UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2015
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________.
Commission
file number: 0-29963
FINDEX.COM,
INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
88-0379462 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
incorporation
or organization) |
|
Identification
No.) |
|
|
|
1313
South Killian Drive, Lake Park, Florida |
|
33403 |
(Address
of principal executive offices) |
|
(Zip
Code) |
(561)
328-6488
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☐ No ☒
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
☐ No ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated
filer ☐ |
Non-accelerated
filer ☐ (Do not check if a smaller reporting company) |
Smaller
reporting company ☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
☐ No ☒
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
At
August 19, 2015 the registrant had outstanding 467,691,409 shares of common stock, of which there is only a single class.
FINDEX.COM,
INC.
QUARTERLY
REPORT ON FORM 10-Q
FOR
FISCAL QUARTER ENDED JUNE 30, 2015
-
INDEX -
|
Page |
PART
I - FINANCIAL INFORMATION: |
|
|
|
Item
1. Financial Statements: |
F-1 |
|
|
Condensed
Consolidated Balance Sheets – June 30, 2015 (unaudited) and December 31, 2014 |
F-1 |
|
|
Condensed
Consolidated Statements of Operations for the three and six months ended June 30, 2015 and for the three and six months ended
June 30, 2014 (unaudited) |
F-2 |
|
|
Condensed
Consolidated Statements of Cash Flows for the three and six months ended June 30, 2015 and for the three and six months ended
June 30, 2014 (unaudited) |
F-3 |
|
|
Notes
to Condensed Consolidated Unaudited Financial Statements (unaudited) |
F-4 |
|
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
1 |
|
|
Item
3. Quantitative and Qualitative Disclosures About Market Risk |
7 |
|
|
Item
4T. Controls and Procedures |
7 |
|
|
PART
II - OTHER INFORMATION: |
|
|
|
Item
1. Legal Proceedings |
8 |
|
|
Item
1A. Risk Factors |
8 |
|
|
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds |
8 |
|
|
Item
3. Defaults Upon Senior Securities |
8 |
|
|
Item
4. Mine Safety Disclosures |
8 |
|
|
Item
5. Other Information |
8 |
|
|
Item
6. Exhibits |
9 |
|
|
Signatures |
12 |
PART
I – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
June 30,
2015 | | |
December 31,
2014 | |
| |
(Unaudited) | | |
(Audited) | |
Assets |
Current Assets: |
Cash and cash equivalents | |
$ | 13,653 | | |
$ | 2,241 | |
Accounts receivable, trade, net | |
| 19,260 | | |
| 38,602 | |
Inventories, net | |
| 52,303 | | |
| 50,959 | |
Other current assets | |
| 6,632 | | |
| 1,729 | |
Total current assets | |
| 91,848 | | |
| 93,531 | |
Property and Equipment, net | |
| 38,724 | | |
| 47,454 | |
Intangible Assets, net | |
| 395,631 | | |
| 419,387 | |
Goodwill | |
| 1,433,465 | | |
| 1,433,465 | |
Total assets | |
$ | 1,959,668 | | |
$ | 1,993,837 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity |
Current Liabilities: | |
| | | |
| | |
Notes payables: | |
| | | |
| | |
Notes payable, trade | |
$ | 366,283 | | |
$ | 323,783 | |
Note payable, derivative liability | |
| - | | |
| 250,000 | |
Note payable, related party | |
| 479,000 | | |
| 489,000 | |
Accrued royalties | |
| 55,813 | | |
| 61,039 | |
Accounts payable, trade | |
| 235,298 | | |
| 221,715 | |
Accounts payable, related parties | |
| 53,183 | | |
| 67,702 | |
Accrued payroll | |
| 388,015 | | |
| 251,127 | |
Other current liabilities | |
| 65,967 | | |
| 68,730 | |
Other current liabilities from discontinued operations | |
| 114,368 | | |
| 114,368 | |
Total current liabilities | |
| 1,757,927 | | |
| 1,847,464 | |
Commitments and Contingencies (Note 10) | |
| | | |
| | |
Stockholders’ Equity: | |
| | | |
| | |
Preferred stock, $.001 par value | |
| | | |
| | |
5,000,000 shares authorized | |
| | | |
| | |
-0- shares issued and outstanding | |
| - | | |
| - | |
Common stock, $.001 par value | |
| | | |
| | |
900,000,000 shares authorized, | |
| | | |
| | |
462,691,409 and 420,479,980 shares issued and outstanding, respectively | |
| 462,691 | | |
| 420,480 | |
Additional paid-in capital | |
| 2,926,351 | | |
| 2,490,563
| |
Accumulated deficit | |
| (3,187,301 | ) | |
| (2,764,670 | ) |
Total stockholders’ equity | |
| 201,741 | | |
| 146,373 | |
Total liabilities and stockholders’ equity | |
$ | 1,959,668 | | |
$ | 1,993,837 | |
See accompanying notes to unaudited
condensed consolidated financial statements.
Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Revenues, net of reserves and allowances | |
$ | 39,106 | | |
$ | 15,879 | | |
$ | 81,874 | | |
$ | 69,535 | |
Cost of sales | |
| 13,562 | | |
| 11,197 | | |
| 31,265 | | |
| 47,779 | |
Gross profit | |
| 25,544 | | |
| 4,682 | | |
| 50,609 | | |
| 21,756 | |
Other operating expenses: | |
| | | |
| | | |
| | | |
| | |
Sales and marketing expenses | |
| 2,907 | | |
| 10,103 | | |
| 5,466 | | |
| 13,564 | |
Professional fees | |
| 60,661 | | |
| 10,366 | | |
| 116,662 | | |
| 19,738 | |
Personnel costs (net of research and development direct labor costs) | |
| 134,182 | | |
| 51,863 | | |
| 236,399 | | |
| 180,580 | |
Research and development | |
| 53,785 | | |
| 1,843 | | |
| 156,478 | | |
| 107,758 | |
Other general and administrative expenses | |
| 66,207 | | |
| 136,559 | | |
| 131,209 | | |
| 284,589 | |
Total operating expenses | |
| 317,742 | | |
| 210,734 | | |
| 646,214 | | |
| 606,229 | |
Loss from operations | |
| (292,198 | ) | |
| (206,052 | ) | |
| (595,605 | ) | |
| (584,473 | ) |
Interest expense | |
| (13,850 | ) | |
| (231,250 | ) | |
| (27,026 | ) | |
| (237,500 | ) |
Gain on debt settlement | |
| - | | |
| - | | |
| 200,000 | | |
| - | |
Loss from operations before income taxes | |
| (306,048 | ) | |
| (437,302 | ) | |
| (422,631 | ) | |
| (821,973 | ) |
Income tax provision | |
| - | | |
| - | | |
| - | | |
| - | |
Net loss | |
$ | (306,048 | ) | |
$ | (437,302 | ) | |
$ | (422,631 | ) | |
$ | (821,973 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share - Basic & Diluted: | |
| | | |
| | | |
| | | |
| | |
Net loss per share from operations | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | (0.01 | ) |
Net loss per share | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Weighted average shares used in computing basic and diluted loss per share | |
| 458,433,827 | | |
| 92,291,435 | | |
| 445,813,603 | | |
| 89,081,516 | |
See accompanying notes to unaudited
condensed consolidated financial statements.
Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
| |
Six Months Ended
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash flows from operating activities: | |
| | |
| |
Net Loss | |
$ | (422,631 | ) | |
$ | (821,973 | ) |
Adjustments to reconcile net loss to cash used in operations: | |
| | | |
| | |
Depreciation | |
| 8,730 | | |
| 9,700 | |
Amortization | |
| 23,756 | | |
| 11,878 | |
Stock issued for services | |
| 84,000 | | |
| - | |
Stock issued for notes payable | |
| - | | |
| 225,000 | |
Gain on debt settlement | |
| (200,000 | ) | |
| - | |
Changes in operating assets and liabilities | |
| | | |
| | |
Decrease (increase) in accounts receivable | |
| 19,342 | | |
| (2,084 | ) |
(Increase) decrease in inventory | |
| (1,344 | ) | |
| 18,893 | |
Increase in other current assets | |
| (4,903 | ) | |
| - | |
Increase
in accounts payable and accrued expenses | |
| 156,962 | | |
| 6,486 | |
Net cash used in operating activities | |
| (336,088 | ) | |
| (552,100 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Purchase of property and equipment | |
| - | | |
| - | |
Net
cash used in investing activities | |
| - | | |
| - | |
Cash flows from financing activities: | |
| | | |
| | |
Sale of common stock | |
| 365,000 | | |
| 552,100 | |
Payments made on term debt | |
| (17,500 | ) | |
| - | |
Net cash provided by financing activities | |
| 347,500 | | |
| 552,100 | |
Net increase in cash and cash equivalents | |
| 11,412 | | |
| - | |
Cash and cash equivalents, beginning of year | |
| 2,241 | | |
| 200 | |
Cash and cash equivalents, end of period | |
$ | 13,653 | | |
$ | 200 | |
| |
| | | |
| | |
Supplemental cash flow information: | |
| | | |
| | |
Interest paid | |
$ | 27,026 | | |
$ | 237,500 | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Schedule of non-cash investing and
financing activities: | |
| | | |
| | |
Issuance of debt for loan modification | |
$ | 50,000 | | |
$ | - | |
Issuance of common stock for directors fees | |
$ | 29,000 | | |
$ | - | |
See accompanying notes to unaudited
condensed consolidated financial statements.
