UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the
quarterly period ended March 31, 2005.
|
[_] |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the
transition period from ________ to _________.
Commission
File Number: 0-29963
FINDEX.COM,
INC.
(Exact
name of small business issuer as specified in its charter)
|
Nevada |
88-0379462 |
|
(State
or other jurisdiction of |
(I.R.S.
Employer |
|
incorporation
or organization) |
Identification
No.) |
|
11204
Davenport Street, Suite 100, Omaha, Nebraska |
68154 |
|
(Address
of principal executive offices) |
(Zip
Code) |
(402)
333-1900
(Issuer’s
telephone number, including area code)
NA.
(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 [_]
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: 48,619,855 shares as of May 13,
2005.
Transitional
Small Business Disclosure Format (check one): Yes
[_] No [X]
|
Page
Number | |
|
F-1 | |
|
1 | |
|
8 | |
|
8 | |
|
8 | |
|
8 | |
|
9 | |
|
9 | |
|
9 |
|
CONDENSED
CONSOLIDATED BALANCE SHEETS | |||||||
|
| |||||||
|
|
(Unaudited) |
||||||
|
|
March
31, 2005 |
December
31, 2004 |
|||||
|
Assets | |||||||
|
Current
assets: | |||||||
|
Cash
and cash equivalents |
$ |
283,141 |
$ |
341,359 |
|||
|
Accounts
receivable, trade |
517,242
|
566,819
|
|||||
|
Inventory |
248,047
|
234,000
|
|||||
|
Other
current assets |
355,099
|
409,269
|
|||||
|
Total
current assets |
1,403,529
|
1,551,447
|
|||||
|
Property
and equipment, net |
140,800
|
131,019
|
|||||
|
Software
license |
2,513,158
|
2,513,158
|
|||||
|
Capitalized
software development costs, net |
783,250
|
701,289
|
|||||
|
Restricted
cash |
50,354
|
50,354
|
|||||
|
Other
assets |
417,854
|
348,069
|
|||||
|
Total
assets |
$ |
5,308,945 |
$ |
5,295,336 |
|||
|
| |||||||
|
Liabilities
and stockholders’ equity | |||||||
|
Current
liabilities: | |||||||
|
Accounts
payable, trade |
$ |
506,852 |
$ |
621,804 |
|||
|
Accrued
royalties |
253,744
|
287,514
|
|||||
|
Other
current liabilities |
474,602
|
473,828
|
|||||
|
Total
current liabilities |
1,235,198
|
1,383,146
|
|||||
|
Long-term
obligations |
296,894
|
296,940
|
|||||
|
Commitments
and contingencies | |||||||
|
Stockholders’
equity: | |||||||
|
Preferred
stock |
-
|
-
|
|||||
|
Common
stock |
48,620
|
48,620
|
|||||
|
Paid-in
capital |
9,198,417
|
9,198,417
|
|||||
|
Retained
(deficit) |
(5,470,184 |
) |
(5,631,787 |
) | |||
|
Total
stockholders’ equity |
3,776,853
|
3,615,250
|
|||||
|
Total
liabilities and stockholders’
equity |
$ |
5,308,945 |
$ |
5,295,336 |
|||
|
| |||||||
|
See
accompanying notes. | |||||||
|
Findex.com,
Inc. | |||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
|
(Unaudited) | |||||||
|
| |||||||
|
Three
Months Ended March 31 |
2005 |
2004 |
|||||
|
Revenues,
net of reserves and allowances |
$ |
1,672,504 |
$ |
1,537,264 |
|||
|
Cost
of sales |
493,506
|
465,110
|
|||||
|
Gross
profit |
1,178,998
|
1,072,154
|
|||||
|
Operating
expenses: | |||||||
|
Sales
and marketing |
437,816
|
217,016
|
|||||
|
General
and administrative |
636,711
|
555,678
|
|||||
|
Other
operating expenses |
20,544
|
12,075
|
|||||
|
Total
operating expenses |
1,095,071
|
784,769
|
|||||
|
Earnings
from operations |
83,927
|
287,385
|
|||||
|
Other
expenses, net |
(3,856 |
) |
(14,330 |
) | |||
|
Income
before income taxes |
80,071
|
273,055
|
|||||
|
Provision
for income taxes |
81,532
|
(800 |
) | ||||
|
Net
income |
161,603
|
272,255
|
|||||
|
Retained
deficit at beginning of year |
(5,631,787 |
) |
(7,845,331 |
) | |||
|
Retained
deficit at end of period |
$ |
(5,470,184 |
) |
$ |
(7,573,076 |
) | |
|
| |||||||
|
Net
earnings per share: | |||||||
|
Basic |
$ |
- |
$ |
0.01 |
|||
|
Diluted |
$ |
- |
$ |
0.01 |
|||
|
| |||||||
|
Weighted
average shares outstanding: | |||||||
|
Basic |
48,619,855
|
21,011,438
|
|||||
|
Diluted |
49,350,801
|
22,965,438
|
|||||
|
| |||||||
|
See
accompanying notes. | |||||||
|
Findex.com,
Inc. | |||||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS | |||||||
|
(Unaudited) | |||||||
|
| |||||||
|
Three
Months Ended March 31 |
2005 |
2004 |
|||||
|
Cash
flows from operating activities: | |||||||
|
Cash
received from customers |
$ |
1,707,292 |
$ |
1,481,382 |
|||
|
Cash
paid to suppliers and employees |
(1,456,683 |
) |
(1,385,164 |
) | |||
|
Other
operating activities, net |
(3,076 |
) |
(13,921 |
) | |||
|
Net
cash provided by operating activities |
247,533
|
82,297
|
|||||
|
Cash
flows from investing activities: | |||||||
|
Software
development costs |
(264,649 |
) |
(73,628 |
) | |||
|
Other
investing activities, net |
(14,581 |
) |
(18,674 |
) | |||
|
Net
cash (used) by investing activities |
(279,230 |
) |
(92,302 |
) | |||
|
Cash
flows from financing activities: | |||||||
|
Proceeds
from line of credit, net |
-
|
16,605
|
|||||
|
Payments
made on long-term notes payable |
(26,521 |
) |
(17,684 |
) | |||
|
Net
cash (used) by financing activities |
(26,521 |
) |
(1,079 |
) | |||
|
Net
(decrease) in cash and cash equivalents |
(58,218 |
) |
(11,084 |
) | |||
|
Cash
and cash equivalents, beginning of year |
341,359
|
142,022
|
|||||
|
Cash
and cash equivalents, end of period |
$ |
283,141 |
$ |
130,938 |
|||
|
| |||||||
|
Reconciliation
of net income to cash flows from operating activities: | |||||||
|
Net
income |
$ |
161,603 |
$ |
272,255 |
|||
|
Adjustments
to reconcile net income to net cash provided
by operating activities: |
|||||||
|
Software
development costs amortized |
182,688
|
152,213
|
|||||
|
Provision
for bad debts |
653
|
2,500
|
|||||
|
Depreciation
& amortization |
19,891
|
9,575
|
|||||
|
Loss
on disposal of property, plant and equipment |
1,715
|
-
|
|||||
|
Change
in assets and liabilities: |
|||||||
|
(Increase)
decrease in accounts receivable |
48,924
|
(80,478 |
) | ||||
|
(Increase)
decrease in inventories |
(14,047 |
) |
99,600
|
||||
|
(Increase)
decrease in prepaid expenses |
51,841
|
(1,750 |
) | ||||
|
(Decrease)
in accrued royalties |
(33,770 |
) |
(100,436 |
) | |||
|
(Decrease)
in accounts payable |
(114,952 |
) |
(251,996 |
) | |||
|
Increase
in income taxes payable |
180
|
-
|
|||||
|
Increase
(decrease) in deferred taxes |
