severance compensation equal to the then base salary
      until the later of (i) the expiration of the term of the agreement as set forth
      therein or (ii) one year, when the termination is other than for cause
      (including termination by reason of disability). There is no severance
      compensation in the event of voluntary termination or termination for
      cause.





In
      2003
      and 2004, we reduced our reserve for rebates payable based, in part, on our
      ability to meet the financial obligation of claims carried forward from our
      last
      rebate program in 2001. As such, we may have a legal obligation to pay rebates
      in excess of the liability recorded.





Our
      royalty agreements for new content generally provide for advance payments to
      be
      made upon contract signing. In addition, several new agreements provide for
      additional advance payments to be made upon delivery of usable content and
      publication. We accrue and pay these advances when the respective milestone
      is
      met.





**NOTE
      9 - RISKS AND UNCERTAINTIES**





Our
      future operating results may be affected by a number of factors. We depend
      upon
      a number of major inventory and intellectual property suppliers. If a critical
      supplier had operational problems or ceased making material available to us,
      operations could be adversely affected.





**NOTE
      10 - GOING CONCERN**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with Generally Accepted Accounting Principles in the
      United States applicable to a going concern. As of September 30, 2006, we had
      a
      year-to-date net income of $1,211, and negative working capital of $2,208,344
      and $3,025,697, and an accumulated deficit of $7,750,886 and $7,752,097 as
      of
      September 30, 2006 and December 31, 2005, respectively. Although these factors
      raise substantial doubt as to our ability to continue as a going concern through
      December 31, 2006, we have taken several measures to mitigate against this
      risk,
      including expanding our in-house telemarketing efforts to increase our
      direct-to-consumer revenue while at the same time reducing commissions paid
      to
      third-party telemarketing firms. In addition, we are focused on distilling
      both
      our sales and marketing, and general and administrative expenses to include
      only
      those providing the most return on investment.





**NOTE
      11 - SUBSEQUENT EVENTS**





On
      October 19, 2006, we repaid the note payable in full.





On
      October 26, 2006, we granted 850,000 nonqualified stock options to non-executive
      employees. These options carry an exercise price of $0.10 per share, vest
      immediately, and have a three-year term.





On
      October 26, 2006, we committed to issue 480,000 restricted shares of common
      stock to our outside director, at the closing price as of October 26, 2006
      ($0.025), in lieu of cash payments of amounts accrued for his service as a
      member of our board from the period of April 1, 2006 through September 30,
      2006.





F-11
 Table
          of Contents


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





***Cautionary
      Statement Regarding Forward-Looking Statements***





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





*Investors
      and prospective investors are cautioned that any such forward-looking statements
      are not guarantees of future performance and involve risks and uncertainties,
      and that actual results may differ materially from those projected in the
      forward-looking statements as a result of various factors. Factors that might
      cause such differences include, among others, those set forth in Part I, Item
      2
      of this quarterly report on Form 10-QSB, entitled “Management’s Discussion and
      Analysis or Plan of Operation”, and including without limitation the ”Risk
      Factors” contained in our annual report on Form 10-KSB for the period ended
      December 31, 2005. Except as required by law, we undertake no obligation to
      update any of the forward-looking statements in this Form 10-QSB after the
      date
      of this report.*





This
      information should be read in conjunction with our unaudited condensed
      consolidated financial statements and the notes thereto included in Part I,
      Item
      1 of this quarterly report on Form 10-QSB, and our audited financial statements
      and the notes thereto and our Management’s Discussion and Analysis or Plan of
      Operation contained in our annual report on Form 10-KSB for the fiscal year
      ended December 31, 2005.





**MANAGEMENT
      OVERVIEW**





During
      the third quarter of 2006 we released an upgrade to our flagship product,
      QuickVerse ® ,
      which
      was one month earlier compared to our upgrade release of QuickVerse ® in 2005.
      In addition, this marked the second year in a row that we released an upgrade
      to
      the QuickVerse ® (Windows) product line that would reach the retail stores prior to the holiday
      season beginning. QuickVerse ® 2007 is
      currently available in six editions, QuickVerse ® 2007
      Bible Suite, QuickVerse ® 2007
      Essentials, QuickVerse ® 2007
      Standard, QuickVerse ® 2007
      Expanded, QuickVerse ® 2007
      Deluxe and QuickVerse ® 2007
      Platinum. These QuickVerse ® 2007
      editions range in retail price from $39.95 to $799.95. The
      QuickVerse ® 2007 new
      features include web dictionary support, integrated PDF files, integrated RSS
      subscriptions and integrated web pages. We believe that the unique features
      of
      the new QuickVerse ® 2007
      editions will provide us with an opportunity to broaden our customer base as
      our
      products appeal not only to those just beginning their journey into Bible study
      but also to the scholars who are searching for an in-depth knowledge of the
      Bible.





During
      the second quarter of 2006 we released QuickVerse ® 2006
      Macintosh ® Gold
      Edition, with a suggested retail price of $349.95, which offers more content
      to
      Mac users than ever before. This edition offers 19 Bibles and 144 reference
      titles, a retail value of over $4,000 if sold separately. We also released
      the
      Holman Christian Standard Bible ® ,
      with a
      suggested retail price of $29.95, which is sponsored by Broadman & Holman
      Publishers. This Bible translation provides English-speaking people across
      the
      world with an accurate, readable Bible in contemporary English and equips
      serious Bible students with an accurate translation for personal study, private
      devotions and memorization.





Finally,
      during the first quarter of 2006, we released QuickVerse ® 2006
      Parable Edition, with a suggested retail price of $49.95, and
      QuickVerse ® 2006
      Bible Suite, with a suggested retail price of $29.95. QuickVerse ® 2006
      Bible Suite appeals to those customers seeking their first Bible study software.
      QuickVerse ® 2006
      Parable Edition is sold exclusively at Parable ® retail
      outlets and through Parable ® ’s website,
      at www.parable.com, and unlike other QuickVerse ® editions, QuickVerse ® 2006
      Parable contains exclusive Parable ® content
      such as *Books
      That Change Lives* and *Standing
      Firm Devotional* .





-1-
 Table
          of Contents


Comparatively,
      during the third quarter of 2005, we released QuickVerse ® 2006
      three months earlier than our upgrade release of QuickVerse ® in 2004.
      During the second quarter of 2005, and for
      the
      first time in our operating history ,
      we introduced QuickVerse ® to the
      Macintosh Operating System in two editions, QuickVerse ® Macintosh
      Black Box (includes
      12 Bibles and 56 reference titles) ,
      with a
      suggested retail price of $99.95 and QuickVerse ® Macintosh
      White Box (includes
      9 Bibles and 40 reference titles) ,
      with a
      suggested retail price of $49.95. We also released an updated version of Bible
      Illustrator ® 3.0
      entitled Sermon Builder ® 4.0,
      with
      a suggested retail price of $69.95. Lastly,
      during the first quarter of 2005, we released an upgrade to our top-selling
      financial and data management software, Membership Plus ® ,
      with a
      suggested retail price of between $149.95 and $349.95, and introduced
      QuickVerse ® 2005
      Essentials, with a suggested retail price of $49.95, and QuickVerse ® 2005
      Platinum, with a suggested retail price of $799.95.





Although
      we did not release an upgrade version of Membership Plus ® during
      the first three quarters of 2006, we did release one in our fourth quarter
      of
      2006. Furthermore, we anticipate the releases of enhanced versions of
      QuickVerse ® Mobile
      and QuickVerse ® Macintosh during our fourth quarter of 2006, as well as the introduction of
      a
      few new titles that will offer additional content to our QuickVerse ® users.





Despite
      our decreased gross revenues during the nine months ended September 30, 2006,
      and although there can be no assurance, we anticipate that revenues will
      increase in real terms throughout the remainder of our 2006 fiscal year based
      upon our development schedule for the remainder of the fiscal year and the
      broadened content made available for our QuickVerse ® products.





***Results
      Of Operations for Quarters Ended September 30, 2006 and September 30,
      2005***





**Statement
                of Operations for Nine Months Ended September 30**
            
            
            **2006**
            
            
            2005
            
            
            Change
            
            
            %Net
                revenues
            
            **$**
            **2,586,197**
            
            $
            3,978,019
            
            $
            (1,391,822
            )
            
            35
            %Cost
                of sales
            
            
            **1,361,157**
            
            
            1,410,191
            
            
            (49,034
            )
            
            3
            %Gross
                profit
            
            **$**
            **1,225,040**
            
            $
            2,567,828
            
            $
            (1,342,788
            )
            
            52
            %Total
                operating expenses
            
            
            **(2,315,591**
            **)**
            
            (3,183,446
            )
            
            867,855
            
            
            27
            %Loss
                from operations
            
            **$**
            **(1,090,551**
            **)**
            $
            (615,618
            )
            $
            (474,933
            )
            
            77
            %Registration
                rights penalties
            
            
            **(49,314**
            **)**
            
            (277,792
            )
            
            228,478
            
            
            82
            %Gain
                (loss) on fair value adjustment of derivatives
            
            
            **1,109,548**
            
            
            (874,992
            )
            
            1,984,540
            
            
            227
            %Other
                expenses, net
            
            
            **(57,929**
            **)**
            
            (12,009
            )
            
            (45,920
            )
            
            382
            %Loss
                before income taxes
            
            **$**
            **(88,246**
            **)**
            $
            (1,780,411
            )
            $
            1,692,165
            
            
            95
            %Income
                tax benefit
            
            
            **89,457**
            
            
            187,182
            
            
            (97,725
            )
            
            52
            %Net
                income (loss)
            
            **$**
            **1,211**
            
            $
            (1,593,229
            )
            $
            1,594,440
            
            
            100
            %





Our
      software products are highly seasonal. More than 50% of our annual sales are
      expected to occur in the five months of September through January; the five
      months of April through August are generally our weakest, historically
      generating only approximately 29% of our annual sales.





