FindEx.com, Inc. Form 10-QSB June 30, 2005
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
quarterly period ended June 30, 2005.
[_]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
For
the
transition period from ________ to _________.
Commission
File Number: 0-29963
FINDEX.COM,
INC.
(Exact
name of small business issuer as specified in its charter)
Nevada
|
88-0379462
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
|
|
11204
Davenport Street, Suite 100, Omaha, Nebraska 68154
|
(Address
of principal executive offices)
|
(402)
333-1900
(Issuer’s
telephone number)
NA.
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the issuer: (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
[X] No [_]
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS
Check
whether the registrant filed all documents and reports required to be filed
by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes
[_] No [_]
APPLICABLE
ONLY TO CORPORATE ISSUERS
State
the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 48,619,855 common shares as of August 19,
2005.
Transitional
Small Business Disclosure Format (Check one): Yes
[_] No [X]
|
|
|
Page
Number
|
|
|
|
|
|
F-1
|
|
1
|
|
10
|
|
|
|
|
|
|
|
11
|
|
11
|
|
11
|
|
11
|
|
11
|
|
11
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
(Unaudited)
|
|
|
|
|
June
30, 2005
|
|
Assets
|
Current
assets:
|
Cash
and cash equivalents
|
|
$
|
95,941
|
|
Accounts
receivable, trade
|
|
|
617,692
|
|
Inventory
|
|
|
225,887
|
|
Other
current assets
|
|
|
359,461
|
|
Total
current assets
|
|
|
1,298,981
|
|
Property
and equipment, net
|
|
|
134,350
|
|
Software
license, net
|
|
|
2,014,030
|
|
Capitalized
software development costs, net
|
|
|
931,103
|
|
Other
assets
|
|
|
532,072
|
|
Total
assets
|
|
$
|
4,910,536
|
|
|
Liabilities
and stockholders’ equity
|
Current
liabilities:
|
Accounts
payable, trade
|
|
$
|
650,984
|
|
Accrued
royalties
|
|
|
304,752
|
|
Other
current liabilities
|
|
|
495,573
|
|
Total
current liabilities
|
|
|
1,451,309
|
|
Long-term
obligations
|
|
|
179,317
|
|
Commitments
and contingencies
|
Stockholders’
equity:
|
Common
stock
|
|
|
48,620
|
|
Paid-in
capital
|
|
|
9,198,417
|
|
Retained
(deficit)
|
|
|
(5,967,127
|
)
|
Total
stockholders’ equity
|
|
|
3,279,910
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
4,910,536
|
|
|
See
accompanying notes.
|
Findex.com,
Inc.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
|
Revenues,
net of reserves and allowances
|
|
$
|
1,276,996
|
|
$
|
1,211,722
|
|
$
|
2,954,410
|
|
$ |
2,778,115
|
|
Cost
of sales
|
|
|
450,993
|
|
|
271,410
|
|
|
959,778
|
|
|
740,069
|
|
Gross
profit
|
|
|
826,003
|
|
|
940,312
|
|
|
1,994,632
|
|
|
2,038,046
|
|
Operating
expenses:
|
Sales
and marketing
|
|
|
307,521
|
|
|
267,902
|
|
|
734,968
|
|
|
510,501
|
|
General
and administrative
|
|
|
690,078
|
|
|
615,895
|
|
|
1,325,796
|
|
|
1,171,574
|
|
Bad
debt expense
|
|
|
22,016
|
|
|
---
|
|
|
22,669
|
|
|
2,500
|
|
Depreciation
and amortization
|
|
|
145,780
|
|
|
139,187
|
|
|
291,548
|
|
|
274,639
|
|
Total
operating expenses
|
|
|
1,165,395
|
|
|
1,022,984
|
|
|
2,374,981
|
|
|
1,959,214
|
|
Income
(loss) from operations
|
|
|
(339,392
|
)
|
|
(82,672
|
)
|
|
(380,349
|
)
|
|
78,832
|
|
Other
expenses, net
|
|
|
(2,920
|
)
|
|
(16,188
|
)
|
|
(6,775
|
)
|
|
(30,518
|
)
|
Income