(81,712 |
) |
800
|
||||
|
Increase
(decrease) in other liabilities |
24,519
|
(19,986 |
) | ||||
|
Net
cash provided by operating activities |
$ |
247,533 |
$ |
82,297 |
|||
|
| |||||||
|
See
accompanying notes. | |||||||
Findex.com,
Inc.
Notes
to Condensed Consolidated Financial Statements
March
31, 2005
(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, 2004.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Significant estimates used in the consolidated financial
statements include the estimates of (i) doubtful accounts, sales returns, price
protection and rebates, (ii) provision for income taxes and realizability of the
deferred tax assets, (iii) the life and realization of identifiable intangible
assets, and (iv) provisions for obsolete inventory. The amounts Findex will
ultimately incur or recover could differ materially from current
estimates.
RESTRICTED
CASH
Restricted
cash represents cash held in reserve by our merchant banker to allow for a
potential increase in credit card chargebacks from increased consumer purchases.
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
The
company reviews 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 its
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.
SOFTWARE
DEVELOPMENT COSTS
In
accordance with SFAS No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed,
software development costs are expensed as incurred until technological
feasibility and marketability has been established, generally with release of a
beta version for customer testing. Once the point of technological feasibility
and marketability is reached, direct production costs (including labor directly
associated with the development projects), indirect costs (including allocated
fringe benefits, payroll taxes, facilities costs, and management supervision),
and other direct costs (including costs of outside consultants, purchased
software to be included in the software product being developed, travel
expenses, material and supplies, and other direct costs) are capitalized until
the product is available for general release to customers. We amortize
capitalized costs on a product-by-product basis. Amortization for each period is
the greater of the amount computed using (a) the straight-line basis over the
estimated product life (generally from 12 to 18 months), or (b) the ratio of
current revenues to total projected product revenues. Total cumulative
capitalized software development costs were $2,013,383, less accumulated
amortization of $1,230,133 at March 31,
2005.
Capitalized
software development costs are stated at the lower of amortized costs or net
realizable value. Recoverability of these capitalized costs is determined at
each balance sheet date by comparing the forecasted future revenues from the
related products, based on management’s best estimates using appropriate
assumptions and projections at the time, to the carrying amount of the
capitalized software development costs. If the carrying value is determined not
to be recoverable from future revenues, an impairment loss is recognized equal
to the amount by which the carrying amount exceeds the future revenues. To date,
no capitalized costs have been written down to net realizable
value.
SFAS 2,
Accounting
for Research and Development Costs,
established accounting and reporting standards for research and development. In
accordance with SFAS 2, costs we incur to enhance our existing products after
general release to the public (bug fixes) are expensed in the period they are
incurred and included in research and development costs. Research and
development costs incurred prior to determination of technological feasibility
and marketability and after general release to the public and charged to expense
were $37,080 and
$16,174 for the
three months ended March 31,
2005 and
2004,
respectively.
We
capitalize costs related to the development of computer software developed or
obtained for internal use in accordance with the American Institute of Certified
Public Accountants (“AICPA”) Statement of Position (“SOP”) 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use.
Software obtained for internal use has generally been enterprise level business
and finance software that we customize to meet our specific operational needs.
We have not sold, leased, or licensed software developed for internal use to our
customers and have no intention of doing so in the future.
We
capitalize costs related to the development and maintenance of our website in
accordance with Financial Accounting Standard Board’s (“FASB’s”) Emerging Issues
Task Force (“EITF”) Issue No. 00-2, Accounting
for Website Development Costs. Under
EITF Issue No. 00-2, costs expensed as incurred are as follows:
|
· |
planning
the website, | |
|
· |
developing
the applications and infrastructure until technological feasibility is
established, | |
|
· |
developing
graphics such as borders, background and text colors, fonts, frames, and
buttons, and | |
|
· |
operating
the site such as training, administration and
maintenance. |
Capitalized
costs include those incurred to:
|
· |
obtain
and register an Internet domain name, | |
|
· |
develop
or acquire software tools necessary for the development
work, | |
|
· |
develop
or acquire software necessary for general website
operations, | |
|
· |
develop
or acquire code for web applications, | |
|
· |
develop
or acquire (and customize) database software and software to integrate
applications such as corporate databases and accounting systems into web
applications | |
|
· |
develop
HTML web pages or templates, | |
|
· |
install
developed applications on the web server, | |
|
· |
create
initial hypertext links to other websites or other locations within the
website, and | |
|
· |
test
the website applications. |
We
amortize website development costs on a straight-line basis over the estimated
life of the site, generally 36 months. Total cumulative website development
costs, included in other assets on our condensed consolidated balance sheets,
were $89,140, less
accumulated amortization of $25,799 at
March 31,
2005.