Our
      gross
      profit decreased approximately $1,343,000 from a gross profit of approximately
      $2,568,000 for the nine months ended September 30, 2005 to a gross profit of
      approximately $1,225,000 for the nine months ended September 30, 2006. Further,
      we incurred a loss from operations of approximately $1,091,000 for the nine
      months ended September 30, 2006, representing an increase of approximately
      $475,000 in our loss from operations of approximately $616,000 for the nine
      months ended September 30, 2005. These negative results of operations are
      primarily attributable to the following:





-2-
 Table
          of Contents


For
      the
      nine months ended September 30, 2006:





▪
            our
                gross revenues decreased approximately $1,951,000 to approximately
                $
                2,794,000 for the nine months ended September 30, 2006 from approximately
                $4,745,000 for the nine months ended September 30, 2005. This decrease
                is
                primarily attributable to the following:▪
            an
                overall net decrease in unit sales of our QuickVerse®product line due to a reduction in the perceived value on the part
                of
                customers of certain upgrades based on the relative frequency
                thereof;▪
            the
                lack of product releases during the nine months ended September 30,
                2006
                as compared to the nine months ended September 30, 2005, including
                our
                annual release of Membership Plus®;
                and▪
            the
                decreased suggested retail price in those products that were released
                during the nine months ended September 30, 2006 compared to those
                released
                during the nine months ended September 30, 2005;▪
            our
                cost of sales remained relatively high, only decreasing approximately
                $49,000 from approximately $1,410,000 for the nine months ended September
                30, 2005 to approximately $1,361,000 for the nine months ended September
                30, 2006 due to the increased amortization of software development
                costs;▪
            we
                incurred liquidated damage penalties of approximately $49,000 in
                connection with our failure to meet certain contractual registration
                obligations; and▪
            our
                interest expense increased approximately $45,000 for the nine months
                ended
                September 30, 2006 due to a loan agreement that was entered into
                in order
                to fund our working capital
                deficit.





Our
      net
      income increased approximately $1,594,000 from a net loss of approximately
      $1,593,000 for the nine months ended September 30, 2005 to a net income of
      approximately $1,000 for the nine months ended September 30, 2006. This increase
      is mainly attributed to the valuation gain of approximately $1,110,000 we
      recognized from the fair value adjustment of our derivative liabilities during
      the nine months ended September 30, 2006. We do anticipate, however, this
      valuation gain to be temporary. If our stock price rebounds during the fourth
      quarter of 2006 to a level consistent with our stock price at December 2005,
      the
      fair value of the derivative liabilities will increase and therefore, the
      valuation gain recognized during the nine months ended September 30, 2006 will
      reverse and we will again reflect a year-to-date valuation loss (see *Derivatives* ).





Offsetting
      to some degree the negative results of operations detailed above were three
      positive developments during the nine months ended September 30, 2006. First,
      our registration statement on Form SB-2, originally filed on November 22, 2004,
      was declared effective by the SEC on February 1, 2006, and therefore, the
      liquidated damage penalties have stopped accruing. Second, we released our
      annual upgrade of our QuickVerse ® (Windows) product line which will reach the retail stores prior to the holiday
      season beginning. Third, we were able to remain operating cash positive despite
      our decrease in gross revenues for the nine months ended September 30, 2006.





***Revenues***





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





-3-
 Table
          of Contents


We
      reduce
      product revenue for estimated returns and price protections that are based
      on
      historical experience and other factors such as the volume and price mix of
      products in the retail channel, trends in retailer inventory and economic trends
      that might impact customer demand for our products. Estimated returns are also
      based upon a percentage of total retail and direct sales. Direct sales accounted
      for approximately 61% of our 2005 fiscal year revenue. We account for cash
      considerations (such as sales incentives - rebates and coupons) that we give
      our
      customers as a reduction of revenue rather than as an operating expense. Product
      revenue is also reduced for the estimated redemption of end-user rebates on
      certain current product sales. We did not have any rebate programs during the
      nine months ended September 30, 2005 and 2006, respectively.





Trends
      that our returns typically follow include (i) the seasonality of sales, and
      (ii)
      the fact that, generally, relatively higher return rates occur during periods
      of
      new title or title version releases. Historically, actual returns have been
      within management’s prior estimates, however, we cannot be certain that any
      future write-offs exceeding reserves will not occur or that amounts written
      off
      will not have a material adverse effect on our business, our financial
      condition, including liquidity and profitability, and our results of operations.
      Management continually monitors and adjusts these allowances to take into
      account actual developments and sales results in the marketplace. In the past,
      particularly during title and title version transitions, we have had to increase
      price concessions to our retail customers.





Product
      returns from distributors and Christian bookstores are allowed primarily in
      exchange for new products or for credit towards purchases as part of a
      stock-balancing program. These returns are subject to certain limitations that
      may exist in the contract. Under certain circumstances, such as termination
      or
      when a product is defective, distributors and bookstores could receive a cash
      refund if returns exceed amounts owed. Returns from sales made directly to
      the
      consumer are accepted within 45 days of purchase and are issued a cash refund.
      Product returns, price protections or price concessions that exceed our reserves
      could materially adversely affect our business and operating results and could
      increase the magnitude of quarterly fluctuations in our operating and financial
      results. Although we released QuickVerse ® 2007 in
      late August 2006 to the Christian Booksellers Association retail channel, we
      did
      not implement a price protection program within the three months ended September
      30, 2006 on our QuickVerse ® 2006
      titles. Furthermore, we do no anticipate implementing a price protection program
      in the near future.





Software
      products are sold separately, without an obligation of future performance such
      as upgrades, enhancements or additional software products, and are sold with
      post contract customer support services such as customer service and technical
      support assistance. In connection with the sale of certain products, we provide
      a limited amount of free technical support assistance to our customers. We
      do
      not defer the recognition of any revenue associated with sales of these
      products, since the cost of providing this free technical support is
      insignificant. The technical support is provided within one year after the
      associated revenue is recognized and free product enhancements (bug fixes)
      are
      minimal and infrequent. We accrue the estimated cost of providing this free
      support upon product shipment and include it in cost of sales.





Shipping
      and handling costs in connection with our software products are expensed as
      incurred and included in cost of sales.





**Revenues
                for Three Months Ended September 30**
            
            
            **2006**
            
            
            **%
                to Sales**
            
            
            
            2005
            
            
            %
                to Sales
            
            
            
            Change
            
            
            %Gross
                revenues
            
            **$**
            **910,896**
            
            
            **100**
            **%**
            
            $
            1,233,389
            
            
            100
            %
            
            $
            (322,493
            )
            
            26
            %Add
                rebate adjustment
            
            
            **---**
            
            
            **0**
            **%**
            
            
            4,910
            
            
            0
            %
            
            
            (4,910
            )
            
            100
            %Less
                reserve for sales returns and allowances
            
            
            **(84,769**
            **)**
            
            **-9**
            **%**
            
            
            (214,690
            )
            
            -17
            %
            
            
            129,921
            
            
            61
            %Net
                revenues
            
            **$**
            **826,127**
            
            
            **91**
            **%**
            
            $
            1,023,609
            
            
            83
            %
            
            $
            (197,482
            )
            
            19
            %




**Revenues
                for Nine Months Ended September 30**
            
            
            **2006**
            
            
            **%
                to Sales**
            
            
            
            2005
            
            
            %
                to Sales
            
            
            
            Change
            
            
            %Gross
                revenues
            
            **$**
            **2,793,594**
            
            
            **100**
            **%**
            
            $
            4,744,759
            
            
            100
            %
            
            $
            (1,951,165
            )
            
            41
            %Add
                rebate adjustment
            
            
            **---**
            
            
            **0**
            **%**
            
            
            14,730
            
            
            0
            %
            
            
            (14,730
            )
            
            100
            %Less
                reserve for sales returns and allowances
            
            
            **(207,397**
            **)**
            
            **-7**
            **%**
            
            
            (781,470
            )
            
            -16
            %
            
            
            574,073
            
            
            73
            %Net
                revenues
            
            **$**
            **2,586,197**
            
            
            **93**
            **%**
            
            $
            3,978,019
            
            
            84
            %
            
            $
            (1,391,822
            )
            
            214
            %





-4-
 Table
          of Contents


Gross
      revenues decreased approximately $322,000 from approximately $1,233,000 for
      the
      three months ended September 30, 2005 to approximately $911,000 for the three
      months ended September 30, 2006 and decreased approximately $1,951,000 from
      approximately $4,745,000 for the nine months ended September 30, 2005 to
      approximately $2,794,000 for the nine months ended September 30, 2006. We
      believe that this decrease was primarily attributable to the lack of product
      releases during the nine months ended September 30, 2006 as compared to the
      nine
      months ended September 30, 2005, and most notably the prolonged delay in our
      annual release of Membership Plus ® .
      During
      2005 and 2006, the following products were released during our first, second
      and
      third quarters, respectively:





First
      Quarter 2005





▪
            an
                enhanced version of our top financial and data management product,
                Membership Plus®,
                including Membership Plus®Standard Edition, with a suggested retail price of $149.95, and Membership
                Plus®Deluxe Edition, with a suggested retail price of
                $349.95;▪
            an
                enhanced version of QuickVerse®2005 Essentials, with a suggested retail price of $49.95; and▪
            QuickVerse®2005 Platinum Edition, with a suggested retail price of
                $799.95.