(loss) before income taxes
|
|
|
(342,312
|
)
|
|
(98,860
|
)
|
|
(387,124
|
)
|
|
48,314
|
|
Provision
for income taxes
|
|
|
149,669
|
|
|
(31,011
|
)
|
|
299,158
|
|
|
(61,322
|
)
|
Net
loss
|
|
$
|
(192,643
|
)
|
$
|
(129,871
|
)
|
|
(87,966
|
)
|
|
(13,008
|
)
|
Retained
deficit at beginning of year
|
|
(5,879,161
|
)
|
|
(7,255,023
|
)
|
Retained
deficit at end of period
|
|
|
$
|
(5,967,127
|
)
|
$
|
(7,268,031
|
)
|
|
|
Net
earnings per share:
|
Basic
|
|
$
|
---
|
|
$
|
(0.01
|
)
|
$
|
---
|
|
$
|
---
|
|
Diluted
|
|
$
|
---
|
|
$
|
(0.01
|
)
|
$
|
---
|
|
$
|
---
|
|
|
Weighted
average shares outstanding:
|
Basic
|
|
|
48,619,855
|
|
|
23,276,312
|
|
|
48,619,855
|
|
|
22,143,875
|
|
Diluted
|
|
|
48,619,855
|
|
|
23,276,312
|
|
|
48,619,855
|
|
|
22,143,875
|
|
|
See
accompanying notes.
|
Findex.com,
Inc.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
Six
Months Ended June 30
|
|
|
2005
|
|
|
2004
|
|
|
Cash
flows from operating activities:
|
Cash
received from customers
|
|
$
|
2,887,090
|
|
$
|
2,687,874
|
|
Cash
paid to suppliers and employees
|
|
|
(2,531,135
|
)
|
|
(2,691,400
|
)
|
Other
operating activities, net
|
|
|
1,323
|
|
|
205,739
|
|
Net
cash provided by operating activities
|
|
|
357,278
|
|
|
202,213
|
|
Cash
flows from investing activities:
|
Software
development costs
|
|
|
(594,161
|
)
|
|
(178,049
|
)
|
Other
investing activities, net
|
|
|
20,000
|
|
|
(50,933
|
)
|
Net
cash (used) by investing activities
|
|
|
(574,161
|
)
|
|
(228,982
|
)
|
Cash
flows from financing activities:
|
Payments
on line of credit, net
|
|
|
---
|
|
|
(2,999
|
)
|
Payments
made on long-term notes payable
|
|
|
(28,535
|
)
|
|
(50,890
|
)
|
Net
cash (used) by financing activities
|
|
|
(28,535
|
)
|
|
(53,889
|
)
|
Net
(decrease) in cash and cash equivalents
|
|
|
(245,418
|
)
|
|
(80,658
|
)
|
Cash
and cash equivalents, beginning of year
|
|
|
341,359
|
|
|
142,022
|
|
Cash
and cash equivalents, end of period
|
|
$
|
95,941
|
|
$
|
61,364
|
|
|
Reconciliation
of net loss to cash flows from operating activities:
|
Net
loss
|
|
$
|
(87,966
|
)
|
$
|
(13,008
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
provided
by operating activities:
|
|
|
Software
development costs amortized
|
|
|
364,347
|
|
|
258,258
|
|
Stock
and warrants issued for services
|
|
|
---
|
|
|
44,186
|
|
Rebate
reserve adjustment
|
|
|
---
|
|
|
(266,301
|
)
|
Provision
for bad debts
|
|
|
22,669
|
|
|
2,500
|
|
Depreciation
& amortization
|
|
|
291,548
|
|
|
274,639
|
|
Loss
on disposal of property, plant and equipment
|
|
|
1,869
|
|
|
---
|
|
Change
in assets and liabilities:
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(73,542
|
)
|
|
180,062
|
|
Decrease
in inventories
|
|
|
8,113
|
|
|
110,697
|
|
Decrease
in refundable taxes
|
|
|
7,164
|
|
|
---
|
|
(Increase)
decrease in prepaid expenses
|
|
|
30,177
|
|
|
(75,406
|
)
|
Increase
(decrease) in accrued royalties
|
|
|
17,238
|
|
|
(204,937
|
)
|
Increase
(decrease) in accounts payable
|
|
|
29,180
|
|
|
(174,711
|
)
|
Increase
in income taxes payable
|
|
|
180
|
|
|
700
|
|
Increase
(decrease) in deferred taxes
|
|
|
(299,338
|
)
|
|
60,625
|
|
Increase
in other liabilities
|
|
|
45,639
|
|
|
4,909
|
|
Net
cash provided by operating activities
|
|
$
|
357,278
|
|
$
|
202,213
|
|
|
See
accompanying notes.
|
Findex.com,
Inc.