NET
REVENUE
We derive
revenues from the sale of packaged software products, product support and
multiple element arrangements that may include any combination of these items.
We recognize software revenue for software products and related services in
accordance with SOP 97-2, Software
Revenue Recognition, as
modified by SOP 98-9,
Modification of SOP 97-2, With Respect to Certain Transactions. We
recognize revenue when persuasive evidence of an arrangement exists (generally a
purchase order), we have delivered the product, the fee is fixed or determinable
and collectibility is probable.
In some
situations, we receive advance payments from our customers. We defer revenue
associated with these advance payments until we ship the products or offer the
support.
In
accordance with EITF Issue No. 01-9, Accounting
for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s
Product, we
generally account for cash considerations (such as sales incentives - rebates
and coupons) that we give to our customers as a reduction of revenue rather than
as an operating expense.
Product
Revenue
We
typically recognize revenue from the sale of our packaged software products when
we ship the product. We sell some of our products on consignment to a limited
number of resellers. We recognize revenue for these consignment transactions
only when the end-user sale has occurred. Revenue for software distributed
electronically via the Internet is recognized when the customer has been
provided with the access codes that allow the customer to take immediate
possession of the software on its hardware and evidence of the arrangement
exists (web order).
We reduce
product revenue for estimated returns and price protections that are based on
historical experience and other factors such as the volume and price mix of
products in the retail channel, trends in retailer inventory and economic trends
that might impact customer demand for our products. We also reduce product
revenue for the estimated redemption of end-user rebates on certain current
product sales. Our rebate reserves are estimated based on the terms and
conditions of the specific promotional rebate program, actual sales during the
promotion, the amount of redemptions received and historical redemption trends
by product and by type of promotional program. We did not offer any rebate
programs to our customers during the three months ended March 31,
2005 and
2004 and
maintain a reserve for rebate claims remaining unpaid from 2000.
Service
Revenue
We offer
several technical support plans and recognize support revenue over the life of
the plans, generally one year.
Multiple
Element Arrangements
We also
enter into certain revenue arrangements for which we are obligated to deliver
multiple products and/or services (multiple elements). For these arrangements,
which include software products, we allocate and defer revenue for the
undelivered elements based on their vendor-specific objective evidence (“VSOE”)
of fair value. VSOE is generally the price charged when that element is sold
separately.
In
situations where VSOE exists for all elements (delivered and undelivered), we
allocate the total revenue to be earned under the arrangement among the various
elements, based on their relative fair value. For transactions where VSOE exists
only for the undelivered elements, we defer the full fair value of the
undelivered elements and recognize the difference between the total arrangement
fee and the amount deferred for the undelivered items as revenue (residual
method). If VSOE does not exist for undelivered items that are services, we
recognize the entire arrangement fee ratably over the remaining service period.
If VSOE does not exist for undelivered elements that are specified products, we
defer revenue until the earlier of the delivery of all elements or the point at
which we determine VSOE for these undelivered elements.
We
recognize revenue related to the delivered products or services only if: (1) the
above revenue recognition criteria are met; (2) any undelivered products or
services are not essential to the functionality of the delivered products and
services; (3) payment for the delivered products or services is not contingent
upon delivery of the remaining products or service; and (4) we have an
enforceable claim to receive the amount due in the event that we do not deliver
the undelivered products or services.
Shipping
and Handling Costs
We record
the amounts we charge our customers for the shipping and handling of our
software products as product revenue and we record the related costs as cost of
sales on our 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 Web
sites, e-mail and other electronic means, and providing technical support
assistance to our customers. In connection with the sale of certain products, we
provide a limited amount of free technical support assistance to customers. We
do not defer the recognition of any revenue associated with sales of these
products, since the cost of providing this free technical support is
insignificant. The technical support is provided within one year after the
associated revenue is recognized and free product enhancements (bug fixes) are
minimal and infrequent. We accrue the estimated cost of providing this free
support upon product shipment and include it in cost of sales.
INCOME
TAXES
The
company utilizes 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
the company’s 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
The
company follows 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 the company, dilutive potential
shares of common stock consist of the incremental shares of common stock
issuable upon the exercise of stock options and warrants for all periods,
convertible notes payable and the incremental shares of common stock issuable
upon the conversion of convertible preferred stock.
When
discontinued operations, extraordinary items, and/or the cumulative effect of an
accounting change are present, income before any of such items on a per share
basis represents the “control number” in determining whether potential shares of
common stock are dilutive or anti-dilutive. Thus, the same number of potential
shares of common stock used in computing diluted EPS for income from continuing
operations is used in calculating all other reported diluted EPS amounts. In the
case of a net loss, it is assumed that no incremental shares would be issued
because they would be anti-dilutive. In addition, certain options and warrants
are considered anti-dilutive because the exercise prices were above the average
market price during the period. Anti-dilutive shares are not included in the
computation of diluted earnings per share, in accordance with SFAS No. 128.
RECLASSIFICATIONS
Certain
accounts in the 2004
financial statements have been reclassified for comparative purposes to conform
with the presentation in the 2005
financial statements.
NOTE
2 - INVENTORIES
At
March 31,
2005,
inventories consisted of the following:
|
Raw
materials |
$ |
134,070 |
||
|
Finished
goods |
113,977 |
|||
|
Inventories |
$ |
248,047 |
During
the three months ended March 31,
2004, the
company wrote-off obsolete inventory with a carried cost totaling $32,396. This
has been included in cost of sales.