Second
      Quarter 2005





▪
            QuickVerse®2006 Macintosh, including QuickVerse®2006 Macintosh Black Box Edition, with a suggested retail price of
                $99.95,
                and QuickVerse®2006 Macintosh White Box Edition, with a suggested retail price of
                $49.95;
                and▪
            an
                enhanced version ofBible
                Illustrator®3.0
                entitled Sermon Builder®4.0,
                with a suggested retail price of
                $69.95.





Third
      Quarter 2005





▪
            an
                enhanced version of our flagship product, QuickVerse®,
                including QuickVerse®2006 Essentials with a suggested retail price of $49.95,
                QuickVerse®2006 Standard with a suggested retail price of $99.95,
                QuickVerse®2006 Expanded with a suggested retail price of $199.95,
                QuickVerse®2006 Deluxe with a suggested retail price of $299.95 and
                QuickVerse®2006 Platinum with a suggested retail price of
                $799.95.





First
      Quarter 2006





▪
            QuickVerse®2006 Parable Edition, with a suggested retail price of $49.95;
                and▪
            QuickVerse®2006 Bible Suite, with a suggested retail price of
                $29.95.





Second
      Quarter 2006





▪
            QuickVerse®2006 Macintosh Gold Box Edition, with a suggested retail price of
                $349.95;
                and▪
            Holman
                Christian Standard Bible®,
                with a suggested retail price of
                $29.95.





Third
      Quarter 2006





▪
            an
                enhanced version of our flagship product, QuickVerse®,
                including QuickVerse®2007 Bible Suite with a suggested retail price of $39.95,
                QuickVerse®2007 Essentials with a suggested retail price of $59.95,
                QuickVerse®2007 Standard with a suggested retail price of $129.95,
                QuickVerse®2007 Expanded with a suggested retail price of $249.95,
                QuickVerse®2007 Deluxe with a suggested retail price of $349.95 and
                QuickVerse®2007 Platinum with a suggested retail price of $799.95.





-5-
 Table
          of Contents


Of
      note,
      and generally, the retail price points for our products released during the
      nine
      months ended September 30, 2006 were significantly less than those released
      during the nine months ended September 30, 2005. Furthermore, due to
      the
      unexpected loss of our primary developer for Membership Plus ® in May
      2005, we have experienced a delay in our annual release of Membership
      Plus ® ,
      which
      typically is released in the month of February. Membership Plus ® 2007 was
      released in October 2006, following the close of our third quarter. Finally,
      we
      believe we experienced a decrease in gross revenues due to the annual early
      releases of our flagship product, QuickVerse ® ,
      which
      in turn has resulted in an overall net decrease in unit sales.
      QuickVerse ® 2007
      Windows was released in August 2006, eleven months following our 2005
      QuickVerse ® upgrade
      release and QuickVerse ® 2006
      Windows was released in September 2005, nine months following our 2004
      QuickVerse ® upgrade
      release. In the past, we have experienced greater sales within the first and
      second quarter of the fiscal year due to the then recent upgrade releases of
      our
      two main product lines, QuickVerse ® and
      Membership Plus ® .





During
      each of the quarters ended September 30, 2005 and 2006, our sales efforts were
      focused on directly targeting end-users through telemarketing and Internet
      sales. Due to the consistency in our development schedule and the annual
      releases of our flagship product, QuickVerse ® ,
      upgrade
      sales are not increasing at a rapid rate. However, we anticipate that revenues
      will increase through 2006 as we continue to expand the content available for
      our QuickVerse ® products, develop new products for multiple platforms, and offer our products
      at
      a range of price points intended to appeal to various market sub-segments.





Sales
      returns and allowances decreased approximately $130,000 from approximately
      $215,000 for the three months ended September 30, 2005 to approximately $85,000
      for the three months ended September 30, 2006, and decreased approximately
      $574,000 from approximately $781,000 for the nine months ended September 30,
      2005 to approximately $207,000 for the nine months ended September 30 2006.
      Sales returns and allowances also decreased as a percentage of gross sales
      from
      approximately 17% for the nine months ended September 30, 2005 to approximately
      7% for the nine months ended September 30, 2006. While this decrease reflects
      lower actual returns during the nine months ended September 30, 2006, it is
      mainly attributable to our relative lack of product releases during the nine
      months ended September 30, 2006. Typically after a new product release, sales
      returns and allowances trend upward as distributors and retail stores will
      return old product in exchange for the new product release. With
      QuickVerse ® 2006
      Windows shipping in September 2005 as compared to QuickVerse ® 2005
      Windows in December 2004, just nine months earlier, we experienced a greater
      increase in sales returns and allowances during the fourth quarter of 2005.
      Furthermore, sales returns and allowance for the nine months ended September
      30,
      2005 reflect the release of Membership Plus ® 2005
      compared to no release of the Membership Plus ® product
      line for the nine months ended September 30, 2006. In addition, due to the
      extended time-line between the releases of the Membership Plus ® product
      line, we have experienced fewer returns from retail stores as there is no new
      product to exchange the old product with. During the nine months ended September
      30, 2005 the following items contributed to the sales returns and allowances:





▪
            price
                protections afforded to consumers and retailers who had purchased
                prior
                versions of Membership Plus®and
                QuickVerse®within
                one year or less of our release of upgraded versions of each of Membership
                Plus®,
                in February 2005, and QuickVerse®,
                in September 2005. Historically, our product upgrades have extended
                over
                two to three years and therefore, price protections were not issued;▪
            increased
                price points associated with products introduced; and▪
            higher
                actual returns on the Membership Plus®2005 product line due to some then unresolved maintenance issues
                and the
                loss of our primary developer of Membership Plus®.





Overall,
      we expect to release enhanced versions of our biggest-selling products on an
      annual basis generally going forward, and anticipate sales returns and
      allowances as a percentage of gross revenues to decrease over time as a result
      of increased stability in the functionality of our products, decreasing reliance
      on retail sales and increasing reliance on direct sales, which have historically
      resulted in fewer returns, and improved planning in the timing of new product
      version releases.





-6-
 Table
          of Contents


***Cost
      of Sales***





**Cost
                of Sales for Nine Months Ended September 30**
            
            
            **2006**
            
            
            **%
                to Sales**
            
            
            
            2005
            
            
            %
                to Sales
            
            
            
            Change
            
            
            %Direct
                costs
            
            **$**
            **372,033**
            
            
            **13**
            **%**
            
            $
            485,674
            
            
            10
            %
            
            $
            (113,641
            )
            
            23
            %Less
                reserve for sales returns and allowances
            
            
            **(30,810**
            **)**
            
            **-1**
            **%**
            
            
            (116,940
            )
            
            -2
            %
            
            
            86,130
            
            
            74
            %Amortization
                of software development costs
            
            
            **600,959**
            
            
            **22**
            **%**
            
            
            524,989
            
            
            11
            %
            
            
            75,970
            
            
            14
            %Royalties
            
            
            **256,737**
            
            
            **9**
            **%**
            
            
            300,000
            
            
            6
            %
            
            
            (43,263
            )
            
            14
            %Freight-out
            
            
            **76,218**
            
            
            **3**
            **%**
            
            
            111,188
            
            
            2
            %
            
            
            (34,970
            )
            
            31
            %Fulfillment
            
            
            **86,020**
            
            
            **3**
            **%**
            
            
            105,280
            
            
            2
            %
            
            
            (19,260
            )
            
            18
            %Cost
                of sales
            
            **$**
            **1,361,157**
            
            
            **49**
            **%**
            
            $
            1,410,191
            
            
            30
            %
            
            $
            (49,034
            )
            
            3
            %





Cost
      of
      sales consists primarily of royalties paid to third party providers of
      intellectual property and the direct costs and manufacturing overhead required
      to reproduce, package, fulfill and ship our software products. Direct costs
      and
      manufacturing overhead also include amortized software development costs and
      non-capitalized technical support wages. The direct costs and manufacturing
      overhead decreased approximately $6,000 from approximately $1,110,000 for the
      nine months ended September 30, 2005 to approximately $1,104,000 for the nine
      months ended September 30, 2006 and increased as a percentage of gross revenues
      approximately 16% for the nine months ended September 30, 2006. The overall
      percentage increase resulted directly from amortization of software development
      costs. The amortization recognized during the nine months ended September 30,
      2006 resulted from several new software releases in 2005 and 2006 including
      Membership Plus ® 2005,
      QuickVerse ® 2006
      Macintosh, Sermon Builder ® 4.0,
      QuickVerse ® 2006
      Windows, QuickVerse ® 2006
      Mobile, QuickVerse ® 2006
      Bible Suite, QuickVerse ® 2006
      Macintosh Gold Edition, Holman Christian Standard Bible ® and
      QuickVerse 2007 ® Windows.
      The shorter timeframes between our product upgrades along with the increased
      amount of product releases during the fiscal year 2005 led to the increased
      amount of amortization recognized. During the nine months ended September 30,
      2005 we continued to amortize the December 2004 release of
      QuickVerse ® 2005
      Windows, the February 2005 release of Membership Plus ® 2005,
      the June 2005 releases of QuickVerse ® Macintosh and Sermon Builder ® 4.0, the
      late September 2005 release of QuickVerse ® 2006 and
      the remainder of QuickVerse ® 8.0 and
      Membership Plus ® 8.0. The
      direct costs and manufacturing overhead percentage are expected to continue
      at
      these levels as more development projects are implemented in a shortened
      timeframe.