Findex.com, Inc.
Notes to Condensed Consolidated Financial
Statements
June 30, 2015
(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
– FINDEX.cOM, Inc.
Findex.com, Inc. (“Findex,” the “Company,”)
is incorporated under the laws of the State of Nevada and has its headquarters and operations in Lake Park, Florida. The Company’s
business is comprised of three distinct operating divisions.
EcoSmart Surface Technologies division manufactures
and distributes a newly developed and customized, extremely durable flooring system that is applied with a patent pending process.
With this system, a completely different looking floor can be applied over most existing hard flooring surfaces. The system can
replicate the appearance of a variety of traditional substances, such as wood and stone, using an environmentally friendly technique,
and can include decorative elements such as logos or other inlaid artwork that is sealed into the polymer finish coating.
EcoSmart Coating Technologies division manufactures
and distributes a portfolio of patented and patent pending processes utilizing nano-technology glass coatings applicable to virtually
every industry for corrosion protection, self-cleaning, self-sterilization, slip resistance, chemical resistance, anti-graffiti,
energy and cosmetic improvement. The coatings can be used on virtually any surface thereby creating the proprieties of a glass
surface, no matter what is coated. The coatings are particularly suited for corrosive industrial environments, high wear or high
traffic protective requirements, marine coatings, consumer equipment coatings subject to mold, dust, or corrosion, surfaces in
a medical environment, and an expanding range of industrial applications.
FormTool division is focused upon the production, marketing
and distribution of a line of consumer software products that offer quality, professionally designed forms for business, accounting,
construction, sales, real estate, human resources and personal organization needs.
Organization – Merger
with Findex.com, Inc. and Ecosmart Surface and Coating Technologies, Inc.
On July 23, 2014, the Company
entered into an agreement and plan of merger, with each of EcoSmart Acquisition Corp., a Delaware corporation and a wholly-owned
special-purpose acquisition subsidiary, EcoSmart Surface & Coating Technologies, Inc., a Florida Corporation (“EcoSmart”),
and The Renewable Corporation, a Washington corporation and the majority-controlling stockholder of EcoSmart pursuant to which
EcoSmart Acquisition Corp. acquired all of the outstanding capital stock of EcoSmart in exchange for 277,982,500 shares of the
Company’s common stock, par value $0.001. On July 23, 2014, the Company completed the filings of the corresponding certificate
of merger in each of the States of Delaware and Florida, thereby consummating a statutory merger (the “Merger”). As
a result, the Company is now the holding company of EcoSmart, which is an operating business centered around the development of
a proprietary line of state-of-the-art specialty materials coatings that have a broad range of value-adding industrial, commercial,
and residential applications.
For accounting purposes, the
Company recognized the Merger in accordance with ASC 805-40, Reverse Acquisitions. Accordingly, the Company has been recognized
as the accounting acquiree in relation to the Merger, with EcoSmart being the accounting acquirer, and the Company’s consolidated
financial statements for the reporting periods from January 1, 2013 through July 23, 2014 being those of EcoSmart, not the enterprise
historically recognized as Findex. The Company’s consolidated financial statements for the periods since July 24, 2014, the
day after which the Merger was consummated, recognize Findex and EcoSmart as a single operating enterprise and entity for accounting
and reporting purposes, albeit with a carryover capital structure inherited from Findex (attributable to the legal structure of
the transaction).
The Company’s current
intention is to continue to operate and further develop its FormTool product line and business, though it is expected that the
Company’s primary focus will shift going forward in the direction of the business of EcoSmart, where the Company believes
the opportunities for future growth are greater and have significantly more to offer economically.
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-Q and Article 8 of Regulation S-X. 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 year or for any future period. The December 31, 2014 condensed
consolidated balance sheet data was derived from audited financial statements. The accompanying financial statements should be
read in conjunction with the audited consolidated financial statements of Findex.com, Inc. included in the Company’s Form
10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 15, 2015.
Principles
of Consolidation
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All intercompany account balances and transactions have
been eliminated.
Reclassifications
Certain accounts in the Company’s 2014 financial statements
have been reclassified for comparative purposes to conform with the presentation in its 2015 financial statements.
Use
of Estimates
The preparation of financial statements in conformity with U.S.
Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual
results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there
are material differences between the estimates and the actual results, future results of operations will be affected.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
INVENTORY
The Company’s inventories are recorded at the lower of cost
or market using the first in, first out method. The Company’s inventory consists of raw materials and finished goods.
INTANGIBLE ASSETS OTHER THAN GOODWILL
The Company’s intangible assets consist of patents and patents
pending acquired from third parties, and are recorded at cost. In accordance with Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) 350-30, General Intangibles Other Than Goodwill, 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, generally three to ten years. All intangible assets are tested for impairment annually during the fourth quarter.
GOODWILL AND CERTAIN OTHER LONG-LIVED ASSETS
As required by ASC 350, Goodwill and Other Intangible Assets,
the Company tests goodwill for impairment during the fourth quarter of its fiscal year. Goodwill is not amortized, but instead
tested for impairment at the reporting unit level at least annually and more frequently upon occurrence of certain events. The
Company has one reporting unit. The annual goodwill impairment test is a two-step process. First, the Company determines if the
carrying value of its reporting unit exceeds fair value, which would indicate that goodwill may be impaired. If the Company then
determines that goodwill may be impaired, it compares the implied fair value of the goodwill to its carry amount to determine if
there is an impairment loss.
There were no impairments of goodwill during the six months ended
June 30, 2015.
The Company accounts for the impairment of long-lived assets other
than goodwill in accordance with ASC 360, Property, Plant, and Equipment, which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets
are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar
manner, except that fair values are reduced for the cost of disposal.
There were no impairments of long-lived assets during the six months
ended June 30, 2015.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value measurements are determined under a three-level hierarchy
for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between
market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable
inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best
information available in the circumstances (“unobservable inputs”). Fair value is the price that would be received
to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between
market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information
generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers
the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity
to identify transactions that are not orderly.
The highest priority is given to unadjusted quoted prices in active
markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities
are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The three hierarchy levels are defined as follows:
Level 1 – Quoted prices in active markets that is unadjusted
and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities
in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for
which significant inputs are observable, either directly or indirectly;
Level 3 – Prices or valuations that require inputs that are
both significant to the fair value measurement and unobservable.
Credit risk adjustments are applied to reflect the Company’s
own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing
counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap
market.
The Company's financial instrument that was adjusted to fair value
at each balance sheet date consisted of a derivative liability related to the conversion feature embedded in convertible debt.
The Company’s derivative liability resulting from the issuance of convertible debt was reflected at fair value based on the
terms of conversion which resulted in fair value approximating intrinsic value, which was consistent with level 3 inputs. During
the six months ended June 30, 2015, the Company entered into a loan modification agreement for the convertible debt with the conversion
feature which called for the convertible debt, along with the conversion feature to be cancelled. Therefore, at June 30, 2015,
the Company had no derivative liabilities. See Note 7.
REVENUE
RECOGNITION
The Company recognizes revenues in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin (SAB) number 104, Revenue Recognition. SAB 104 clarifies application of
U.S. generally accepted accounting principles to revenue transactions. Under certain circumstances, the Company recognizes revenue
in accordance with the provisions of Statement of Financial Accounting Standards No. 139 and American Institute of Certified Public
Accountants Statement of Position 00-2 (collectively referred to as “SOP 00-2”). The Company recognizes revenue when
the earnings process is complete. That is, when the arrangements of the goods are documented, the pricing becomes final and collectability
is reasonably assured. An allowance for bad debt is provided based on estimated losses.
Revenue is recognized when a product is delivered or shipped to
the customer and all material conditions relating to the sale have been substantially performed.
In addition, within the Company’s operations as a whole, the
Company derives part of its revenues from the sale of downloadable software products. The Company recognizes software revenue for
software products and related services in accordance with ASC 985-605, Software Revenue Recognition. The Company recognizes
revenue when persuasive evidence of an arrangement exists (generally a purchase order), the Company has delivered the product,
the fee is fixed or determinable and collectability is probable. In some situations, the Company receives advance payments from
the Company’s customers. The Company defers revenue associated with these advance payments until the Company ships the products
or offers the support.
RESEARCH AND DEVELOPMENT
The Company’s research
and development costs consist of direct production costs, including labor directly associated with the development of projects
and outside consultants, and indirect costs such as those associated with facilities use. For labor costs and costs of outside
consultants, the Company records the research and development costs as a reduction against either personnel costs or professional
fees. For facilities leasing related expenses, the Company records the research and development costs as a reduction against rent.
For the six months ended June 30, 2015 and 2014, the Company recognized $156,478 and $107,758, respectively, in research and development
costs.
EARNINGS (LOSS) PER SHARE
The Company follows the guidance of ASC 260, Earnings Per Share,
to calculate and report basic and diluted earnings per share (“EPS”). Basic EPS is computed by dividing income available
to common stockholders 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 EPS, in accordance
with ASC 260-10-45-17.