NOTE
3 - INCOME TAXES
The
provision (benefit) for taxes on net income for the three months ended
March 31,
2005 and
2004
consisted of the following:
|
2005 |
2004 |
||||||
|
Current: | |||||||
|
Federal |
$ |
--- |
$ |
--- |
|||
|
State |
180 |
--- |
|||||
|
180 |
--- |
||||||
|
Deferred: | |||||||
|
Federal |
(83,038 |
) |
650 |
||||
|
State |
1,326 |
150 |
|||||
|
(81,712 |
) |
800 |
|||||
|
Total
tax provision (benefit) |
$ |
(81,532 |
) |
$ |
800 |
||
NOTE
4 - EARNINGS PER COMMON SHARE
Earnings
per common share are computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the year. Common stock equivalents are the net additional number of shares that
would be issuable upon the exercise of the outstanding common stock options and
warrants, assuming that the company reinvested the proceeds to purchase
additional shares at market value.
The
following table shows the amounts used in computing earnings per share and the
effect on income and the average number of shares of dilutive potential common
stock:
|
For
the Three Months Ended March 31 |
2005 |
2004 |
|||||
|
Net
Income |
$ |
161,603 |
$ |
272,255 |
|||
|
Preferred
stock dividends |
--- |
--- |
|||||
|
Net
income available to common shareholders |
$ |
161,603 |
$ |
272,255 |
|||
|
Basic
weighted average shares outstanding |
48,619,855 |
21,011,438 |
|||||
|
Dilutive
effect of: | |||||||
|
Stock
options |
480,790 |
--- |
|||||
|
Convertible
notes payable |
--- |
1,800,000 |
|||||
|
Convertible
Preferred Series A |
--- |
114,000 |
|||||
|
Convertible
Preferred Series B |
--- |
40,000 |
|||||
|
Warrants |
250,156 |
--- |
|||||
|
Diluted
weighted average shares outstanding |
49,350,801 |
22,965,438 |
|||||
A total
of 24,285,000 and 4,075,283 dilutive potential securities for the three months
ended March 31,
2005 and
2004,
respectively, have been excluded from the computation of diluted earnings per
share, as their inclusion would be anti-dilutive.
NOTE
5 - COMMITMENTS AND CONTINGENCIES
The
company is subject to legal proceedings and claims that arise in the ordinary
course of its business. In the opinion of management, the amount of ultimate
liability with respect to these actions will not materially affect the financial
position of the company.
As part
of the July 2004 financing transaction, we entered into a certain Registration
Rights Agreement with a New York based private investment partnership pursuant
to which we committed to registering all of the shares issued as part of such
transaction, including those issuable under each of the two warrants. Under the
terms of the Registration Rights Agreement, as amended, we had until November
12, 2004 to file a registration statement covering the shares already issued in
the transaction, and we have another 150 days thereafter to have caused such
registration statement to become effective. Upon receipt of the requisite
stockholder approval to increase the number of authorized common shares so as to
be able to deliver the warrants, which was effectively obtained as of November
10, 2004 (and which increase was effectuated on November 10, 2004), we had 30
days in which to file a registration statement covering such shares (which was
filed November 22, 2004), and another 150 days thereafter to cause such
registration statement to become effective. Any delays in meeting these
obligations will result in our being liable to the New York based private
investment partnership in an amount equal to $630,000 per year, pro-rated as
appropriate for the duration of any such delay.
NOTE
6 - RISKS AND UNCERTAINTIES
The
company’s future operating results may be affected by a number of factors. The
company is dependent upon a number of major inventory and intellectual property
suppliers. If a critical supplier had operational problems or ceased making
material available to the company, operations could be adversely affected.
NOTE
7 - SUBSEQUENT EVENTS
As of
April 22, 2005, the registration statement filed on November 22, 2004 had not
yet been declared effective. Pursuant to an agreement reached with the New York
based private investment partnership in relation to the associated accruing
penalties, we have agreed to pay the New York based private investment
partnership an amount in cash equal to $100,000 in two equal installments of
$50,000 between April 22, 2005 and May 22, 2005, with no additional penalty
obligations accruing for at least 60 days from April 22, 2005. Although there
can be no assurance, management believes that the prospects for the company
being able to cause the registration statement to be declared effective by June
21, 2005 are good. If we are unsuccessful in causing the registration statement
to be declared effective by the SEC by June 21, 2005, however, and depending on
how long any such delay in causing effectiveness to be declared by the SEC
continues thereafter, it is likely to have a very material adverse effect on our
business, financial condition and results of operations.
Cautionary Statement Regarding Forward-Looking Statements
This
Form 10-QSB, press releases and certain information provided periodically in
writing or orally by our officers or our agents contain statements which
constitute forward-looking. 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) market and
other trends affecting our future financial condition or results of operations;
(v) our growth strategy and operating strategy; and (vi) the declaration and/or
payment of dividends.
Investors
and prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. The factors that
might cause such differences include, among others, those set forth in Part I,
Item 2 of this quarterly report on Form 10-QSB, entitled Management’s Discussion
and Analysis of Financial Condition and Results of Operations, including without
limitation the risk factors contained in the company’s annual report on Form
10-KSB for the period ending December 31, 2004. 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 the financial statements and the
notes thereto included in Item 1 of Part I of this Quarterly Report and the
audited financial statements and notes thereto and Management’s Discussion and
Analysis of Financial Condition and Results of Operations contained in the
company’s Annual Report on Form 10-KSB for the fiscal year ended December
31, 2004.