Fulfillment
      costs from a third-party warehouse and included in the manufacturing overhead
      costs noted above decreased approximately $19,000 from approximately $105,000
      for the nine months ended September 30, 2005 to approximately $86,000 for the
      nine months ended September 30, 2006. This decrease is a direct result of
      decreased sales volume. Furthermore, our fulfillment center continues to improve
      its efficiency which has led to the lower rate in fulfillment
      costs.





Similar
      to the fulfillment costs, freight costs, included in the manufacturing overhead
      costs noted above, decreased approximately $35,000 from approximately $111,000
      for the nine months ended September 30, 2005 to approximately $76,000 for the
      nine months ended September 30, 2006. This decrease, too, is related to the
      decrease in sales volume.





Royalties
      paid to third party providers of intellectual property decreased approximately
      $43,000 from approximately $300,000 for the nine months ended September 30,
      2005
      to approximately $257,000 for the nine months ended September 30, 2006 and
      increased approximately 3% as a percentage of gross revenues for the nine months
      ended September 30, 2006. The overall percentage increase in royalties paid
      for
      the nine months ended September 30, 2006 reflects the following:





▪
            sales
                of QuickVerse®2005 editions to a liquidator in the first and third quarters of
                2006 and
                no sales to a liquidator in the first and third quarters of
                2005;▪
            our
                increased sales focus on the QuickVerse®product line which have associated royalty fees;▪
            an
                increase in retail sales for the QuickVerse®2007 product line during the month of September 2006 compared to
                only
                upgrade sales for the QuickVerse®2006 product line during the same time frame in 2005; and▪
            our
                decreased sales focus on the Membership Plus®product line, which has no associated royalty fees. We have experienced
                a
                delay in our annual upgrade release of Membership Plus®2007 and, during the first quarter of 2005, we released an upgrade
                to
                Membership Plus®in
                February 2005.





-7-
 Table
          of Contents


The
      royalty rate as a percentage of gross sales is expected to increase in the
      future as sales to new users are expected to increase, more development projects
      are implemented for new and/or enhanced products, and as we continue to expand
      the content available for our QuickVerse ® line of
      products. Upgrade sales will remain only subject to royalties on their content
      additions.





We
      expect
      all cost of sales will increase in the future as we also anticipate revenues
      will increase throughout the remainder of our 2006 fiscal year based upon our
      development schedule for the remainder of the fiscal year and the broadened
      content made available for our QuickVerse ® products.





Software
      development costs are expensed as incurred as research and development until
      technological feasibility and marketability have been established, at which
      time
      development costs are capitalized until the software title is available for
      general release to customers. Software development is segregated by title and
      technology platform. Once a product has been successfully released, subsequent
      revisions and upgrades are deemed to constitute development, and, accordingly,
      the costs of the revision and upgrade are capitalized. Capitalized costs are
      amortized on a product-by-product basis using the greater of (i) straight-line
      amortization over the estimated life of the product or (ii) the ratio of current
      revenues from the product to the total projected revenue over the life of the
      product. Generally, we consider technological feasibility to have been
      established with the release of a “beta” version for testing.





Our
      software development costs for the three and nine months ended September 30,
      2005 and 2006 are summarized in the table below. These costs, consisting
      primarily of direct and indirect labor and related overhead charges, capitalized
      during the three months ended September 30, 2005 and 2006, were approximately
      $172,000 and approximately $174,000, respectively, and during the nine months
      ended September 30, 2005 and 2006, were approximately $766,000 and approximately
      $412,000, respectively. Accumulated amortization of these development costs,
      which were included in cost of sales, totaled approximately $161,000 and
      approximately $143,000 for the three months ended September 30, 2005 and 2006,
      respectively, and approximately $525,000 and approximately $601,000 for the
      nine
      months ended September 30, 2005 and 2006, respectively. The overall increase
      in
      the amortization is a result of the shorter timeframes between our product
      upgrades along with the increased amount of product releases. Furthermore,
      the
      overall decrease in the capitalized costs reflects the decreased amount of
      product releases for the nine months ended September 30, 2006 as well as that
      during the nine months ended September 30, 2005 we were capitalizing the
      development costs related to our QuickVerse ® Macintosh product line which was our first product line for the Macintosh
      platform.





**Software
                Development Costs for**
            
            **Three
                Months Ended September 30,**
            **Nine
                Months Ended September 30,****2006**
            
            
            2005
            
            
            **2006**
            
            
            2005Beginning
                balance
            
            **$**
            **487,849**
            
            $
            931,103
            
            **$**
            **707,067**
            
            $
            701,289Capitalized
            
            
            **173,728**
            
            
            171,990
            
            
            **412,108**
            
            
            766,151Amortized
                (Cost of sales)
            
            
            **143,361**
            
            
            160,642
            
            
            **600,959**
            
            
            524,989Ending
                Balance
            
            **$**
            **518,216**
            
            $
            942,451
            
            **$**
            **518,216**
            
            $
            942,451Research
                and development expense (General and administrative)
            
            **$**
            **47,393**
            
            $
            63,164
            
            **$**
            **131,013**
            
            $
            130,407





-8-
 Table
          of Contents


***Sales,
      General and Administrative***





**Sales,
                General and Administrative Costs for Nine Months Ended September
                30**
            
            
            **2006**
            
            
            **%
                to Sales**
            
            
            
            2005
            
            
            %
                to Sales
            
            
            
            Change
            
            
            %***Selected
                expenses:***Commissions
            
            **$**
            **151,499**
            
            
            **5**
            **%**
            
            $
            611,653
            
            
            13
            %
            
            $
            (460,154
            )
            
            75
            %Advertising
                and direct marketing
            
            
            **156,537**
            
            
            **6**
            **%**
            
            
            419,217
            
            
            9
            %
            
            
            (262,680
            )
            
            63
            %Sales
                and marketing wages, reclassified
            
            
            **272,648**
            
            
            **10**
            **%**
            
            
            266,966
            
            
            6
            %
            
            
            5,682
            
            
            2
            %**Total
                sales and marketing**
            
            **$**
            **580,684**
            
            
            **21**
            **%**
            
            $
            1,297,836
            
            
            27
            %
            
            $
            (717,152
            )
            
            55
            %Research
                and development
            
            
            **131,013**
            
            
            **5**
            **%**
            
            
            130,407
            
            
            3
            %
            
            
            606
            
            
            0
            %Personnel
                costs
            
            
            **564,825**
            
            
            **20**
            **%**
            
            
            572,688
            
            
            12
            %
            
            
            (7,863
            )
            
            1
            %Legal
            
            
            **83,539**
            
            
            **3**
            **%**
            
            
            157,970
            
            
            3
            %
            
            
            (74,431
            )
            
            47
            %Accounting
            
            
            **48,505**
            
            
            **2**
            **%**
            
            
            22,031
            
            
            0
            %
            
            
            26,474
            
            
            120
            %Rent
            
            
            **74,260**
            
            
            **3**
            **%**
            
            
            57,387
            
            
            1
            %
            
            
            16,873
            
            
            29
            %Telecommunications
            
            
            **28,967**
            
            
            **1**
            **%**
            
            
            42,605
            
            
            1
            %
            
            
            (13,638
            )
            
            32
            %Corporate
                services
            
            
            **54,000**
            
            
            **2**
            **%**
            
            
            73,972
            
            
            2
            %
            
            
            (19,972
            )
            
            27
            %Investor
                services
            
            
            **55,000**
            
            
            **2**
            **%**
            
            
            ---
            
            
            0
            %
            
            
            55,000
            
            
            0
            %Other
                general and administrative costs
            
            
            **270,231**
            
            
            **10**
            **%**
            
            
            361,997
            
            
            8
            %
            
            
            (91,766
            )
            
            25
            %**Total
                general and administrative**
            
            **$**
            **1,310,340**
            
            
            **47**
            **%**
            
            $
            1,419,057
            
            
            30
            %
            
            $
            (108,717
            )
            
            8
            %





With
      gross revenues decreasing approximately $1,951,000 from our nine months ended
      September 30, 2005 to our nine months ended September 30, 2006, total sales,
      general and administrative costs also decreased approximately $826,000 from
      approximately $2,717,000 for the nine months ended September 30, 2005 to
      approximately $1,891,000 for the nine months ended September 30, 2006. Of the
      total sales, general and administrative costs, sales and marketing expenses
      decreased approximately $717,000 from approximately $1,298,000 for the nine
      months ended September 30, 2005 to approximately $581,000 for the nine months
      ended September 30, 2006. Included in sales expenses, third-party telemarketing
      commissions decreased approximately $460,000 from approximately $612,000 for
      the
      nine months ended September 30, 2005 to approximately $152,000 for the nine
      months ended September 30, 2006, and decreased as a percentage of gross revenues
      from approximately 13% to approximately 5% for the nine months ended September
      30, 2005 and 2006, respectively. This decrease is mainly attributed to the
      lack
      of product releases during the nine months ended September 30, 2006, as well
      as
      the use of our own in-house direct telemarketing sales team which was developed
      specifically to reduce our reliance on third-party telemarketing services.