The following potentially dilutive securities were excluded from
the calculation of diluted loss per share for the six months ended June 30, 2015 and 2014, because their impact was anti-dilutive:
For the Six Months Ended June 30, | |
2015 | | |
2014 | |
Warrants | |
| 3,950,000 | | |
| --- | |
Convertible notes payable | |
| 24,500,000 | | |
| 50,000,000 | |
Total weighted average anti-dilutive potential common shares | |
| 28,450,000 | | |
| 50,000,000 | |
RECENT ACCOUNTING PRONOUNCEMENTS
At June 30, 2015, there were no recent accounting pronouncements
that the Company believed would have a material impact on its consolidated financial statements.
NOTE 2 – 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 June 30, 2015, the Company had negative working capital of $1,666,079, and an
accumulated deficit of $3,187,301. The Company incurred a net loss of $422,631 and used $336,088 of cash in operations for
the six months ended June 30, 2015. Although these factors raise substantial doubt as to the Company’s ability to
continue as a going concern, the Company has taken several actions intended to mitigate against this risk. These actions
include the Merger Agreement with EcoSmart. See Note 3. These condensed consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – MERGER AGREEMENT
On July 23, 2014, the Company entered into an agreement and plan
of merger (the “Merger Agreement”), with each of EcoSmart Acquisition Corp., a Delaware corporation and a wholly-owned
special-purpose acquisition subsidiary of the Company’s (“Merger-Sub”), EcoSmart Surface & Coating Technologies,
Inc., a Florida Corporation (“EcoSmart”), and The Renewable Corporation, a Washington corporation and the majority-controlling
stockholder of EcoSmart (“TRC”), pursuant to which Merger-Sub acquired all of the outstanding capital stock of EcoSmart
in exchange for 111,193 shares of the Company’s Series MX convertible preferred stock, par value $0.001 per share (the “Series
MX Convertible Preferred Stock”), which shares of Series MX Convertible Preferred Stock will automatically convert, on a
combined basis, into a total of 277,982,500 shares of common stock, par value $0.001 upon the effectiveness of any amendment to
the Company’s articles of incorporation increasing the number of authorized shares of the Company’s Common Stock to
900,000,000 or more (currently fixed at 120,000,000). On July 23, 2014, the Company completed the filings of the corresponding
certificate of merger in each of the States of Delaware and Florida, thereby consummating a statutory merger (the “Merger”).
In effect, the Merger involved the Company issuing new shares amounting to 70% of its outstanding Common Stock in order to acquire
the business of EcoSmart.
As a result of the Merger, in addition to the Company’s pre-Merger
FormTool consumer software business, the Company is now the holding company of EcoSmart, which is an operating business centered
around the development of a proprietary line of state-of-the-art specialty materials coatings that have a broad range of value-adding
industrial, commercial, and residential applications.
The Merger Agreement contains certain detailed information regarding
the terms of the Merger, which, in general, govern the contractual rights and relationships, and allocate certain risks, between
and among the parties in relation to the Merger. The Merger Agreement additionally sets out the legal effects and procedural mechanics
surrounding the conversion and exchange of the EcoSmart common stock and other securities into FIND securities, including how and
when the EcoSmart security holders will receive new certificates reflecting the FIND securities to which they became entitled as
a result of the Merger.
The Merger Agreement provides that, as of the consummation of the
Merger, which occurred on July 23, 2014 contemporaneously with the signing of the Merger Agreement, EcoSmart merged with and into
Merger-Sub, a wholly-owned subsidiary of FIND recently formed under the laws of the State of Delaware for the specific purpose
of effecting the Merger, and as a result, the entity that was EcoSmart prior to the Merger has now been merged out of existence
while the business of EcoSmart has, as a result of the Merger, effectively become a wholly-owned subsidiary of FIND, albeit now
held in the form of the recently-formed Delaware corporation.
The Company recognizes the Merger Agreement in accordance with ASC
805-40, Reverse Acquisitions. Accordingly, the accounting acquiree (the “Company”, “Findex”) issued
equity shares to the owners of the accounting acquirer (EcoSmart). The consideration transferred by EcoSmart for its interest in
the Company is based on the number of equity interests EcoSmart would have had to issue to give the owners of the Company the same
percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity
interests calculated in that way can be used as the fair value of consideration transferred in exchange for the Company.
The fair value of the acquired assets and liabilities, and the resulting
amount of goodwill was determined as follows:
Consideration – 119,134,980 outstanding shares of common stock of the Company at a closing price of $0.006 as of July 23, 2014 | |
| | | |
$ | 714,810 | |
Net recognized values of the Company’s identifiable assets and liabilities | |
| | | |
| | |
Assets | |
$ | 32,047 | | |
| | |
Liabilities | |
| (750,702 | ) | |
$ | 718,655 | |
Goodwill | |
| | | |
$ | 1,433,465 | |
NOTE 4 – INVENTORIES
At June 30, 2015, inventories consisted of the following:
| |
2015 | |
Raw materials | |
$ | 45,976 | |
Finished goods | |
| 6,327 | |
Inventories | |
$ | 52,303 | |
NOTE 5 – PROPERTY AND EQUIPMENT
At June 30, 2015, property and equipment consisted of the following:
| |
2015 | |
Office equipment | |
$ | 3,466 | |
Warehouse equipment | |
| 76,339 | |
Computer equipment | |
| 8,708 | |
Less: accumulated depreciation | |
| (49,789 | ) |
Property and equipment | |
$ | 38,724 | |
For the six months ended June 30, 2015 and 2014, the Company recorded
depreciation expense of $8,730 and $9,700, respectively.
NOTE 6 – INTANGIBLE ASSETS
The Company’s intangible assets consist of patents and patents
pending acquired from third parties, and are recorded at cost. The Company amortizes the costs of its intangible assets over their
estimated useful lives unless such lives of approximately 11 years. Patents pending are not amortized until the patents are issued.
Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair
value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment,
at least annually, and written down to fair value as required.
At June 30, 2015, the Company’s intangible assets, net of
accumulated amortization, consisted of the following:
SMT assets | |
$ | 380,631 | |
MRP assets | |
| 15,000 | |
Intangible assets | |
$ | 395,631 | |
The SMT assets include a patent, a patent pending, trade secret
technology, instructions, manuals and applicable materials on certain manufacturing processes, know-how, scientific testing equipment,
warehouse equipment, shelving and shop supplies. The MRP assets include trade secret technology, instructions, manuals and applicable
materials on certain manufacturing processes. For the six months ended June 30, 2015, the Company had no impaired carrying value
of its SMT assets and MRP assets.
NOTE 7 – NOTES PAYABLE
At June 30, 2015, the notes payable consisted
of the following:
| |
2015 | |
Note payable, trade | |
$ | 366,283 | |
Note payable, related party | |
| 479,000 | |
Total | |
$ | 845,283 | |
At June 30, 2015, the notes payable, trade
consisted of the following:
| |
| |
2015 | |
Unsecured term note payable to a former shareholder due January 2012, plus interest at 5% APR. Interest on overdue principal accruing at 10% APR. | |
(a) | |
$ | 28,783 | |
Unsecured term note payable to a shareholder individual due August 1, 2015, plus interest at 10% APR. | |
(b) | |
| 300,000 | |
Secured term note payable to a current shareholder due December 31, 2014, plus interest at 14% APR. | |
(c) | |
| 20,000 | |
Unsecured term note payable to a current shareholder, no due date, non-interest bearing. | |
(d) | |
| 7,500 | |
Convertible term note payable to a non-shareholder individual due August 2016, plus interest at 10% APR, convertible at $0.02 per share of common stock. | |
(e) | |
| 10,000 | |
Total | |
| |
$ | 366,283 | |
As of June 30, 2015, the Company held a note
payable (b) with a shareholder individual. The original note payable contained a conversion feature in the amount of $250,000.
However, in March 2015, the Company entered into a loan modification agreement which called for the original note payable, along
with the conversion feature, to be cancelled. Furthermore, the loan modification called for a replacement note to be entered into
at the adjusted principal amount of $300,000, but without any conversion feature exercisable on the part of the holder. See Note
8. During the six months ended June 30, 2015, the Company repaid $7,500 of an unsecured note payable (d) to a current shareholder.
At June 30, 2015, the Company was in arrears on the unsecured term
notes payable (a) to the former shareholder. For the security on the note payable (c) to a current shareholder, the Company agreed
to transfer the domain FormTool.com name to the shareholder to hold in escrow in case of default as the security on this note payable
(c). The shareholder agreed to maintain the domain name in good standing throughout the term of the note and transfer the domain
back to the Company within 30 days following final payment of the note.
RELATED PARTY
At June 30, 2015, the notes payable, related
party consisted of the following:
| |
| |
2015 | |
Non-interest bearing note payable, due on demand. | |
(a) | |
$ | 239,000 | |
Convertible note payable to a company controlled by an outside director due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock. | |
(b) | |
| 60,000 | |
Convertible note payable to the Company’s current corporate counsel due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock. | |
(c) | |
| 150,000 | |
Convertible note payable to an outside director due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock. | |
(d) | |
| 30,000 | |
Total | |
| |
$ | 479,000 | |
As of June 30, 2015, no principle payments
have been made on note (a). Note payables (b) and (d) are agreements with an outside director and cover a portion of the amount
that the outside director was owed for certain vendor payments made directly by the outside director’s personal credit card
and/or for funds previously loaned to the Company for working capital. Note payable (c) is an agreement with the Company’s
current corporate counsel and covers the amount that was due its corporate counsel at the year ended December 31, 2014. See Note
11. During the six months ended June 30, 2015, the Company repaid $10,000 of an unsecured note payable to a current shareholder.