MANAGEMENT
OVERVIEW
During
the first quarter of 2005, and for the second consecutive year, we released an
upgrade to our top-selling financial and data management software, Membership
Plus®. As a
result of this release, as well as our release in December 2004 of our most
recent upgrade to QuickVerse®, our
first quarter 2005 revenues were slightly higher than those during the first
quarter of 2004. Also during the first quarter of 2005, we introduced two new
QuickVerse®
editions, QuickVerse® 2005
Essentials and QuickVerse® 2005
Platinum. QuickVerse® 2005
Essentials appeals to those customers who are seeking their first Bible study
software and it is a great way to begin a Bible study software collection. It
has a suggested retail price of $49.95. QuickVerse®
2005
Platinum is the most comprehensive Bible study edition we have to offer and
appeals to scholars who are serious about Bible study. It has a suggested retail
price of $799.95. We believe that the unique features of these two new editions
will provide us with an opportunity to broaden our customer base as they 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. Our
performance during the first quarter of 2005 marks the fourth straight year in
which we have increased our gross revenues during our first quarter. Although
there can be no assurance, we believe that we can sustain our revenue growth
through the second and third quarters based upon our anticipated introduction
during the second quarter of our QuickVerse®
Macintosh edition, which was announced during the first quarter 2005. We believe
that this introduction will make us the only publisher of Bible reference
software for each of Windows, Macintosh, Pocket PC and Palm OS.
Results
Of Operations for Quarters Ending March 31, 2005 and March 31,
2004
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, generating only about
33% of our annual sales.
During
the three months ended March 31, 2004, the company had a one-time, non-recurring
write down of a distinct category of obsolete inventory of approximately $32,000
which is included in cost of sales. This non-recurring item had no effect on the
cash flow statement. Our net income decreased approximately $110,000 from a net
income of approximately $272,000 for the three months ended March 31, 2004 to a
net income of approximately $162,000 for the three months ended March 31, 2005.
For the three months ended March 31, 2004 and 2005 we did not recognize any
non-cash expenses related to common shares of stock and warrants issued for
services.
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 elements and include
software products, we allocate and defer revenue for the undelivered elements
based on their vendor-specific objective evidence of fair value, which is
generally the price charged when that element is sold separately.
We reduce
product revenue for estimated returns and price protections that are based on
historical experience and other factors such as the volume and price mix of
products in the retail channel, trends in retailer inventory and economic trends
that might impact customer demand for our products. Estimated returns are also
based upon a percentage of total retail and direct sales. Direct sales accounted
for approximately 65% of our 2004 fiscal year revenue. We account for cash
considerations (such as sales incentives - rebates and coupons) that we give our
customers as a reduction of revenue rather than as an operating expense. Product
revenue is also reduced for the estimated redemption of end-user rebates on
certain current product sales. We did
not have any rebate programs during the three months ended March 31, 2004 and
2005, respectively.
Product
returns from distributors and Christian bookstores are allowed primarily in
exchange for new products or for credit towards purchases as part of a
stock-balancing program. These returns are subject to certain limitations that
may exist in the contract. 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 or price protection concessions that exceed our reserves could
materially adversely affect our business and operating results and could
increase the magnitude of quarterly fluctuations in our operating and financial
results.
Software
products are sold separately, without 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.
Gross
revenues increased approximately $269,000 from approximately $1,715,000 for the
three months ended March 31, 2004 to approximately $1,984,000 for the three
months ended March 31, 2005. Such increase is due to the company’s release of an
enhanced version of our top financial and data management product, Membership
Plus®, during
the first quarter of 2005 and an enhanced version of our flagship product,
QuickVerse®, during
late fourth quarter of 2004. During the fourth quarter of 2004 when
QuickVerse® 2005 was
released, it was available in three editions ranging in price from $99.95 to
$299.95. During the first quarter of 2005, the company released an enhanced
version of the QuickVerse®
Essentials edition which retails for $49.95. In addition, we released a new
edition to the QuickVerse® family,
the QuickVerse® Platinum
edition, which contains the most Bible translations and reference titles of any
QuickVerse® edition
and retails for $799.95. Comparatively,
during the three months ended March 31, 2004, we had the product release of
Membership Plus®
8.0 which
ranged in price from $199.95 to $299.95 and the late December 2003 release of
QuickVerse® 8.0
which ranged in price from $99.95 to $299.95.
Sales
returns and allowances increased approximately $102,000 from approximately
$209,000 for the three months ended March 31, 2004 to approximately $311,000 for
the three months ended March 31, 2005 and increased as a percentage of gross
sales from approximately 12% for the three months ended March 31, 2004 to
approximately 16% for the three months ended March 31, 2005. The increase in
sales returns and allowances as a percentage is attributable to our release of
enhanced versions of QuickVerse® and
Membership Plus® in
December of 2004 and February of 2005, respectively. The release of these two
enhanced products resulted in an increased quantity of sales returns and
allowances of prior versions as distributors and stores made shelf space during
the first quarter of 2005. Furthermore, the timeframe between the last
enhancements for both of these titles was approximately one year. In the past,
product enhancements were typically extended over two to three
years. Although we are on track to continue to release enhanced versions of
our products on an annual basis, we do anticipate the sales return and
allowances as a percentage to decrease due to the increased focus of our sales
efforts to the end-user and our decreased presence in the retail market.
Incidents of return are lower for sales direct to the end-user than sales into
the retail stores.
Cost
of Sales
Cost of
sales consists primarily of royalties to third party providers of intellectual
property and the direct costs and manufacturing overhead required to reproduce,
package and ship the software products, and the amortized software development
costs. The direct costs and manufacturing overhead increased approximately
$42,000 from approximately $275,000 for the three months ended March 31, 2004 to
approximately $317,000 for the three months ended March 31, 2005 and remained
steadily at approximately 16% as a percentage of gross revenues for the three
months ended March 31, 2004 and 2005, respectively. The consistent percentage of
cost of sales reflects the continual software development cycle of enhancing our
two major product lines within a one year timeframe and the amortization of
those software development costs. The amortization recognized during the three
months ended March 31, 2004 resulted from several new software releases in late
2003 and early 2004 including QuickVerse® 8.0 and
Membership Plus® 8.0.
Similarly, the amortization recognized during the three months ended March 31,
2005 resulted from the December 2004 release of QuickVerse® 2005 and
the February 2005 release of Membership Plus® 2005.
The direct costs and manufacturing overhead percentage are expected to
continue at the 2005 levels as working capital remains more consistent and as
more development projects are implemented in a shortened timeframe.