Advertising
      and direct marketing costs decreased approximately $263,000 from approximately
      $419,000 for the nine months ended September 30, 2005 to approximately $156,000
      for the nine months ended September 30, 2006 and decreased as a percentage
      of
      gross revenues from approximately 9% to approximately 6% for the nine months
      ended September 30, 2005 and 2006, respectively. The decrease in advertising
      and
      direct marketing costs reflect that there was no upgrade release to the
      Membership Plus ® product
      line in the nine months ended September 30, 2006 as compared to the Membership
      Plus ® 2005
      release in the nine months ended September 30, 2005, as well as an overall
      decrease in the number of product releases during the nine months ended
      September 30, 2006 compared to that of the nine months ended September 30,
      2005.
      Advertising and direct marketing costs are expected to increase in future
      periods as we continue to enhance our product visibility online, increase and
      focus more on our direct marketing efforts, and increase the scope and frequency
      of our print advertising campaigns in order to maximize sales associated with
      new products and product enhancements throughout the coming year. Wages
      associated with our sales team and marketing team have been reclassified and
      are
      included in the total sales and marketing costs. The reclassified sales and
      marketing wages increased approximately $6,000 from approximately $267,000
      for
      the nine months ended September 30, 2005 to approximately $273,000 for the
      nine
      months ended September 30, 2006. This increase is attributed to our recent
      expansion of our marketing team, and we expect these wages to increase in future
      periods as we expand our in-house direct telemarketing sales team.





-9-
 Table
          of Contents


Research
      and development costs include direct production costs (including labor directly
      associated with the development projects), indirect costs (including allocated
      fringe benefits, payroll taxes, facilities costs and management supervision),
      and other direct costs (including costs of outside consultants, purchased
      software to be included in the software product being developed, travel
      expenses, material and supplies, and other direct costs). Software development
      costs related to third-party developers and direct labor expensed as research
      and development (see table above) amounted to approximately $63,000 for the
      three months ended September 30, 2005 compared to approximately $47,000 for
      the
      three months ended September 30, 2006 and approximately $130,000 for the nine
      months ended September 30, 2005 compared to approximately $131,000 for the
      nine
      months ended September 30, 2006. The slight increase in 2006 reflects the
      capitalization of less research and development costs for the nine months ended
      September 30, 2006 as compared to the nine months ended September 30, 2005.
      During the nine months ended September 30, 2005, we were capitalizing the
      development costs related to our QuickVerse ® Macintosh product line, which was our first product line for the Macintosh
      platform. In addition, during the nine months ended September 30, 2005 we had
      more development projects underway compared to the nine months ended September
      30, 2006 as well as more research and development costs associated with
      maintenance issues on titles after they are released to the general public.
      Research and development expenses are expected to increase in future periods
      as
      we continue to expand our internal development team, add new products and
      product versions, and as we continue to expand the array of platforms upon
      which
      our products are made available.





Total
      personnel costs decreased approximately $8,000, from approximately $573,000
      for
      the nine months ended September 30, 2005, to approximately $565,000 for the
      nine
      months ended September 30, 2006. In addition, direct salaries and wages
      decreased approximately $60,000, from approximately $1,208,000 to approximately
      $1,148,000, over the same period. The decrease in direct salaries and wages
      was
      a result of losing our main developer for our Membership Plus ® product
      line as well as the loss of our marketing manager. Due to a cost cutting
      initiative, we also lost our Vice President of Sales and Marketing and an
      individual on our product development staff. However, we do anticipate direct
      salaries and wages to increase in the future, as we are still focused on
      expanding our sales team, including additions to our own telemarketing sales
      team, our marketing staff and further expansion of our product development
      staff. As a percentage of gross revenues, direct salaries and wages increased
      approximately 16% from approximately 25% for the nine months ended September
      30,
      2005 to approximately 41% for the nine months ended September 30, 2006.





As
      a
      result of having restructured our health benefits plans in October 2005, our
      employment-related health care costs have decreased approximately $20,000 from
      approximately $105,000 for the nine months ended September 30, 2005 to
      approximately $85,000 for the nine months ended September 30, 2006. In July
      2005, we initiated a Simple IRA retirement plan for our employees and for those
      who participated we decided to match up to 3% of the employee’s annual gross
      pay. Therefore, we anticipate that our costs related to this benefit will
      increase in future periods as more employees take advantage of the retirement
      plan.





The
      capitalization of direct and indirect labor and related overhead charges as
      software development costs (see “Cost of Sales” above) decreased by
      approximately $144,000 from approximately $370,000 for the nine months ended
      September 30, 2005 to approximately $226,000 for the nine months ended September
      30, 2006. This decrease reflects the development of our QuickVerse ® Macintosh product line during the nine months ended September 30, 2005, which
      was our first product line for the Macintosh platform. It is anticipated that
      personnel costs will continue to increase in future periods as operating capital
      is available and deployed to further fund the staffing requirements of our
      product development, direct sales teams and marketing staff.





Direct
      legal costs decreased approximately $74,000 for the nine months ended September
      30, 2006 as a result of our registration statement on Form SB-2, originally
      filed on November 22, 2004, having been declared effective by the SEC on
      February 1, 2006. It is anticipated that legal costs will increase in future
      periods as we continue to meet our ongoing SEC reporting and corporate
      governance obligations, possibly raise additional capital, and pursue our
      business plan for growth by potentially acquiring other companies or product
      lines.





Accounting
      and audit related expenses increased approximately $26,000 for the nine months
      ended September 30, 2006 as a result of engaging a new principal accounting
      firm
      for our fiscal year end 2005 audit. It is anticipated that accounting costs
      will
      continue to increase in the future as we expect that our fees payable to the
      new
      principal accounting firm, which we expect to utilize on an ongoing basis,
      will
      generally be higher than those payable to our former accounting
      firm.





Rent
      costs increased approximately $17,000 for the nine months ended September 30,
      2006 as a result of periodic percentage increase provisions in our leases
      agreements. It is anticipated that rent cost will continue to increase in the
      future as our lease agreement for our office/warehouse facilities in Omaha,
      Nebraska extends through May 2007 and our lease agreement for our office space
      in Naperville, Illinois extends through March 2007.





-10-
 Table
          of Contents


Telecommunications
      costs decreased approximately $14,000 for the nine months ended September 30,
      2006 as a result of our having switched our local and long-distance carriers
      beginning in February 2005. Our call volume enabled us to change our service
      to
      dedicated T-1 lines which in turn reduced our long-distance charges. We also
      invested in internet protocol phones for our remote locations which reduced
      the
      overall local and long distance charges in our Illinois and Iowa locations.
      Furthermore, we experienced a decrease in call volume in the technical support
      and customer service departments for the nine months ended September 30, 2006
      due to the delayed Membership Plus ® upgrade
      release. We anticipate our call volume to increase during the fourth quarter
      of
      2006 and the first quarter of 2007 as Membership Plus ® 2007 was
      released in October 2006.





Corporate
      service fees decreased approximately $20,000 for the nine months ended September
      30, 2006 resulting from the expiration of an independent consulting agreement
      and the resultant ability on our part to cease carrying the associated expense
      for a 2004 issuance to such consultant of a warrant to purchase 600,000 shares
      of common stock which had been allocated over the term of the agreement. We
      currently engage the services of an independent consultant for purposes of
      investor relations and therefore expect these fees to increase in future
      periods.





Finally,
      investor services fees increased approximately $55,000 for the nine months
      ended
      September 30, 2006 as we entered into an investor relations service agreement
      in
      April 2006. These fees are related to the hiring of an investor relations firm
      and the expense for the issuance of a total of 500,000 restricted shares of
      common stock allocated over the term of the investor relations contract. We
      anticipate these fees to increase in future periods.





***Registration
      Rights Penalties***





As
      of
      September 30, 2006, and in connection with a July 19, 2004 private placement
      with Barron Partners, LP and a certain Registration Rights Agreement, as
      amended, we had accrued a total of approximately $490,000 (284 days at $1,726
      per day) in penalties under the terms of the Registration Rights Agreement,
      of
      which we paid $150,000 prior to April 7, 2006. On April 7, 2006, we signed
      a
      two-year promissory note for $336,000 together with simple interest at the
      rate
      of 8% per annum with Barron Partners for the unpaid registration rights
      penalties. The note agreement calls for monthly installments for the first
      twelve months of $10,000, beginning May 1, 2006 and $20,000 per month
      thereafter. The accrual of and payment on the registration rights penalties
      has
      had a material adverse effect on our business, our financial condition,
      including liquidity and profitability, and our results of operations, including
      a corresponding decrease in our net income of approximately $49,000 for the
      nine
      months ended September 30, 2006.





***Derivatives***





In
      May
      2004, we issued a three-year warrant to purchase up to 600,000 shares of our
      common stock to a consultant. This warrant may be exercised on a cashless basis
      at the option of the holder at a price per share of $0.15. In November 2004,
      we
      issued two five-year warrants to purchase an aggregate of 21,875,000 shares
      of
      our common stock in connection with a certain Stock Purchase Agreement completed
      with Barron Partners, LP, on July 19, 2004. The first warrant entitles the
      holder to purchase up to 10,937,500 shares of our common stock at a price of
      $0.18 per share, and the second warrant entitles the holder to purchase up
      to
      10,937,500 additional shares of our common stock at a price of $0.60 per share.
      Each warrant is subject to standard adjustment provisions and each provides
      for
      settlement in registered shares of our common stock and may, at the option
      of
      the holder, be settled in a cashless, net-share settlement.