NOTE 8 – GAIN ON DEBT SETTLEMENT
In March 2015, the Company recognized a gain on debt settlement
in the amount of $200,000. This gain is a result of entering into a loan modification agreement with a shareholder that had held
an outstanding convertible note agreement in the amount of $250,000 carrying a conversion feature that had the accounting effect
of increasing the derivative liability associated with the obligation from $250,000 to $500,000. The loan modification called for
the original convertible note payable ($250,000), along with the conversion feature ($250,000), dated July 2014 to be cancelled.
In addition, the loan modification called for a replacement note payable to be entered into at the adjusted principal amount of
$300,000, total, but without any conversion feature exercisable on the part of the holder. All other terms of the original note
agreement remained unchanged. As a result, the Company recognized a net gain of $200,000, and has treated it as a gain from extinguishment
of debt and included it in Gain on debt settlement on our condensed consolidated Statement of Operations for the six months ended
June 30, 2015. See Note 7.
NOTE 9 – STOCKHOLDERS’ DEFICIT
Common
Stock
Date Securities Issued | |
Securities Title | |
Issued To | |
Number of Securities Issued | | |
Price per share | | |
Consideration | | |
Number of Warrants | | |
Footnotes | |
Common Stock Issuances |
Sold for Cash |
Six months ended June 30, 2015 | |
Restricted Common Stock | |
Private Purchasers | |
| 36,500,000 | | |
$ | 0.010 | | |
$ | 365,000 | | |
| 3,650,000 | | |
| 1 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issued for compensation to employees, executive officers and board of directors |
Six months ended June 30, 2015 | |
Restricted Common Stock | |
Outside Directors | |
| 2,071,429 | | |
$ | 0.014 | | |
$ | 29,000 | | |
| --- | | |
| 2 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issued for compensation to contractors |
Six months ended June 30, 2015 | |
Restricted Common Stock | |
Consultants | |
| 6,000,000 | | |
$ | 0.014 | | |
$ | 84,000 | | |
| --- | | |
| 3 | |
We relied in each case for these unregistered sales 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 acquirer’s 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
acquirer’s.
(1) These were sales made pursuant to private placement commenced
as of December 8, 2014 carrying a purchase price of $10,000 per unit, with each such unit consisting of 1,000,000 shares of common
stock (effectively priced at $0.01 per share) and a 1-year warrant to purchase an additional 100,000 shares of common stock at
an exercise price of $0.10 per share.
(2) Shares to be issued in lieu of cash for partial director’s
fees accrued and unpaid from January 2014 through December 2014. Consideration is calculated to be the value of the security at
the date of grant of March 6, 2015.
(3) Issued as compensation for consulting, planning, research and
development and enhancement of sales opportunities. Consideration is calculated to be the value of the security at the date of
grant of March 6, 2015.
During the six months ended June 30, 2015 the Company cancelled
117,500 shares of common stock that was initially part of the Merger Agreement. These shares were cancelled due to a rounding adjustment.
Finally, during the six months ended June 30, 2015 the Company accepted
the cancellation of 2,192,500 shares of common stock held by an officer of The Renewable Corporation which they received in part
as a portion of the Merger Agreement. These shares were accepted by both parties as a cancellation due to the Company having to
pay the audit fees which were incurred by The Renewable Corporation as part of the Merger Agreement that called for The Renewable
Corporation to have fully audited books prior to the closing of the Merger Agreement. Due to the delinquency by The Renewable Corporation
to the Company’s auditors and in order for the Company to continue to utilize its current auditor, the Company paid a total
of $16,005 in audit fees on behalf of The Renewable Corporation.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims that may
arise in the ordinary course of business. In the opinion of management, the amount of potential liability the Company is likely
to be found liable for otherwise incur as a result of these actions is not so much as would materially affect the Company’s
financial condition.
On July 23, 2014, the Company entered into an employment
agreement with the Company’s Chief Executive Officer. The term for the employment agreement is three (3) years and
contains a provision for an incentive-based bonus, an amount in cash equal to one and one half percent (1.5%) of Free Cash
Flow (FCF); provided, however, that such bonus does not exceed five hundred thousand dollars ($500,000) for any single Fiscal
Year. The Company accrues this bonus on a quarterly basis. No amounts for bonuses have been earned or accrued as of June 30, 2015.
The Company’s Chief Executive Officer has the following base annual salary rate:
| |
Chief Executive Officer | |
Base Annual Salary | |
$ | 162,500 | |
In addition to the bonus provision and the annual base salary, the
Chief Executive Officer’s employment agreement provides for payment of the following for termination by reason of disability.
| |
Accrued Base Salary | | |
Vested Deferred Vacation Compensation | |
Aggregate included in Accrued Payroll at June 30, 2015 | |
$ | 283,218 | | |
$ | 12,501 | |
The agreement also provides for severance compensation equal to
the then base salary until the expiration of the term of the agreement. There is no severance compensation in the event of voluntary
termination or termination for cause.
The Company entered into an employment agreement with Mr.
Bo Inge Hakan Gimvang as Vice President of Research and Development in March 2015. Among other terms and provisions, the employment
agreement provides that Mr. Gimvang will be employed by the Company with specific executive-level responsibilities for a term of
3 years, unless the term is either extended or the agreement is terminated at some time prior to the duration of the term by either
party, either for cause, without cause, due to disability or death, or voluntarily. During the term of the employment agreement,
and in addition to certain benefits, expense coverage and severance compensation, Mr. Gimvang is entitled to a base annual salary
of not less than $120,000, as well as a royalty of 5% of the gross revenue, net of returns, for all revenues generated by the intellectual
property that Mr. Gimvang has assigned to the Company.
In January 2015, the Company entered into a lease agreement with
1313 Group LLC for the corporate offices located at 1313 South Killian Drive, Lake Park, Florida 33403. The Company leases this
8,560 square foot facility under a five year lease agreement ending December 31, 2019 with an option to renew for one successive
term of five years at the then current occupancy rates. The monthly rent, including sales and use taxes, is $7,000.00. In accordance
with the terms of the leasehold agreement, the Company is responsible for all utilities, repairs and maintenance.
In February 2015, the Company entered into a lease agreement with
R Schwarz Enterprises, Inc. for a research facility located at 223 Fentress Boulevard, Daytona Beach, Florida 32114. The Company
leases this 3,200 square foot facility under a month to month lease agreement ending on December 31, 2015. The monthly rent, including
sales and use taxes, is $2,662.50. In accordance with the terms of the leasehold agreement, we are responsible for all utilities,
repairs and maintenance.
Total rent expense, before adjustments of reclassified facilities
cost for research and development, for the six months ended June 30, 2015 for these facilities totaled $57,975.
The Company has included third-party technology in FormTool®
under a contract with a publisher provider that has expired. The Company is currently pursuing resolution, however, there is no
guarantee that the Company will be able to secure a new agreement, or an extension, and should the publisher demand the Company
cease and desist including their technology, the unknown potential negative impact could be material.
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company’s executive officers and employees, from time
to time, make purchases of materials and various expense items (including business related travel) in the ordinary course of business
via their personal credit cards in lieu of a corporate check for COD orders and/or prior to establishment of a line of credit with
a vendor. The Company does not provide its employees or executive officers with corporate credit cards and reimburses these purchases
as quickly as possible. The unpaid expense account balances are included in Accounts payable, related parties, on the Condensed
Consolidated Balance Sheets.
During the six months ended June 30, 2015, the Company experienced
a slight decrease in accounts payable due to related parties as some payments were made on previous balances owed. The accounts
payable due to related parties is comprised of certain vendor payments made directly by one of the Company’s outside directors,
including the Company’s auditors and transfer agent, via his personal credit card. In addition, the accounts payable due
to related parties includes out of pocket expenses as well as certain vendor payments made directly by the Company’s CEO
due to the limited available cash on hand. It was agreed at the time that all accounts payable due to related parties, including
those due to these vendor payments, will be reimbursed as quickly as possible.
As of June 30, 2015, the Company held a non-interest bearing
promissory note with a current shareholder individual. The note payable is due on demand and totals $239,000. As of June 30, 2015,
no principle payments have been made on this note. See Note 7.
As of June 30, 2015, one of the Company’s outside directors
held two convertible note payable agreements with the Company. These convertible note payable agreements cover a portion of the
amount that the outside director was owed for certain vendor payments made directly by the outside director’s personal credit
card and/or for funds previously loaned to the Company for working capital. The first convertible note payable agreement is between
the Company and a company controlled by the outside director and is in the amount of $60,000. It is due on demand, plus interest
at 4.5% APR and convertible at $0.01 per share of common stock. The second convertible note payable agreement is between the Company
and the outside director and is in the amount of $30,000. It is due on demand, plus interest at 4.5% APR and convertible at $0.01
per share of common stock. See Note 7.