Royalties
to third party providers of intellectual property increased approximately
$55,000 from approximately $80,000 for the three months ended March 31, 2004 to
approximately $135,000 for the three months ended March 31, 2005. Royalties also
increased as a percentage of gross revenues from approximately 4.7% for the
three months ended March 31, 2004 to approximately 6.8% for the three months
ended March 31, 2005. The increase of royalties reflects the release of the
QuickVerse® 2005
editions in early December 2004, and the two additional QuickVerse®
editions, specifically QuickVerse®
Essentials and QuickVerse®
Platinum, which were released in early March of 2005. Furthermore, we sold some
of the older QuickVerse® versions
to liquidators at a reduced price throughout the first quarter of 2005 compared
to no sales to liquidators during the first quarter of 2004. During the year
ended 2004, we renegotiated several royalty contracts which resulted in some
cases in a higher royalty rate along with access to more content. The royalty
rate as a percentage of gross sales is expected to increase in the future as
sales to new users are expected to increase and as more development
projects are implemented for new and/or enhanced products. However, upgrade
sales will continue to be subject to royalties only on content additions of the
upgraded version.
Software
development costs are expensed as incurred until technological feasibility and
marketability has been established, at which time development costs are
capitalized until the software title is available for general release to
customers. 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 is segregated by title and technology platform. Once a product has
been successfully released, subsequent revisions and upgrades are considered
development and the costs of the revision and upgrade are capitalized.
Capitalized costs are amortized on a product-by-product basis using the greater
of (a) the straight-line amortization over the estimated life of the product
(generally from 12 to 18 months) or (b) the ratio of current revenues from the
product to the total projected revenue over the life of the product. Generally,
we consider technological feasibility to have been established with the release
of a beta version for testing.
Software
development costs are summarized in the table below. The software development
costs, consisting primarily of direct and indirect labor and related overhead
charges, capitalized during the three months ended March 31, 2004 and 2005 were
approximately $74,000 and approximately $265,000, respectively. Accumulated
amortization of these development costs included in cost of sales totaled
approximately $152,000 and approximately $183,000 for the three months ended
March 31, 2004 and 2005, respectively. The increase in both the capitalization
and amortization is a direct result of the increase in the number of development
projects and the consistent one year turn around on enhanced versions of our two
major product lines QuickVerse® and
Membership Plus®.
|
Three
Months Ended | |||||||
|
March
31, | |||||||
|
2004 |
2005 |
||||||
|
Beginning
balance |
$ |
584,706 |
$ |
701,289 |
|||
|
Capitalized |
73,628 |
264,649 |
|||||
|
Amortized
(cost of sales) |
152,213 |
182,688 |
|||||
|
Ending
balance |
$ |
506,121 |
$ |
783,250 |
|||
|
Research
and development expense (General and administrative) |
$ |
16,174 |
$ |
37,080 |
|||
Sales,
General and Administrative
With
gross revenues increasing approximately $269,000 for the first quarter of 2005
from the first quarter of 2004, sales expenses also increased approximately
$221,000 from approximately $217,000 for the three months ended March 31, 2004
to approximately $438,000 for the three months ended March 31, 2005. Included in
sales expenses, commissions to a third-party telemarketing firm increased
approximately $105,000 from approximately $166,000 for the three months ended
March 31, 2004 to approximately $271,000 for the three months ended March 31,
2005. Commissions also increased as a percentage of gross revenues from
approximately 9.7% to approximately 13.7% for the three months ended March 31,
2004 and 2005, respectively. This increase is attributed to the increased focus
of our sales to the direct consumer along with the number of new and enhanced
product releases during the first quarter of 2005 compared with just one product
release during the first quarter of 2004. Fulfillment costs from a third-party
warehouse decreased approximately $20,000 from approximately $35,000 for the
three months ended March 31, 2004 to approximately $15,000 for the three months
ended March 31, 2005 as we moved our retail fulfillment to a new outside entity.
Advertising and direct marketing costs increased approximately $84,000 from
approximately $73,000 for the three months ended March 31, 2004 to approximately
$157,000 for the three months ended March 31, 2005 and increased as a percentage
of gross revenues from approximately 4% to 8%, respectively. This increase is a
direct result in continuing to market our products online through multiple
sources, continuing to increase and focus more on our direct marketing efforts,
and the increased number of publication advertisements due to the new product
enhancements of QuickVerse® and
Membership Plus®.
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 expensed as research and development (see table above) amounted to
approximately $16,000 for the three months ended March 31, 2004 compared to
approximately $37,000 incurred for the three months ended March 31, 2005. The
increase in 2005 reflects more research and development costs associated with
maintenance issues on titles after they are released to the general public along
with exploring new platforms for future products. Research and development
expenses are expected to increase in future periods as we add new products and
versions to our product mix.
Total
personnel costs decreased approximately $12,000 from approximately $395,000 for
the three months ended March 31, 2004 to approximately $383,000 for the three
months ended March 31, 2005. Direct salaries and wages increased approximately
$65,000 from approximately $356,000 for the three months ended March 31, 2004 to
approximately $421,000 for the three months ended March 31, 2005 but remained
consistent as a percentage of gross revenues at approximately 21%. This includes
approximately $6,000 in expense for upper management year-end bonus accrual.
This increase in salaries and wages is a result of increasing our sales and
marketing team, technical support staff and development staff. However, the
associated health care costs decreased approximately $15,000 from approximately
$48,000 for the three months ended March 31, 2004 to approximately $33,000 for
the three months ended March 31, 2005 as we restructured our health benefits
plans. The capitalization of direct and indirect labor and related overhead
charges as software development costs (see “Cost of Sales” above) increased by
approximately $52,000 from approximately $45,000 for the three months ended
March 31, 2004 to approximately $97,000 for the three months ended March 31,
2005. This increase is due to the addition of development staff and the
increased amount of new development projects. It is anticipated that personnel
costs will increase in future periods as operating capital is available to fund
full staffing of our product development team and expansion of the direct sales
staff.