These
      warrants have been accounted for as a liability according to the guidance of
      EITF 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* .
      In
      accordance with the accounting mandate, the derivative liability associated
      with
      these warrants has been, and shall continue to be, until each is either fully
      exercised or expires, adjusted to fair value at each balance sheet date and
      is
      accordingly reassessed at each such time to determine whether the warrants
      should be classified (or reclassified, as appropriate) as a liability or as
      equity. Under EITF 00-19, a decrease in our stock price results in a decrease
      in
      the fair value of the derivative liability and a valuation gain to be recognized
      in our income statement whereas an increase in our stock price results in an
      increase in the fair value of the derivative liability and a valuation loss
      to
      be recognized in our income statement. At September 30, 2006, the fair value
      of
      the derivative liability was approximately $953,000, fair value adjustments
      of
      approximately $328,000 and approximately $875,000 have been included in other
      expenses for the three and nine months ended September 30, 2005, respectively,
      and fair value adjustments of approximately $237,000 and approximately
      $1,110,000 have been included in other income for the three and nine months
      ended September 30, 2006, respectively. If our stock price rebounds during
      the
      fourth quarter of 2006 to a level consistent with our stock price at December
      2005, the fair value of the derivative liability will increase and therefore,
      the valuation gain recognized during the three and nine months ended September
      30, 2006 will decrease and/or reverse and we could potentially reflect a
      year-to-date valuation loss.





-11-
 Table
          of Contents


***Amortization***





Amortization
      expenses remained steady at approximately $133,000 and approximately $399,000
      for the three and nine months ended September 30, 2005 and 2006, respectively.
      The software license acquired from TLC in July of 1999 (the “1999 license”) is
      amortized over a 10 year useful life. Amortization expenses for 2005 and 2006
      reflect the continual amortization of the software license as well as the
      amortization of our website, www.quickverse.com, which we launched during the
      second quarter of 2004.





***Income
      Tax Benefits***





Our
      effective tax rate differs from the statutory federal rate due to differences
      between income and expense recognition prescribed by the Internal Revenue Code
      and Generally Accepted Accounting Principles. We utilize different methods
      and
      useful lives for depreciating property and equipment. Changes in estimates
      (reserves) are recognized as an expense for financial reporting but are not
      deductible for income tax purposes.





We
      have
      recognized a net deferred tax asset whose realization depends on generating
      future taxable income. At September 30, 2006, management adjusted the amount
      of
      valuation allowance based on the assessment that we will produce sufficient
      income in the future to realize our net deferred tax asset. The resulting
      deferred tax liability reflects income taxes payable in future periods on the
      net deductible differences related to the 1999 license. We currently have net
      operating loss carryforwards, for income tax purposes, of approximately
      $8,468,000. The carryforwards are the result of income tax losses generated
      in
      2000 ($2,086,000 expiring in 2020), 2001 ($5,191,000 expiring in 2021), 2002
      ($235,000 expiring in 2022) and 2005 ($956,000 expiring in 2025). We will need
      to achieve a minimum annual taxable income, before deduction of operating loss
      carryforwards, of approximately $527,000 to fully utilize the current loss
      carryforwards. Although there can be no assurance, we believe this is achievable
      through careful expense management and continued introduction of new products
      and enhanced versions of our existing products.





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





***Liquidity
      And Capital Resources***





Our
      primary needs for liquidity and capital resources are the funding of our
      continued operations, which includes the ongoing internal development of new
      products, expansion and upgrade of existing products, and marketing and sales.
      We believe our future cash provided by operations will be sufficient to fund
      our
      continued operations. However, our pursuit of future strategic product line
      and/or corporate acquisitions and licensing will require funding from outside
      sources. Funding from outside sources may include but is not limited to the
      exercise of outstanding warrants and pursuit of other financing options such
      as
      commercial loans, common stock and/or preferred stock issuances and convertible
      notes. At this time, we have no legally committed funds for future capital
      expenditures including software development.





**Working
                Capital at September 30**
            
            
            **2006**Current
                assets
            
            **$**
            **658,101**Current
                liabilities
            
            **$**
            **2,866,445**Retained
                deficit
            
            **$**
            **(7,750,886**
            **)**





-12-
 Table
          of Contents


As
      of
      September 30, 2006, we had approximately $658,000 in current assets,
      approximately $2,866,000 in current liabilities and a retained deficit of
      approximately $7,751,000. We had net income of approximately $26,000 for the
      three months ended September 30, 2006 and net income of approximately $1,000
      for
      the nine months ended September 30, 2006, respectively. For the three and nine
      months ended September 30, 2006, we had registration rights penalties of $-0-
      and approximately $49,000, respectively, and a related gain of approximately
      $237,000 and approximately $1,110,000, respectively, from the fair value
      adjustment of derivatives. See “Results Of Operations” above.





**Cash
                Flows for Nine Months Ended September 30**
            
            
            **2006**
            
            
            2005
            
            
            Change
            
            
            %Cash
                flows provided by operating activities
            
            **$**
            **291,051**
            
            $
            479,934
            
            $
            (188,883
            )
            
            39
            %Cash
                flows (used) by investing activities
            
            **$**
            **(425,063**
            **)**
            $
            (750,851
            )
            $
            325,788
            
            
            43
            %Cash
                flows provided (used) by financing activities
            
            **$**
            **15,444**
            
            $
            (30,604
            )
            $
            46,048
            
            
            150
            %





Net
      cash
      provided by operating activities was approximately $291,000 for the nine months
      ended September 30, 2006, and approximately $480,000 for the nine months ended
      September 30, 2005. The decrease was primarily due to a decrease in the amounts
      received from customers resulting from decreased sales and a temporary decrease
      in payments to trade vendors and content providers.





Net
      cash
      used in investing activities was approximately $425,000 for the nine months
      ended September 30, 2006 and approximately $751,000 for the nine months ended
      September 30, 2005. The decrease was mainly the result of capitalizing fewer
      costs associated with software development.





Net
      cash
      provided by financing activities was approximately $15,000 for the nine months
      ended September 30, 2006, and net cash used by financing activities was
      approximately $31,000 for the nine months ended September 30, 2005. Both years
      reflect payments made on long-term notes payable. However, the nine months
      ended
      September 30, 2006 reflect proceeds received from a note payable.





***Financing***





As
      part
      of the July 19, 2004 financing transaction with Barron Partners, LP, we entered
      into a certain Registration Rights Agreement pursuant to which we became
      committed to registering all of the shares issued as part of such transaction,
      including those issuable under each of two warrants. On November 22, 2004 we
      filed a registration statement on Form SB-2 covering the shares issued to Barron
      Partners, as well as the shares underlying the warrants issued to Barron
      Partners. On February 1, 2006, the SEC declared such registration statement
      effective. Due to continued delays in effectiveness of the registration
      statement (due principally to ongoing efforts made necessary by our
      determination to restate certain of our historical financial information),
      and
      in accordance with the Registration Rights Agreement, we accrued a total of
      approximately $490,000 (284 days at $1,726 per day) in penalties, of which
      we
      had paid $150,000 prior to April 7, 2006. On April 7, 2006, we signed a two-year
      promissory note for $336,000 together with simple interest at the rate of 8%
      per
      annum with Barron Partners for the unpaid registration rights penalties. The
      note agreement calls for monthly installments for the first twelve months of
      $10,000, beginning May 1, 2006 and $20,000 per month thereafter. The accrual
      and
      payment on the registration rights penalties has had a material adverse effect
      on our business, our financial condition, including liquidity and profitability,
      and our results of operations, including a corresponding $49,000 decrease in
      our
      net income for the nine months ended September 30, 2006.





On
      July
      20, 2006, we entered into a loan agreement with an individual, for the principal
      sum of $150,000, to fund an existing working capital deficit. The loan was
      evidenced by a convertible secured promissory note bearing interest at a rate
      of
      10% per thirty-day period with the principal, together with all accrued
      interest, due on or before September 18, 2006. In further consideration of
      the
      loan, we issued the lender a three-year common stock purchase warrant to acquire
      up to an aggregate of 100,000 shares of our common stock at an exercise price
      of
      $0.07 per share. On September 19, 2006, we entered into a Modification and
      Extension Agreement in connection with this note. As of the original maturity
      date and in accordance with the original terms of the loan agreement, we repaid
      fifty percent of the original principal ($75,000). This Modification and
      Extension Agreement extended the repayment term of the balance of the
      outstanding principal under the loan agreement ($75,000), as well as the
      interest payable thereon and on the principal previously repaid, until October
      20, 2006. In consideration for the extension of the maturity date, we agreed
      to
      pay an amount equal to one percentage point on the principal that remains
      outstanding ($750). On October 19, 2006, in connection with the above-mentioned
      loan, we repaid in full the remaining principal ($75,000), the interest payable
      on the original principal amount of $150,000 ($35,416.67) and the consideration
      payable for the extension of the maturity date ($750).





-13-
 Table
          of Contents


We
      have
      been unsuccessful in previous attempts to secure bank financing due to our
      internal financial ratios and negative working capital position and do not
      expect that we will be successful in securing any such financing unless and
      until our ratios in this regard improve. Although we have, in the past, secured
      financing on our open accounts receivable, we were unable to pursue that option
      because of a lien placed upon our accounts receivable, together with all of
      our
      other assets, in connection with the security interest granted to the lender
      for
      the July 20, 2006 loan. As of October 19, 2006, however, this loan was retired
      in full and financings secured against our open accounts receivable may once
      again, therefore, be a possible option for us in satisfying our future financing
      needs.





***Contractual
      Liabilities***





We
      lease
      office space/warehouse facilities in Omaha, Nebraska under an operating lease
      with a third-party with terms extending through 2007. We are responsible for
      all
      taxes, insurance and utility expenses associated with this lease. There is
      no
      lease renewal option contained in the lease.