As of June 30, 2015, the Company’s current corporate counsel
held a convertible note payable agreement in the amount $150,000 with the Company. This note payable agreement covered the amount
that was due the Company’s corporate counsel at the year ended December 31, 2014. The convertible note payable agreement
is due on demand, plus interest at 4.5% APR and convertible at $0.01 per share of common stock. See Note 7.
NOTE 12 – DISCONTINUED OPERATIONS
On May 5, 2011, Findex entered into a Software Product Line Purchase
Agreement to sell Findex’s QuickVerse® product line to WORDsearch Corp., L.L.C. In accordance with the Software
Product Line Purchase Agreement, WORDsearch agreed to acquire from Findex all of the assets associated with its QuickVerse®
product line for $975,000 in cash at closing and the assumption of up to $140,000 of Findex’s then-existing liabilities at
closing.
On June 30, 2011, closing of the asset sale transaction governed
by the Software Product Line Purchase Agreement, which is transitional in nature and expected to be ongoing through approximately
the end of April, 2012, commenced. As one of the initial parts of the closing, on July 1, 2011 WORDsearch assumed possession of
the physical assets conveyed in the transaction as well as control and responsibility of the business operations related to the
QuickVerse® product line, including, among many
other things, the receipt of revenues for sales in exchange for partial payment of the cash portion of the purchase price being
paid to Findex. On April 13, 2012, Findex determined that the final closing conditions under the Software Product Line Purchase
Agreement had been met, which meant that Findex was able to deliver to WORDsearch the last in a series of officer’s certificates
required thereunder. Having delivered such certificate to WORDsearch on April 13, 2012, the sale of the QuickVerse®
product line to WORDsearch was complete.
As a result of the decision to sell the QuickVerse®
product line, the Company has classified the QuickVerse® product line as discontinued operations for the six months
ended June 30, 2015. The Company has recorded the remaining class of liabilities for the QuickVerse® product line
as presented below:
Other current liabilities from discontinued operations: | |
June 30, 2015 | |
Accrued royalties | |
$ | 114,368 | |
Other current liabilities from discontinued operations | |
$ | 114,368 | |
NOTE 13 – SUBSEQUENT EVENTS
In July 2015, an individual
entered into a common stock subscription agreement to purchase from the Company a total of 5,000,000 restricted shares of common
stock at a price of one hundredths of a dollar ($0.01) per share, such price paid to the Company in $50,000 in cash. In addition,
the individual received a warrant to purchase an additional 500,000 shares of common stock for a period of up to one year at an
exercise price of $0.10 per share
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary
Statement Regarding Forward-Looking Statements
Certain
statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the
Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such
statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements
of Findex.com, Inc. (“we”, “us”, “our” or the “Company”) to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking
statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company.
Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report
will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives
and plans of the Company will be achieved.
This information
should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in
Item 1 of Part I of this quarterly report, and our audited financial statements and the notes thereto and our Management’s
Discussion and Analysis of Financial Condition and Results of Operation contained in our annual report on Form 10-K for the fiscal
year ended December 31, 2014.
Description
of Business
Findex.com,
Inc. (“Findex,” the “Company,” “we,” “us,” or “our”) headquarters
and operations are based in Lake Park, Florida. Our business is comprised of three distinct operating divisions. As a result of
a recent merger (the “Merger”), two of these divisions, EcoSmart, centers around the development of a proprietary
line of specialty materials coatings that have a broad range of value-adding industrial, commercial, and residential applications.
The other division, FormTool, which we acquired in February 2008, is focused upon the production, marketing and distribution of
a line of consumer software products that offer quality, professionally designed forms for business, accounting, construction,
sales, real estate, human resources and personal organization needs.
For accounting
purposes, we recognized the Merger in accordance with ASC 805-40, Reverse Acquisitions. Accordingly, Findex has been recognized
as the accounting acquiree in relation to the Merger, with EcoSmart being the accounting acquirer, and our condensed consolidated
financial statements for the reporting period from January 1, 2013 through July 23, 2014 being those of EcoSmart, not the enterprise
historically recognized as Findex. Our condensed consolidated financial statements for the periods since July 24, 2014, the day
after which the Merger was consummated, recognize Findex and EcoSmart as a single operating enterprise and entity for accounting
and reporting purposes, albeit with a carryover capital structure inherited from Findex (attributable to the legal structure of
the transaction). Readers of this quarterly report on Form 10-Q should note that, in order to provide materially relevant disclosure
regarding certain of Findex’s historical, operational expenses not otherwise appropriately accounted for in our condensed
consolidated financial statements given the applied accounting treatment described herein, certain disclosure is contained in
the text of this report relating to such expenses that does not numerically align with the corresponding figures contained in
our condensed consolidated financial statements.
EcoSmart
is divided into two basic product areas. One product area is currently centered around a line of specialty industrial glass-based
“smart surface” coatings that have a wide range of uses across each of the industrial, commercial, and household market
segments and that are centered around a U.S. patented technology that, either on its own or when coupled with any of an array
of available proprietary formula additives, offers a unique combination of beneficial surface properties that allow for a broad
array of multi-surface and end-product applications. The other product area involves a proprietary surfacing process – for
which a U.S. patent is currently pending – to treat and cover existing floors, walls, counter-tops and table-tops, that
offers property owners and occupants of all types a cost-effective means of enjoying a virtually limitless array of very lightweight,
aesthetically desirable and high-demand decorative options, coupled with a variety of meaningfully beneficial surface-layer properties,
without the necessity for having to remove and dispose of the floors, walls, counter-tops and table-tops already in place, and
which process affords a uniquely attractive solution to those property owners and occupants otherwise facing the very costly,
time-consuming and administratively burdensome challenges of having to remove and dispose of existing legacy-laden, chemically
contaminated and/or vinyl asbestos tile (so-called “VAT”).
Over time,
EcoSmart intends to develop itself in the strategic direction of becoming a leading research-oriented high-tech specialty “smart-surface”
materials development and licensing company centered around a highly qualified research team and state-of-the-art research lab
and applying a combination of organic and inorganic chemistries, materials science engineering, and nanotechnology. EcoSmart currently
has expertise and capabilities in each of these areas.
Though we
believe that our FormTool product line has opportunities to offer in terms of generating potential revenue, for the time being,
it is almost exclusively our EcoSmart specialty coatings products to which we are devoting our limited resources. This is due
principally to a combination of market considerations and projected gross profit margins. For this reason, moreover, the remainder
of the substantive business discussion in this Management’s Discussion and Analysis of Financial Condition and Results of
Operation will focus primarily on the EcoSmart coatings business.
Management
Overview
A key focus
of management during the six months ended June 30, 2015 centered on exploring and building relationships with potentially key
strategic business partners, investors, and potential distributors and/or resellers of our products. Each of the strategic sell-side
relationships were pointedly pursued in order to establish, further develop, and/or expand our existing market share within certain
of our most aggressively targeted verticals. For this period, and for the indefinite future, management is committed to securing
and solidifying foundational relationships within each of its hardscape, solar, oil, gas and mining, HVAC, and marine markets,
and intends to allocate its financial and human resources accordingly.
During the
period ending June 30, 2015, management remained focused on three primary areas identified as keys to the near-term viability,
growth and prosperity of EcoSmart. One area is revenue generation, as effected through the formalization of various distribution
and licensing relationships that the Company has been pursuing over time. A second area is the maximization of cash flow and return
on existing assets, as effected through the refinement of internal production operations and throughput efficiencies. The third
other area is corporate finance, and specifically the raising of capital necessary to bridge shortfalls in available cash, for
both operational and capital investment purposes, through to the point, if at all, at which working capital and cash reserve levels
are sufficient to be self-sustaining.
At this
time, near-term liquidity poses a continuous challenge to us and is expected to continue to do so for the foreseeable future.
Moreover, the need to find ways to stretch our very limited economic resources places ongoing strains on our very limited human
resources.