Direct
legal costs increased approximately $30,000 for the three months ended March 31,
2005 as the company continues to work through the registration process for the
SB-2 registration statement. It is anticipated that legal costs will continue to
increase as we pursue our business plan for growth by acquiring companies that
are synergistic with our current product line and customer base.
Telecommunications costs decreased approximately $23,000 for the three months
ended March 31, 2005 as we switched our local and long distance carriers in
order to take advantage of the provider’s current technology. Our increased call
volume enabled us to change our service to dedicated T-1 lines which in turn
reduced the long distance charges. Furthermore, we invested in internet protocol
phones for our remote locations which reduced the overall local and long
distance charges in our Illinois and Iowa locations. The increased call volume
in the technical support and customer service departments resulted from the
release of the two major product upgrades beginning in December 2004 through
March 2005. Corporate service fees increased approximately $33,000 for the three
months ended March 31, 2005. These fees are related to the hiring of an outside
consultant and the expense for a 2004 issuance of a warrant to purchase
600,000 shares of common stock allocated over the term of the consulting
contract. Interest expense for the three months ended March 31, 2005 decreased
by approximately $11,000 compared to 2004. This is due to our continuing efforts
to reduce our trade payables and meet the scheduled terms and the reduced loans
and long-term note payables.
Nonrecurring
Item
As a
result of the settlement with the Zondervan Corporation in March 2004, the
company was forced to destroy inventory that was not technologically obsolete,
but had been produced for resale prior to receiving notice to cease and desist
selling Zondervan content. Therefore, during the three months ended March 31,
2004, the company wrote-off this distinct category of inventory with a carried
cost totaling approximately $32,000. This has been included in cost of sales.
Amortization
Amortization
of the software license did not take place during the three months ended March
31, 2004 and 2005. Upon final settlement with The Learning Company in October of
2003, the term of the software license agreement was extended indefinitely and
provided the company with the exclusive worldwide right to market, sell and
continue to develop those titles it covers such as QuickVerse® and
Membership Plus®. In
addition to the technology of the program engine, user interface, source and
object code, etc., the license also granted the company the exclusive, perpetual
and fully-paid up right to use the trademarks associated with the programs. The
company believes that the right to use the trademarks is the true economic value
of the license and is not subject to technological obsolescence. We believe the
history of the products, the existing and projected markets, the competition and
the economy provides sufficient evidence that these trademarks will continue to
generate cash flows for the remainder of the life of the license which is
indefinite. This effectively changed the substance of the software license
agreement from an amortizable intangible asset with a finite useful life to an
unamortizable intangible asset with an indefinite useful life. Amortization
expense, determined using the straight-line method, was previously calculated
through the settlement date of October 20, 2003. Amortization expense for 2005
reflects the launch of our new website, www.quickverse.com, 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 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 March 31, 2005, management established the valuation
allowance based on the assessment that the company will produce sufficient
income in the future to realize its net deferred tax asset. The resulting
deferred tax liability reflects income taxes payable in future periods on the
net deductible differences related to the software license agreement. We
currently have net operating loss carryforwards, for income tax purposes, of
approximately $7,648,000. The carryforwards are the result of income tax losses
generated in 2000 ($2,480,000 expiring in 2020) and 2001 ($5,168,000 expiring in
2021). We will need to achieve a minimum annual taxable income, before deduction
of operating loss carryforwards, of approximately $450,000 to fully utilize the
current loss carryforwards. We believe this is achievable through careful
expense management and continued introduction of new products and enhanced
versions of our existing products.
Although
there can be no assurance, management expects the deductible temporary
differences (reserves) to reverse sometime beyond the next fiscal year.
Liquidity
And Capital Resources
The
company’s primary needs for liquidity and capital resources are the funding of
our continued operations, which includes the ongoing internal development of new
products and expansion and upgrade of existing products and our pursuit of
future strategic product line and/or corporate acquisitions and
licensing.
As of
March 31, 2005, Findex had $1,403,529 in current assets, $1,235,198 in current
liabilities and a retained deficit of $5,470,184. We had a income before income
taxes of $80,071 for the three months ended March 31, 2005.
Net cash
provided by operating activities was approximately $82,000 for the three months
ended March 31, 2004 and approximately $248,000 for the three months ended March
31, 2005. The increase in cash provided was primarily due to an increase in the
amounts received from customers resulting from increased sales.
Net cash
used in investing activities was approximately $92,000 for the three months
ended March 31, 2004 and approximately $279,000 for the three months ended March
31, 2005. The increase in cash used for investing activities results from
capitalizing costs associated with software development and upgrading our
internal computer equipment and software in order to increase our operating
efficiency capabilities.
Net cash
used by financing activities was approximately $1,000 for the three months ended
March 31, 2004 and approximately $27,000 for the three months ended March 31,
2005. Cash used by financing activities reflects payments made on long-term note
payables.
On July
19, 2004, we completed an equity financing in the amount of $1,750,000 through a
private placement with Barron Partners, L.P. (“Barron”). Under the terms of the
agreement, Barron purchased 21,875,000 restricted shares of common stock at a
price of $0.08 per share. In addition, according to the terms of the agreement,
Barron received two warrants to purchase common stock. The first warrant
entitles Barron to purchase up to 10,937,500 shares of common stock at a price
of $0.18 per share and the second warrant entitles Barron to purchase up to
10,937,500 additional shares of common stock at a price of $0.60 per share. The
original terms of the agreement called for the exercise price associated with
each of the warrants to be subject to downward adjustment based on the
occurrence or non-occurrence of certain events. An amendment to the Barron stock
purchase agreement was entered into on September 30, 2004 which voided these
provisions. See Exhibits 10.10, 10.11, 10.12, and 10.13.
(a) Evaluation
of Disclosure Controls and Procedures.
Based on
their most recent evaluation of our disclosure controls and procedures, which
was completed as of March 31, 2005, the end of the period covered by this
quarterly report, the company’s principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended)
are effective.
(b) Changes
In Internal Controls Over Financial Reporting.