We
      lease
      office space in Naperville, Illinois under an operating lease with a third-party
      with terms extending through March 2007. We are responsible for all insurance
      expenses associated with this lease.





At
      September 30, 2006, the future minimum rental payments required under these
      leases are as follows:





2006
            
            $
            20,3332007
            
            
            31,248Total
                future minimum rental payments
            
            $
            51,581





We
      lease
      telephone equipment under a capital lease due to expire in November 2009. The
      asset and liability under the capital lease are recorded at the present value
      of
      the minimum lease payments. The asset is depreciated over a 5 year life. Minimum
      future lease payments under capital leases as of September 30, 2006 for each
      of
      the next five years and in the aggregate are:





2006
            
            $
            3,4322007
            
            
            13,7262008
            
            
            13,7262009
            
            
            12,5822010
            
            
            ---Total
                minimum lease payments
            
            
            43,466Less:
                Amount representing interest
            
            
            7,282Total
                obligations under capital lease
            
            
            36,184Less:
                Current installments of obligations under capital lease
            
            
            10,023Long-term
                obligation under capital lease
            
            $
            26,161





***The
      Potential Impact of Known Facts, Commitments, Events and Uncertainties on Future
      Operating Results or Future Liquidity Requirements***





***New
      Accounting Pronouncements***





In
      the
      past, we have applied Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      related interpretations in accounting as allowed by SFAS No 123, *Accounting
      for Stock Based Compensation* ,
      for
      various forms of share-based awards including incentive and nonqualified stock
      options and stock appreciation rights attached to stock options; and therefore,
      no compensation cost had been recognized. However, in December 2004, the FASB
      issued SFAS No 123 (R), *Share-Based
      Payment* ,
      which
      replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123 (R)
      requires compensation costs related to share-based payment transactions to
      be
      recognized in the financial statements. With limited exceptions, the amount
      of
      compensation cost will be measured based on the fair value on the grant date
      of
      the equity or liability instruments issued. Compensation cost will be recognized
      over the period that the service is provided for that award. This new standard
      became effective for us in the first quarter of fiscal year 2006.





-14-
 Table
          of Contents


In
      February 2006, the FASB issued Statement No. 155, *Accounting
      for Certain Hybrid Financial Instruments - an amendment of FASB Statements
      No.
      133 and 140* .
      The
      Statement permits fair value remeasurement for any hybrid financial instrument
      that contains an embedded derivative that otherwise would require bifurcation.
      The new Statement also requires companies to identify interests in securitized
      financial assets that are freestanding derivatives or contain embedded
      derivatives that would have to be accounted for separately. This new Statement
      is effective for fiscal years beginning after September 15, 2006 with early
      adoption permitted. We do not expect the adoption of SFAS 155 to have a material
      impact on our business, our financial condition, including liquidity and
      profitability, or our results of operations.





In
      March
      2006, the FASB issued Statement No. 156, *Accounting
      for Servicing of Financial Assets, an amendment of Statement No. 14 (SFAS
      156)* .
      SFAS
      156 requires all separately recognized servicing assets and servicing
      liabilities to be initially measured at fair value, if practicable, and permits
      an entity to subsequently measure those servicing assets and servicing
      liabilities at fair value. SFAS 156 is effective for fiscal years beginning
      after September 15, 2006. We do not expect the adoption of SFAS 156 to have
      a
      material impact on our business, our financial condition, including liquidity
      and profitability, or our results of operations.





In
      April
      2006, the FASB issued Staff Position FIN 46(R)-6, *Determining
      Variability to be Considered in Applying FIN 46(R)* .
      FIN
      46(R)-6 states that the variability to be considered in applying FIN 46(R)
      shall
      be based on an analysis of the design of the entity following a two-step
      process. The first step is to analyze the nature of the risks in the entity.
      The
      second step would be to determine the purpose(s) for which the entity was
      created and determine the variability (created by the risks identified in Step
      1) the entity is designed to create and pass along to its interest holders.
      The
      guidance in this FASB Staff Position is effective prospectively beginning July
      1, 2006, although companies have until December 31, 2006 to elect retrospective
      applications. We do not expect FIN 46(R)-6 to have a material impact on our
      business, our financial condition, including liquidity and profitability, or
      our
      results of operations.





In
      July
      2006, the FASB released FIN 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of SFAS 109* .
      This
      interpretation clarifies the accounting for uncertainty in income taxes
      recognized in accordance with SFAS 109. This interpretation prescribes a
      recognition threshold and measurement attribute for financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. It also provides guidance on derecognition, classification, interest
      and penalties, interim periods and disclosure. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. We will adopt FIN 48 as of January
      1,
      2007 and we do not expect the adoption to have a material impact on our
      business, our financial condition, including liquidity and profitability, or
      our
      results of operations.





In
      September 2006, the FASB issued Statement No. 157, *Fair
      Value Measurements,* which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. This Statement applies under other accounting pronouncements
      that require or permit fair value measurements, but does not require any new
      fair value measurements. SFAS 157 is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. We are currently assessing
      the potential impact that adoption of SFAS 157 will have on our financial
      statements.





In
      September 2006, the FASB issued Statement No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans—an
      amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS
      158”)* .
      This
      Statement requires an employer to recognize the overfunded or underfunded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This Statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position, with limited exceptions. SFAS 158 is effective for financial
      statements issued for fiscal years ending after December 15, 2006. We do not
      expect the adoption of SFAS 158 to have a material impact on our business,
      our
      financial condition, including liquidity and profitability, or our results
      of
      operations.





-15-
 Table
          of Contents


**ITEM
      3. CONTROLS AND PROCEDURES.**





**(a)
      Formation of Disclosure Controls and Procedures Officer
      Committee**





Our
      Disclosure Controls and Procedures Officer Committee (the “Disclosure Policy
      Committee”) was formed in September 2002 and reports directly to our Chief
      Executive Officer and Chief Financial Officer. The Disclosure Policy Committee
      has implemented disclosure controls and procedures that meet the standards
      established by Rule 13a-15 of the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”).





**Disclosure
      Controls and Procedures**





The
      Disclosure Policy Committee is primarily responsible for establishing and
      maintaining disclosure controls and procedures designed to ensure that the
      information required to be disclosed in our reports filed or submitted under
      the
      Exchange Act, is recorded, processed, summarized and reported in a timely manner
      as specified in the rules and forms set forth by the SEC and that the
      information required to be disclosed in our reports is accumulated and
      communicated to our management, including our principal executive and principal
      financial officers, or other persons performing similar functions, as
      appropriate to allow timely decisions regarding required
      disclosure.





**(b)
      Evaluation of Disclosure Controls and Procedures and Annual Report on Internal
      Control over Financial Reporting**





The
      Disclosure Policy Committee meets quarterly within one week of the last day
      of
      the period in which a given report is due. Members provide information that
      is
      documented in the Quarterly Control and Procedures Report for the period in
      which a quarterly 10-QSB or annual 10-KSB report is due. This report contains
      attestations and documentation in regard to the following:





▪
            the
                fact that disclosure controls and procedures have been reviewed as
                of the
                end of the period covered by a given report;▪
            any
                concerns regarding weaknesses in disclosure controls and
                procedures;▪
            any
                concerns relating to events that may require
                disclosure;▪
            any
                concerns relating to internal fraud/defalcation;▪
            potential
                material losses;▪
            new
                off-balance sheet arrangements; and▪
            material
                amounts not reflected on the general
                ledger.





The
      Quarterly Control and Procedures Report is completed, signed and presented
      to
      the CEO and CFO prior to completion of the first draft of each 10-QSB and
      10-KSB. Because material issues may occur between regularly scheduled quarterly
      meetings, this report is to be generated by the disclosure policy appropriate
      officers at any time warranted. The CEO and CFO will consult with our Disclosure
      Policy Committee to determine any action that is necessary.





Our
      CEO
      and CFO have evaluated the effectiveness of the design and operation of our
      disclosure controls and procedures (as defined in Rule 13a-15(e) under the
      Exchange Act) as of the end of the fiscal quarter covered by this quarterly
      report on Form 10-QSB. Based on this evaluation, our CEO and CFO have concluded
      that our disclosure controls and procedures are effective and designed to ensure
      that the information required to be disclosed in our reports filed or submitted
      under the Exchange Act, is recorded, processed, summarized and reported within
      the requisite time periods.





During
      the course of their evaluation our CEO and CFO did not discover any fraud
      involving management or any other personnel who play a significant role in
      our
      disclosure controls and procedures. Furthermore, because there were no
      significant deficiencies and/or material weaknesses discovered no remedial
      measures were necessary or taken during the period covered by this report to
      correct any such deficiencies.





-16-
 Table
          of Contents


**(c)
      Changes in Internal Control over Financial Reporting**





No
      changes in our disclosure controls and procedures, internal control over
      financial reporting or other factors have occurred during the fiscal quarter
      covered by this report that would materially affect or be reasonably likely
      to
      materially affect our disclosure controls and procedures or internal control
      over financial reporting.