Results
of Operations for Quarters Ending June 30, 2015 and June 30, 2014
Statements of Operations for Six Months Ended June 30, | |
2015 | | |
2014 | | |
Change | |
Net revenues | |
$ | 81,874 | | |
$ | 69,535 | | |
$ | 12,339 | |
Cost of sales | |
| (31,265 | ) | |
| (47,779 | ) | |
| 16,514 | |
Gross profit | |
$ | 50,609 | | |
$ | 21,756 | | |
$ | 28,853 | |
Sales, marketing and general and administrative expenses | |
| (646,214 | ) | |
| (606,229 | ) | |
| (39,985 | ) |
Total operating expenses | |
$ | (646,214 | ) | |
$ | (606,229 | ) | |
$ | (39,985 | ) |
Loss from operations | |
$ | (595,605 | ) | |
$ | (584,473 | ) | |
$ | (11,132 | ) |
Other expenses, net | |
| (27,026 | ) | |
| (237,500 | ) | |
| 210,474 | |
Gain on debt settlement | |
| 200,000 | | |
| --- | | |
| 200,000 | |
Loss before income taxes | |
$ | (422,631 | ) | |
$ | (821,973 | ) | |
$ | 399,342 | |
Income tax (provision) | |
| --- | | |
| --- | | |
| --- | |
Net loss from operations | |
$ | (422,631 | ) | |
$ | (821,973 | ) | |
$ | 399,342 | |
Statements of Operations for Three Months Ended June 30, | |
2015 | | |
2014 | | |
Change | |
Net revenues | |
$ | 39,106 | | |
$ | 15,879 | | |
$ | 23,227 | |
Cost of sales | |
| (13,562 | ) | |
| (11,197 | ) | |
| (2,365 | ) |
Gross profit | |
$ | 25,544 | | |
$ | 4,682 | | |
$ | 20,862 | |
Sales, marketing and general and administrative expenses | |
| (317,742 | ) | |
| (210,734 | ) | |
| (107,008 | ) |
Total operating expenses | |
$ | (317,742 | ) | |
$ | (210,734 | ) | |
$ | (107,008 | ) |
Loss from operations | |
$ | (292,198 | ) | |
$ | (206,052 | ) | |
$ | (86,146 | ) |
Other expenses, net | |
| (13,850 | ) | |
| (231,250 | ) | |
| 217,400 | |
Loss before income taxes | |
$ | (306,048 | ) | |
$ | (437,302 | ) | |
$ | 131,254 | |
Income tax (provision) | |
| --- | | |
| --- | | |
| --- | |
Net loss from operations | |
$ | (306,048 | ) | |
$ | (437,302 | ) | |
$ | 131,254 | |
The differing
results of operations are primarily attributable to the following for the three and six months ended June 30, 2015:
|
● |
an
increase in net revenues resulting from the expansion of our products in the hardscape industry; |
|
● |
an
overall reduction in cost of sales resulting from a decrease in the price of certain production materials and freight-out
expenses; |
|
● |
an
increase in sales, marketing and general and administrative expenses; |
|
● |
a
decrease in interest expense as during the six months ended June 30, 2014 we experienced a large increase in interest expense
related to an issuance of our shares of common stock to a note holder as consideration for the extension of the maturity date
of the note payable; and |
|
● |
an
accounting gain realized in connection with a settlement agreement entered into with a current note holder. |
Although
there can be no assurance, in future periods, we anticipate an increase in overall Company revenues as well as an increase in
overall sales, marketing and general and administrative expenses due to our anticipated growth and expansion in certain vertical
markets.
Revenues
Our net
revenues increased approximately $12,000 from approximately $70,000 for the six months ended June 30, 2014 to approximately $82,000
for the six months ended June 30, 2015. Furthermore, we saw an increase in net revenues of approximately $23,000 from approximately
$16,000 for the three months ended June 30, 2014 to approximately $39,000 for the three months ended June 30, 2015. These increases
in net revenues are mainly attributed to the expansion of our products in the hardscape industry. Although there can be no assurance,
we anticipate an increase in overall Company revenues in future periods as we continue to pursue a variety of vertical markets
that management has been targeting over the past year as near-term opportunities for revenue growth.
Cost
of Sales
| |
| | |
| | |
| | |
| | |
Change | |
Cost of Sales for Operations for Six Months Ended June 30, | |
2015 | | |
% to Sales | | |
2014 | | |
% to Sales | | |
$ | |
Direct costs | |
$ | 22,293 | | |
| 27% | | |
$ | 38,377 | | |
| 55% | | |
$ | (16,084 | ) |
Royalties | |
| 4,300 | | |
| 5% | | |
| 1,073 | | |
| 2% | | |
| 3,227 | |
Freight-out | |
| 4,672 | | |
| 6% | | |
| 8,329 | | |
| 12% | | |
| (3,657 | ) |
Cost of sales | |
$ | 31,265 | | |
| 38% | | |
$ | 47,779 | | |
| 69% | | |
$ | (16,514 | ) |
| |
| | |
| | |
| | |
| | |
Change | |
Cost of Sales for Operations for Three Months Ended June 30, | |
2015 | | |
% to Sales | | |
2014 | | |
% to Sales | | |
$ | |
Direct costs | |
$ | 10,153 | | |
| 26% | | |
$ | 6,438 | | |
| 41% | | |
$ | 3,715 | |
Royalties | |
| 990 | | |
| 3% | | |
| --- | | |
| 0% | | |
| 990 | |
Freight-out | |
| 2,419 | | |
| 6% | | |
| 4,759 | | |
| 30% | | |
| (2,340 | ) |
Cost of sales | |
$ | 13,562 | | |
| 35% | | |
$ | 11,197 | | |
| 71% | | |
$ | 2,365 | |
Cost of
sales consists primarily of direct costs, royalties accrued to third party providers of intellectual property, and the costs associated
with reproducing, packaging, and shipping our products. The overall decrease in cost of sales for the six months ended June 30,
2015 are attributable to the following:
|
● |
a
decrease in direct costs attributable to a change in certain suppliers for materials; |
|
● |
an
increase in royalties due to an increase in sales of products that carry a royalty obligation; and |
|
● |
a
decrease in freight-out resulting from a change in shipping service providers. |
Into the
immediate future, we anticipate that our direct costs are likely to increase because of escalating sales volume coupled with our
continuing inability to make materials bulk purchases at substantial discount rates. Though there can be no assurance that our
cash position and financial condition will improve over time, if it does, we intend to take advantage of bulk purchasing opportunities
at discounted rates. More generally, we anticipate our cost of sales to increase in the future in relation to anticipated increases
in our overall Company revenues.
Sales,
General and Administrative
| |
| | |
| | |
| | |
| | |
Change | |
Sales, General and Administrative Costs for Operations for Six Months Ended June 30, | |
2015 | | |
% to Sales | | |
2014 | | |
% to Sales | | |
$ | | |
% | |
Selected expenses: | |
| | |
| | |
| | |
| | |
| | |
| |
Advertising and direct marketing | |
$ | 5,466 | | |
| 7% | | |
$ | 13,564 | | |
| 20% | | |
$ | (8,098 | ) | |
| 60% | |
Total
sales and marketing | |
$ | 5,466 | | |
| 7% | | |
$ | 13,564 | | |
| 20% | | |
$ | (8,098 | ) | |
| 60% | |
Personnel costs | |
$ | 236,399 | | |
| 284% | | |
$ | 180,580 | | |
| 260% | | |
$ | 55,819 | | |
| 31% | |
Amortization and depreciation | |
| 32,486 | | |
| 39% | | |
| 21,578 | | |
| 31% | | |
| 10,908 | | |
| 51% | |
Legal | |
| 19,338 | | |
| 23% | | |
| 14,545 | | |
| 21% | | |
| 4,793 | | |
| 33% | |
Accounting | |
| 15,513 | | |
| 19% | | |
| 2,000 | | |
| 3% | | |
| 13,513 | | |
| 676% | |
Research and development | |
| 156,478 | | |
| 188% | | |
| 107,758 | | |
| 155% | | |
| 48,720 | | |
| 45% | |
Directors fees | |
| 18,000 | | |
| 22% | | |
| --- | | |
| 0% | | |
| 18,000 | | |
| 0% | |
Contract Services | |
| 60,500 | | |
| 73% | | |
| --- | | |
| 0% | | |
| 60,500 | | |
| 0% | |
Other general and administrative costs | |
| 102,034 | | |
| 122% | | |
| 266,204 | | |
| 383% | | |
| (164,170 | ) | |
| 62% | |
Total general and administrative | |
$ | 640,748 | | |
| 769% | | |
$ | 592,665 | | |
| 852% | | |
$ | 48,083 | | |
| 8% | |
Total sales, marketing, general and administrative | |
$ | 646,214 | | |
| 775% | | |
$ | 606,229 | | |
| 872% | | |
$ | 39,985 | | |
| 7% | |
| |
| | |
| | |
| | |
| | |
Change | |
Sales, General and Administrative Costs for Operations for Three Months Ended June 30, | |
2015 | | |
% to Sales | | |
2014 | | |
% to Sales | | |
$ | | |
% | |
Selected expenses: | |
| | |
| | |
| | |
| | |
| | |
| |
Advertising and direct marketing | |
$ | 2,907 | | |
| 7% | | |
$ | 10,103 | | |
| 64% | | |
$ | (7,196 | ) | |
| 71% | |
Total
sales and marketing | |
$ | 2,907 | | |
| 7% | | |
$ | 10,103 | | |
| 64% | | |
$ | (7,196 | ) | |
| 71% | |
Personnel costs | |
$ | 134,182 | | |
| 343% | | |
$ | 51,863 | | |
| 327% | | |
$ | 82,319 | | |
| 159% | |
Amortization and depreciation | |
| 16,243 | | |
| 42% | | |
| --- | | |
| 0% | | |
| 16,243 | | |
| 0% | |
Legal | |
| 6,243 | | |
| 16% | | |
| 5,366 | | |
| 34% | | |
| 877 | | |
| 16% | |
Accounting | |
| 13,063 | | |
| 33% | | |
| 2,000 | | |
| 13% | | |
| 11,063 | | |
| 553% | |
Research and development | |
| 53,785 | | |
| 138% | | |
| 1,843 | | |
| 12% | | |
| 51,942 | | |
| 2818% | |
Directors fees | |
| 9,000 | | |
| 23% | | |
| --- | | |
| 0% | | |
| 9,000 | | |
| 0% | |
Contract Services | |
| 32,000 | | |
| 82% | | |
| --- | | |
| 0% | | |
| 32,000 | | |
| 0% | |
Other general and administrative costs | |
| 50,319 | | |
| 129% | | |
| 139,559 | | |
| 879% | | |
| (89,240 | ) | |
| 64% | |
Total general and administrative | |
$ | 314,835 | | |
| 805% | | |
$ | 200,631 | | |
| 1263% | | |
$ | 114,204 | | |
| 57% | |
Total
sales, marketing, general and administrative | |
$ | 317,742 | | |
| 813% | | |
$ | 210,734 | | |
| 1327% | | |
$ | 107,008 | | |
| 51% | |
Our
research and development costs consist of direct production costs, including labor directly associated with the development of
projects and outside consultants, and indirect costs such as those associated with facilities use. For labor costs and costs of
outside consultants, we record the research and development costs as a reduction against either personnel costs or contract services.