Based on
their most recent evaluation of our internal controls over financial reporting
the company’s principal executive officer and principal financial
officer have concluded that there have been no changes in the company’s
internal controls over financial reporting during the quarter ended March 31,
2005 that have materially affected, or which are reasonably likely to materially
affect, the company’s internal controls over financial reporting.
As of the date of this report, 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, financial condition, and operating results.
Subsequent
to December 31, 2004, the company restored a stale check that was issued
to Business Investor Services, Inc. as payment in full of a note payable.
This resulted in the conversion of the note payable into 466,666 shares of
common stock. The conversion of such securities was effected without
registration under the Securities Act based on their being exempted securities
under Section 3(a)(9) thereof. There were no underwriters or placement agents
involved in this issuance and no commissions were paid.
There
were no reportable events under this Item 3 during the quarterly period ended
March 31, 2005.
No
matters were submitted to a
vote of our stockholders during the quarterly period ended March 31,
2005.
There
were no material changes to the procedures by which security holders may
recommend nominees to our board of directors.
The
Annual Meeting of the Stockholders of Findex.com, Inc. will be held on September
8, 2005. Stockholders of record who wish to submit a proposal at the 2005 Annual
Meeting must provide written notice to the Secretary of the company in
accordance with Article IX of our Articles of Incorporation. Under our
Articles of Incorporation, such notice must be received by the Secretary no
earlier than July 10, 2005, and no later than August 9,
2005.
|
No. |
Description
of Exhibit |
|
2.1 |
Share
Exchange Agreement between Findex.com, Inc. and the stockholders of Reagan
Holdings, Inc. dated March 7, 2000, incorporated by reference to Exhibit
2.1 on Form 8-K filed March 15, 2000. |
|
3.1(i) |
Articles
of Incorporation of Findex.com, Inc., incorporated by reference to Exhibit
3.1 on Form 8-K filed March 15, 2000. |
|
3.1(ii) |
Amendment
to Articles of Incorporation of Findex.com, Inc. dated November 12, 2004
incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed November
12, 2004. |
|
3.2 |
By-Laws
of Findex.com, Inc., incorporated by reference to Exhibit 3.3 on Form 8-K
filed March 15, 2000. |
|
10.1 |
Stock
Incentive Plan of Findex.com, Inc. dated May 7, 1999, incorporated by
reference to Exhibit 10.1 on Form 10-KSB/A filed May 13,
2004. |
|
10.2 |
Share
Exchange Agreement between Findex.com, Inc. and the stockholders of Reagan
Holdings Inc., dated March 7, 2000, incorporated by reference to Exhibit
2.1 on Form 8-K filed March 15, 2000. |
|
10.3 |
License
Agreement between Findex.com, Inc. and Parsons Technology, Inc. dated June
30, 1999, incorporated by reference to Exhibit 10.3 on Form 10-KSB/A filed
May 13, 2004. |
|
10.4 |
Employment
Agreement between Findex.com, Inc. and Steven Malone dated July 25, 2003,
incorporated by reference to Exhibit 10.4 on Form 10-KSB/A filed May 13,
2004. |
|
10.5 |
Employment
Agreement between Findex.com, Inc. and Kirk Rowland dated July 25, 2003,
incorporated by reference to Exhibit 10.5 on Form 10-KSB/A filed May 13,
2004. |
|
10.6 |
Employment
Agreement between Findex.com, Inc. and William Terrill dated June 7, 2002,
incorporated by reference to Exhibit 10.6 on Form 10-KSB/A filed May 13,
2004. |
|
10.7 |
Restricted
Stock Compensation Agreement between Findex.com, Inc. and John A. Kuehne
dated July 25, 2003, incorporated by reference to Exhibit 10.7 on Form
10-KSB/A filed May 13, 2004. |
|
10.8 |
Restricted
Stock Compensation Agreement between Findex.com, Inc. and Henry M.
Washington dated July 25, 2003, incorporated by reference to Exhibit 10.8
on Form 10-KSB/A filed May 13, 2004. |
|
10.9 |
Restricted
Stock Compensation Agreement between Findex.com, Inc. and William Terrill
dated July 25, 2003, incorporated by reference to Exhibit 10.9 on Form
10-KSB/A filed May 13, 2004. |
|
10.10 |
Stock
Purchase Agreement, including the form of warrant agreement, between
Findex.com, Inc. and Barron Partners, LP dated July 19, 2004, incorporated
by reference to Exhibit 10.1 on Form 8-K filed July 28,
2004. |
|
10.11 |
Amendment
No. 1 to Barron Partners, LP Stock Purchase Agreement dated September 30,
2004, incorporated by reference to Exhibit 10.3 on Form 8-K filed October
6, 2004. |
|
10.12 |
Registration
Rights Agreement between Findex.com, Inc. and Barron Partners, LP dated
July 26, 2004, incorporated by reference to Exhibit 10.2 on Form 8-K filed
July 28, 2004. |
|
10.13 |
Waiver
certificate between Findex.com, Inc. and Barron Partners, LP dated
September 16, 2004, incorporated by reference to Exhibit 10.4 on Form 8-K
filed October 6, 2004. |
|
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 May 16, 2005. FILED
HEREWITH. |
|
31.2 |
Certification
of Findex.com, Inc. Chief Financial Officer, Kirk Rowland, required by
Rule 13a-14(a) or Rule 15d-14(a), and dated May 16, 2005. FILED
HEREWITH. |
|
32.1 |
Certification
of Findex.com, Inc. Chief Executive Officer, Steven Malone, required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350), and dated May 16, 2005.
FILED HEREWITH. |
|
32.2 |
Certification
of Findex.com, Inc. Chief Financial Officer, Kirk 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 May 16, 2005.
FILED HEREWITH. |
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:
May 16, 2005 |
By |
/s/
Steven Malone |
|
|
Steven
Malone |
|||
|
President
and Chief Executive Officer |
|
Date:
May 16, 2005 |
By |
/s/
Kirk R. Rowland |
|
|
Kirk
R. Rowland, CPA |
|||
|
Chief
Financial Officer |