**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS.**





As
      of the
      date of this quarterly report on Form 10-QSB for the period ended September
      30,
      2006, there were no pending material legal proceedings to which we were a party
      and we were not aware that any were contemplated. There can be no assurance,
      however, that we will not be made a party to litigation in the future. Moreover,
      there can be no assurance that our insurance coverage will prove adequate to
      cover all liabilities arising out of any claims that may be initiated against
      us
      in the future. Any finding of liability imposed against us coupled with a lack
      of corresponding insurance coverage is likely to have an adverse effect on
      our
      business, our financial condition, and including liquidity and profitability,
      and our results of operations.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS.**





**Date
                Securities Issued**
            
            
            **Securities
                Title**
            
            
            **Issued
                to**
            
            
            **Number
                of Securities Issued**
            
            
            **Consideration
                *****Common
                Stock Issuances**10/26/2006
            
            
            Common
                Stock
            
            
            Independent
                Board of Director
            
            
            480,000
            
            $
            12,000**Common
                Stock Warrant Issuances****Promissory
                Notes Convertible into Common Stock**7/20/2006
            
            
            Common
                Stock
            
            
            W.
                Sam Chandoha
            
            
            100,000
            
            $
            4,997**Common
                Stock Option Issuances**10/26/2006
            
            
            Common
                Stock
            
            
            Non-Executive
                Employees
            
            
            850,000
            
            $
            21,250*
                Consideration is calculated to be the value of the security at the
                date of
                issuance.





For
      the
      unregistered sale, we relied on the private offering exemption of Section 4(2)
      of the Securities Act and/or the private offering safe harbor provision of
      Rule
      506 of Regulation D promulgated thereunder based on the following factors:
      (i)
      the number of offerees or purchasers, as applicable, (ii) the absence of general
      solicitation, (iii) representations obtained from the acquirors relative to
      their accreditation and/or sophistication (or from offeree or purchaser
      representatives, as applicable), (iv) the provision of appropriate disclosure,
      and (v) the placement of restrictive legends on the certificates reflecting
      the
      securities coupled with investment representations obtained from the
      acquirors.





**ITEM
      3. DEFAULTS UPON SENIOR
      SECURITIES.**





There
      were no reportable events under this Item 3 during the quarterly period ended
      September 30, 2006.





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





No
      matters were submitted to a vote of our stockholders during the quarterly period
      ended September 30, 2006.





**ITEM
      5. OTHER INFORMATION.**




Our
      Annual Meeting of the Stockholders of Findex.com, Inc., previously scheduled
      to
      be held on September 14, 2006, has been rescheduled for May 4,
      2007.


There
        were no reportable events under this Item 5 during the quarterly period ended
        September 30, 2006.


-17-
 Table
          of Contents


**ITEM
      6. EXHIBITS.**





**No.**
            **Description
                of Exhibit**2.1
            Share
                Exchange Agreement between Findex.com, Inc. and the stockholders
                of Reagan
                Holdings, Inc. dated March 7, 2000, incorporated by reference to
                Exhibit
                2.1 on Form 8-K filed March 15, 2000.3(i)(1)
            Restated
                Articles of Incorporation of Findex.com, Inc. dated June 1999 incorporated
                by reference to Exhibit 3.1 on Form 8-K filed March 15, 2000.3(i)(2)
            Amendment
                to Articles of Incorporation of Findex.com, Inc. dated November 10,
                2004
                incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed
                November
                10, 2004.3(ii)
            Restated
                By-Laws of Findex.com, Inc., incorporated by reference to Exhibit
                3.3 on
                Form 8-K filed March 15, 2000.10.1
            Stock
                Incentive Plan of Findex.com, Inc. dated May 7, 1999, incorporated
                by
                reference to Exhibit 10.1 on Form 10-KSB/A filed May 13,
                2004.10.2
            Share
                Exchange Agreement between Findex.com, Inc. and the stockholders
                of Reagan
                Holdings Inc., dated March 7, 2000, incorporated by reference to
                Exhibit
                2.1 on Form 8-K filed March 15, 2000.10.3
            License
                Agreement between Findex.com, Inc. and Parsons Technology, Inc. dated
                June
                30, 1999, incorporated by reference to Exhibit 10.3 on Form 10-KSB/A
                filed
                May 13, 2004.10.4
            Employment
                Agreement between Findex.com, Inc. and Steven Malone dated July 25,
                2003,
                incorporated by reference to Exhibit 10.4 on Form 10-KSB/A filed
                May 13,
                2004.10.5
            Employment
                Agreement between Findex.com, Inc. and Kirk Rowland dated July 25,
                2003,
                incorporated by reference to Exhibit 10.5 on Form 10-KSB/A filed
                May 13,
                2004.10.6
            Employment
                Agreement between Findex.com, Inc. and William Terrill dated June
                7, 2002,
                incorporated by reference to Exhibit 10.6 on Form 10-KSB/A filed
                May 13,
                2004.10.7
            Restricted
                Stock Compensation Agreement between Findex.com, Inc. and John A.
                Kuehne
                dated July 25, 2003, incorporated by reference to Exhibit 10.7 on
                Form
                10-KSB/A filed May 13, 2004.10.8
            Restricted
                Stock Compensation Agreement between Findex.com, Inc. and Henry M.
                Washington dated July 25, 2003, incorporated by reference to Exhibit
                10.8
                on Form 10-KSB/A filed May 13, 2004.10.9
            Restricted
                Stock Compensation Agreement between Findex.com, Inc. and William
                Terrill
                dated July 25, 2003, incorporated by reference to Exhibit 10.9 on
                Form
                10-KSB/A filed May 13, 2004.10.10
            Stock
                Purchase Agreement, including the form of warrant agreement, between
                Findex.com, Inc. and Barron Partners, LP dated July 19, 2004, incorporated
                by reference to Exhibit 10.1 on Form 8-K filed July 28,
                2004.10.11
            Amendment
                No. 1 to Stock Purchase Agreement between Findex.com, Inc. and Barron
                Partners, LP dated September 30, 2004, incorporated by reference
                to
                Exhibit 10.3 on Form 8-K filed October 6, 2004.10.12
            Registration
                Rights Agreement between Findex.com, Inc. and Barron Partners, LP
                dated
                July 26, 2004, incorporated by reference to Exhibit 10.2 on Form
                8-K filed
                July 28, 2004.




-18-
 Table
          of Contents




10.13
            Waiver
                Certificate between Findex.com, Inc. and Barron Partners, LP dated
                September 16, 2004, incorporated by reference to Exhibit 10.4 on
                Form 8-K
                filed October 6, 2004.10.14
            Settlement
                Agreement between Findex.com, Inc., The Zondervan Corporation, Mattel,
                Inc., TLC Multimedia, Inc., and Riverdeep, Inc. dated October 20,
                2003,
                incorporated by reference to Exhibit 10.14 on Form 10-KSB/A filed
                December
                14, 2005.10.15
            Employment
                Agreement Extension between Findex.com, Inc and Steven Malone dated
                March
                31, 2006, incorporated by reference to Exhibit 10.1 on Form 8-K filed
                April 6, 2006.10.16
            Employment
                Agreement Extension between Findex.com, Inc and William Terrill dated
                March 31, 2006, incorporated by reference to Exhibit 10.2 on Form
                8-K
                filed April 6, 2006.10.17
            Employment
                Agreement Extension between Findex.com, Inc and Kirk R. Rowland dated
                March 31, 2006, incorporated by reference to Exhibit 10.3 on Form
                8-K
                filed April 6, 2006.10.18
            Promissory
                Note to Barron Partners, LP dated April 7, 2006, incorporated by
                reference
                to Exhibit 10.1 on Form 8-K filed April 13, 2006.10.19
            Share
                Exchange Agreement between Findex.com, Inc. and the stockholders
                of Reagan
                Holdings Inc., dated March 7, 2000, incorporated by reference to
                Exhibit
                2.1 on Form 8-K filed March 15, 2000.10.20
            Convertible
                Secured Promissory Note between FindEx.com, Inc. and W. Sam Chandoha,
                dated July 20, 2006, incorporated by reference to Exhibit 10.1 on
                Form 8-K
                filed July 26, 2006.10.21
            Security
                Agreement between FindEx.com, Inc. and W. Sam Chandoha, dated July
                20,
                2006, incorporated by reference to Exhibit 10.2 on Form 8-K filed
                July 26,
                2006.10.22
            Common
                Stock Purchase Warrant between FindEx.com, Inc. and W. Sam Chandoha,
                dated
                July 20, 2006, incorporated by reference to Exhibit 10.3 on Form
                8-K filed
                July 26, 2006.10.23
            Modification
                and Extension Agreement Between FindEx.com, Inc. and W. Sam Chandoha,
                dated September 20, 2006, incorporated by reference to Exhibit 10.1
                on
                Form 8-K filed September 25,2006.31.1
            Certification
                of Findex.com, Inc. Chief Executive Officer, Steven Malone, required
                by
                Rule 13a-14(a) or Rule 15d-14(a), and dated November 20, 2006. FILED
                HEREWITH.31.2
            Certification
                of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland, required
                by
                Rule 13a-14(a) or Rule 15d-14(a), and dated November 20, 2006. FILED
                HEREWITH.32.1
            Certification
                of Findex.com, Inc. Chief Executive Officer, Steven Malone, required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of
                Title
                18 of the United States Code (18 U.S.C. 1350), and dated November
                20,
                2006. FILED HEREWITH.32.2
            Certification
                of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland, required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of
                Title
                18 of the United States Code (18 U.S.C. 1350), and dated November
                20,
                2006. FILED HEREWITH.





-19-
 Table
          of Contents


**Signatures**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**FINDEX.COM,
                INC.**Date:
                November 20, 2006
            By
            /s/
                Steven MaloneSteven
                MalonePresident
                and Chief Executive Officer





Date:
                November 20, 2006
            By
            /s/
                Kirk R. RowlandKirk
                R. Rowland, CPAChief
                Financial Officer































-20-
 Table
          of Contents