For facilities leasing related expenses, we record the research and development costs as a reduction against rent. For
the six months ended June 30, 2015, we reclassified to research and development approximately $72,000 from total personnel costs,
approximately $16,000 from rent, and approximately $60,000 from total contract services.
The differing
results of total sales, marketing, general and administrative costs are primarily attributable to the following for the three
and six months ended June 30, 2015:
|
● |
a
decrease in advertising and direct marketing year over year as certain costs incurred
during the three and six months ended June 30, 2014 were non-recurring, non-capitalized expenses associated with the
development of our Company website; |
|
● |
an
overall increase in total personnel costs, before adjustments of reclassified wages for research and development, as our staff
and use of outside contractors increased based on operational growth; |
|
● |
an
increase in amortization and depreciation due to the continual amortization of our intangible assets; |
|
● |
an
increase in legal and accounting expenses due to the very significant changes in our operating business year over year, including
those associated with related disclosure obligations under our Exchange Act reporting requirements; |
|
● |
an
increase in research and development as we continue to explore new markets and test our products in different vertical
markets; |
|
● |
an
increase in directors fees attributable to the addition of an outside director on our board of directors; |
|
● |
an
increase in total contract services, before adjustments of reclassified contract services for research and development, as
we (i) engaged an outside contractor for certain business development services, and (ii) issued stock as compensation to three
consultants for their advisory services in connection with research and development and enhancement of sales opportunities;
and |
|
● |
a
decrease in our other general and administrative costs. |
For
the immediate future, and although there can be no assurance, we would anticipate our sales, marketing, general and administrative
costs to increase in the future in relation to anticipated increases in our overall Company revenues.
Gain
on Debt Settlement
For the
six months ended June 30, 2015, we recognized a gain on debt settlement in the amount of $200,000. This gain is a result of entering
into a loan modification agreement with a shareholder that had held an outstanding convertible note agreement in the amount of
$250,000 carrying a conversion feature that had the accounting effect of increasing the derivative liability associated with the
obligation from $250,000 to $500,000. The loan modification called for the original convertible note payable ($250,000), along
with the conversion feature ($250,000), dated July 2014 to be cancelled. In addition, the loan modification called for a replacement
note payable to be entered into at the adjusted principal amount of $300,000, total, but without any conversion feature exercisable
on the part of the holder. All other terms of the original note agreement remained unchanged. As a result, we recognized a net
gain of $200,000, and we have treated it as a gain from extinguishment of debt and included it in Gain on debt settlement on our
condensed consolidated Statement of Operations for the six months ended June 30, 2015.
Income
Taxes
For the
six months ended June 30, 2015 and 2014, based on uncertainty about the timing of and ability to generate future taxable income
and our assessment that the realization of the deferred tax assets no longer met the “more likely than not” criterion
for realization, we provided for a full valuation allowance against our net deferred tax assets. If we determine that it is more
likely than not that we will be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset
valuation allowance would be recorded in the period when such determination is made.
Liquidity
And Capital Resources
Our primary
needs for liquidity and capital resources are the working capital requirements of our continued operations, which includes the
ongoing internal development of new products, expansion and upgrade of existing products, and marketing and sales. Although cash
generated through our current operations may prove sufficient to sustain such operations, there can be no assurance of such a
result, and, in any event, our pursuit of an aggressive growth plan, as currently exists, will likely require funding from outside
sources. Funding from outside sources may include but is not limited to the pursuit of other financing options such as commercial
loans or public or private sales of securities, including common stock, preferred stock and/or convertible notes or debentures.
Working Capital | |
June
30,
2015 | | |
December 31, 2014 | |
Current assets | |
$ | 91,848 | | |
$ | 93,531 | |
Current liabilities | |
$ | 1,757,927 | | |
$ | 1,847,464 | |
Accumulated deficit | |
$ | 3,187,301 | | |
$ | 2,987,960 | |
Liquidity
for our day-to-day continuing operations remains a very serious ongoing concern for us, and there can be no continuing assurance
of it remaining manageable.
Cash Flows for Six Months Ended June 30, | |
2015 | | |
2014 | | |
Change | | |
% | |
Cash flows used in operating activities | |
$ | (336,088 | ) | |
$ | (552,100 | ) | |
$ | 216,012 | | |
| 39 | % |
Cash flows used in investing activities | |
$ | --- | | |
$ | --- | | |
$ | --- | | |
| 0 | % |
Cash flows provided by financing activities | |
$ | 347,500 | | |
$ | 552,100 | | |
$ | (204,600 | ) | |
| 37 | % |
Net cash
used in operating activities for the six months ended June 30, 2015 and 2014 consisted mainly of payments going out for accounts
payable items, accrued expenses and stock compensation.
The lack
of cash used in investing activities was primarily due to our not having made any capital investments during the six months ended
June 30, 2015.
For the
six months ended June 30, 2015, cash provided by financing activities was primarily the result of the sale of shares of our common
stock and convertible notes in exchange for cash.
Financing
Given practical
considerations, we believe that our ability to meaningfully pursue our business plan in the immediate term will depend on the
availability of cash, the precise amount of which is uncertain as the date of this quarterly filing on Form 10-Q given certain
variables surrounding our ability to generate funds internally, including through sales of product and/or territorial distributorships.
To the extent that it becomes necessary to access funds through a public or private sales of securities, as we currently anticipate,
this is likely to be pursued through an offering involving common stock, preferred stock and/or convertible notes or debentures.
In connection with any such contemplated financing, it may become necessary given market conditions and the unavailability of
alternative options for us to issue additional shares of our common stock or securities exchangeable for shares of our common
stock, including but not limited to convertible preferred stock or convertible notes or debentures containing so-called “floorless
convertible” provisions that can be, and often are, extremely dilutive to existing stockholders upon conversion. Any such
issuances, as well as any related issuances of common stock or other purchase warrants, would likely have the effect of depressing
the market price of our common stock and diluting the interests of our common stockholders, potentially very significantly.
Although
no attempt has been made for several years now due to management’s practical awareness that it would be unrealistic to obtain
it, we have been unable to secure any bank or other secured financing due to our revenue and cash flow levels, internal financial
ratios, and negative working capital position, and we do not expect that we will be successful in securing any such financing
if we were to recommence efforts to do so unless and until our revenues and cash flows become substantially higher, and our internal
financial ratios dramatically improve, something we believe to be unlikely absent the occurrence of a major business combination
and/or equity or equity-linked financing transaction.
Discontinued
Operations
On May 5,
2011, we entered into a Software Product Line Purchase Agreement to sell the QuickVerse® product line to WORDsearch.
On June 30, 2011, closing of the asset sale transaction governed by the Software Product Line Purchase Agreement, which was transitional
in nature and expected to be ongoing through approximately the end of April, 2012, commenced. As one of the initial parts of the
closing, on July 1, 2011 WORDsearch assumed possession of the physical assets conveyed in the transaction as well as control and
responsibility of the business operations related to the QuickVerse® product line, including, among many other
things, the receipt of revenues for sales in exchange for partial payment of the cash portion of the purchase price being paid
to us. On April 13, 2012, we determined that the final closing conditions under the Software Product Line Purchase Agreement had
been met, and the sale of the QuickVerse® product line to WORDsearch was complete. As a result, we have classified
this asset as discontinued operations for the six months ended June 30, 2015.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
Contractual
Obligations
As a “smaller
reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide this information.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller
reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide this information.
Item
4T. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
As required
by paragraph (b) of Rule 13a-15 under the Exchange Act, our principal executive and principal financial officers are responsible
for assessing the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(f) under the Exchange Act).
Accordingly, we maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our
filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms. Our Chief Executive Officer/Chief Financial Officer has evaluated
our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, and has determined
that such disclosure controls and procedures are not effective. Our disclosure controls and procedures are not effective as a
result of the material weakness in internal control over financial reporting because of inadequate segregation of duties over
authorization, review and recording of transactions as well as the financial reporting of such transactions. Management is attempting
to develop a plan to mitigate the above material weaknesses. Despite the existence of these material weaknesses, we believe the
financial information presented herein is materially correct and in accordance with generally accepted accounting principles.
Changes
in Internal Controls
There were
no changes in our internal control over financial reporting during the fiscal quarter covered by this report, other than those
disclosed above that materially affected, or is reasonable likely to materially effect, the Company’s internal control over
financial reporting.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
As of the
date of this quarterly report on Form 10-Q for the period ended June 30, 2015, and to the best knowledge of our officers and directors,
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.
ITEM
1A. RISK FACTORS.
As a “smaller
reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required
by this Item.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Date Securities Issued | |
Securities Title | |
Issued To | |
Number of Securities Issued | | |
Consideration | | |
Footnotes | |
Common Stock Issuances |
Sold for Cash |
4/21/2015 | |
Common Stock | |
Private Purchaser | |
| 500,000 | | |
$ | 5,000 | | |
| 1 | |
6/8/2015 | |
Common Stock | |
Private Purchaser | |
| 5,000,000 | | |
$ | 50,000 | | |
| 1 | |
6/22/2015 | |
Common Stock | |
Private Purchaser | |
| 2,500,000 | | |
$ | 25,000 | | |
| 1 | |
We relied in each case for these unregistered sales 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 acquirer’s 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
acquirer’s.
(1) These were sales made pursuant to private placement commenced as of
December 8, 2014 carrying a purchase price of $10,000 per unit, with each such unit consisting of 1,000,000 shares of common stock
(effectively priced at $0.01 per share) and a 1-year warrant to purchase an additional 100,000 shares of common stock at an exercise
price of $0.10 per share. The amount referenced in each case represents the amount allocated strictly to the common stock.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
For the
period ended June 30, 2015, we are in default under a certain unsecured term note payable to a former shareholder in the total
amount of approximately $42,000. The arrearage as of such date was $28,783, plus interest. In accordance with the terms of the
note, however, our default has triggered an acceleration of the entire balance plus accumulated interest.
ITEM
4. MINE SAFETY DISCLOSURES.
None.
ITEM
5. OTHER INFORMATION.
As of the
date of this quarterly report on Form 10-Q for the period ended June 30, 2015, there were no reportable events under this Item
5.
ITem
6. Exhibits.
Exhibits
required by Item 601 of Regulation S-K.
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. |
|
|
|
2.2 |
|
Agreement
and Plan of Merger by and among Findex.com, Inc., EcoSmart Acquisition Corp. EcoSmart Surface & Coating Technologies,
Inc., and The Renewable Corp. dated July 23, 2014, incorporated by reference to Exhibit 2.1 on Form 8-K filed July 29, 2014. |
|
|
|
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. |
|
|
|
4.1 |
|
Certificate
of Designation of FIND Series MX Convertible Preferred Stock dated June 30, 2014, incorporated by reference to Exhibit 4.1
on Form 8-K filed July 29, 2014. |
|
|
|
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. |
No. |
|
Description
of Exhibit |
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. |
|
|
|
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. |
|
|
|
10.24 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and Steven Malone dated April 13, 2007, incorporated by reference to
Exhibit 10.24 on Form 10-KSB filed April 17, 2007. |
|
|
|
10.25 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and William Terrill dated April 13, 2007, incorporated by reference
to Exhibit 10.25 on Form 10-KSB filed April 17, 2007. |
|
|
|
10.26 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and Kirk R. Rowland dated April 13, 2007, incorporated by reference
to Exhibit 10.26 on Form 10-KSB filed April 17, 2007. |
|
|
|
10.27 |
|
Asset
Purchase Agreement between Findex.com, Inc. and ACS Technologies Group, Inc. dated October 18, 2007, incorporated by reference
to Exhibit 10.27 on Form 8-K filed October 24, 2007. |
|
|
|
10.28 |
|
Partial
Assignment of License Agreement Among Findex.com, Inc., Riverdeep, Inc.,LLC and ACS Technologies Group, Inc. dated October
11, 2007, incorporated by reference to Exhibit 10.28 on Form 8-K filed October 24, 2007. |
No. |
|
Description
of Exhibit |
10.29 |
|
Asset
Purchase Agreement between Findex.com, Inc. and ORG Professional, LLC dated February 25, 2008, incorporated by reference to
Exhibit 10.29 on Form 8-K filed on February 28, 2008. |
|
|
|
10.30 |
|
Warrant
Cancellation Agreement between Findex.com, Inc. and Barron Partners, L.P. dated March 6, 2008, incorporated by reference to
Exhibit 10.30 on Form 8-K filed on March 10, 2008. |
|
|
|
10.31 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and Steven Malone dated April 14, 2008, incorporated by reference to
Exhibit 10.31 on Form 10-KSB filed on April 15, 2008. |
|
|
|
10.32 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and William Terrill dated April 14, 2008, incorporated by reference
to Exhibit 10.32 on Form 10-KSB filed on April 15, 2008. |
|
|
|
10.33 |
|
Employment
Agreement Extension Amendment between Findex.com, Inc. and Kirk R. Rowland dated April 14, 2008, incorporated by reference
to Exhibit 10.33 on Form 10-KSB filed on April 15, 2008. |
|
|
|
10.34 |
|
License
Agreement between Findex.com, Inc. and Houghton Mifflin Harcourt Publishing Company dated May 7, 2010, incorporated by reference
to Exhibit 10.34 on Form 10-K filed on April 15, 2012. |
|
|
|
10.35 |
|
Software
Product Line Purchase Agreement between FindEx.com, Inc. and WORDsearch Corp., L.L.C. dated May 5, 2011, incorporated by reference
to Exhibit 10.35 on Form 8-K filed on May 10, 2011. |
|
|
|
10.36 |
|
Promissory
Note to Barron Partners, LP dated August 18, 2011, incorporated by reference to Exhibit 10.36 on Form 10-Q filed on August 22, 2011. |
|
|
|
10.37 |
|
Letter
of Intent between Findex.com, Inc. and Next Level Hockey, LLC dated June 6, 2013, incorporated by reference to Exhibit 10.37
on Form 8-K filed on June 7, 2013. |
|
|
|
10.38 |
|
Binding
Letter of Intent between Findex.com, Inc. and the Renewable Corporation dated October 29, 2013, incorporated by reference
to Exhibit 10.38 on Form 8-K filed on November 4, 2013. |
|
|
|
10.39 |
|
Agreement
and Plan of Merger among FindEx.com, Inc., certain of its affiliated stockholders, ESCT Acquisition Corp., The Renewable Corporation,
and EcoSmart Surface and Coating Technologies, Inc. dated January 23, 2014, exclusive of schedules and exhibits other than
exhibit forms of Employment Agreements to be entered into between Findex.com, Inc. and each of Joseph Alvarez and Steven Malone,
incorporated by reference to Exhibit 10.39 on Form 8-K filed on January 29, 2014. |
|
|
|
10.40 |
|
Voting
Agreement between EcoSmart Surface and Coating Technologies, Inc. and each of three individual stockholders of Findex.com,
Inc. dated January 23, 2014, incorporated by reference to Exhibit 10.40 on Form 8-K filed on January 29, 2014. |
|
|
|
10.41 |
|
Employment
Agreement by and among Findex.com, Inc., EcoSmart Acquisition Corp., and Steven Malone dated July 23, 2014, incorporated by
reference to Exhibit 10.1 on Form 8-K filed July 29, 2014. |
|
|
|
10.42 |
|
Demand
Promissory Note dated August 3, 2013, incorporated by reference to Exhibit 10.2 on Form 8-K filed on July 29, 2014. |
|
|
|
10.43 |
|
The
Loan Modification and Loan Assumption Acknowledgment dated July 23, 2014, incorporated by reference to Exhibit 10.3 on Form
8-K filed on July 20, 2014. |
|
|
|
10.44 |
|
Convertible
Promissory Note dated July 23, 2014, incorporated by reference to Exhibit 10.4 on Form 8-K filed on July 29, 2014. |
|
|
|
10.45 |
|
Employment
Agreement by and among Findex.com, Inc., EcoSmart Acquisition Corp., and Bo Inge Hakan Gimvang dated March 3, 2015, incorporated
by reference to Exhibit 10.45 on Form 10-K filed on April 15, 2015. |
|
|
|
10.46 |
|
Loan
Modification Agreement and Promissory Note dated March 2, 2015, incorporated by reference to Exhibit 10.46 on Form 10-K filed
on April 15, 2015. |
|
|
|
31.1 |
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and dated
August 19, 2015. FILED HEREWITH. |
|
|
|
32.1 |
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and dated
August 19, 2015. FILED HEREWITH. |
Signatures
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
FINDEX.COM, INC. |
|
|
|
Date:
August 19, 2015 |
By |
/s/
Steven Malone |
|
|
Steven
Malone |
|
|
President |
|
|
Chief
Executive Officer (Principal Executive Officer) |
|
|
Chief
Financial Officer (Principal Accounting Officer) |
12
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
I, Steven Malone, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Findex.com, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Dated: August 19, 2015 |
By: |
/s/ Steven Malone |
|
|
Steven Malone |
|
|
President |
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
Chief Financial Officer (Principal Accounting Officer) |
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, Steven Malone, the President, Chief Executive Officer and Chief Financial Officer
of FindEx.com, Inc., certifies, to his knowledge, that:
| (1) | The
Quarterly Report on Form 10-Q for the period ending June 30, 2015of FindEx.com, Inc.
(the “Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and |
| (2) | The
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of FindEx.com, Inc. |
Dated: August
19, 2015
|
By: |
/s/
Steven Malone |
|
|
Steven
Malone |
|
|
President |
|
|
Chief
Executive Officer (Principal Executive Officer) |
|
|
Chief
Financial Officer (Principal Accounting Officer) |
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