Notes
to Condensed Consolidated Financial Statements
June
30, 2005
(Unaudited)
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS
OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles for interim
financial information and with the instructions to Form 10-QSB and Item 310
of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by Generally Accepted Accounting Principles for complete
financial statements. The accompanying unaudited condensed consolidated
financial statements reflect all adjustments that, in the opinion of management,
are considered necessary for a fair presentation of the financial position,
results of operations, and cash flows for the periods presented. The results
of
operations for such periods are not necessarily indicative of the results
expected for the full fiscal year or for any future period. The accompanying
financial statements should be read in conjunction with the audited consolidated
financial statements of Findex.com, Inc. included in our Form 10-KSB/A for
the
fiscal year ended December 31, 2004.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the
accompanying notes. Significant estimates used in the consolidated financial
statements include the estimates of (i) doubtful accounts, sales returns, price
protection and rebates, (ii) provision for income taxes and realizability of
the
deferred tax assets, (iii) the life and realization of identifiable intangible
assets, and (iv) provisions for obsolete inventory. The amounts we will
ultimately incur or recover could differ materially from current
estimates.
INVENTORY
Inventory,
including out on consignment, consists primarily of software media, manuals
and
related packaging materials and is recorded at the lower of cost or market
value, determined on a first-in, first-out, and adjusted on a per-item, basis.
ACCOUNTING
FOR LONG-LIVED ASSETS
We
review
property and equipment and intangible assets for impairment whenever events
or
changes in circumstances indicate that the carrying amount of an asset may
not
be recoverable. Recoverability is measured by comparison of our carrying amount
to future net cash flows the assets are expected to generate. If such assets
are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair market value.
Property and equipment to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
INTANGIBLE
ASSETS
In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,
Goodwill
and Other Intangible Assets,
intangible assets with an indefinite useful life are not amortized. Intangible
assets with a finite useful life are amortized on the straight-line method
over
the estimated useful lives. The software license is amortized over a 10 year
useful life.
SOFTWARE
DEVELOPMENT COSTS
In
accordance with SFAS No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed,
software development costs are expensed as incurred until technological
feasibility and marketability has been established, generally with release
of a
beta version for customer testing. Once the point of technological feasibility
and marketability is reached, direct production costs (including labor directly
associated with the development projects), indirect costs (including allocated
fringe benefits, payroll taxes, facilities costs, and management supervision),
and other direct costs (including costs of outside consultants, purchased
software to be included in the software product being developed, travel
expenses, material and supplies, and other direct costs) are capitalized until
the product is available for general release to customers. We amortize
capitalized costs on a product-by-product basis. Amortization for each period
is
the greater of the amount computed using (i) the straight-line basis over the
estimated product life (generally from 12 to 18 months), or (ii) the ratio
of
current revenues to total projected product revenues. Total cumulative
capitalized software development costs were $2,342,895, less accumulated
amortization of $1,411,792 at June 30, 2005.
Capitalized
software development costs are stated at the lower of amortized costs or net
realizable value. Recoverability of these capitalized costs is determined at
each balance sheet date by comparing the forecasted future revenues from the
related products, based on management’s best estimates using appropriate
assumptions and projections at the time, to the carrying amount of the
capitalized software development costs. If the carrying value is determined
not
to be recoverable from future revenues, an impairment loss is recognized equal
to the amount by which the carrying amount exceeds the future revenues. To
date,
no capitalized costs have been written down to net realizable
value.
SFAS
No.
2, Accounting
for Research and Development Costs,
established accounting and reporting standards for research and development.
In
accordance with SFAS No. 2, costs we incur to enhance our existing products
after general release to the public (bug fixes) are expensed in the period
they
are incurred and included in research and development costs. Research and
development costs incurred prior to determination of technological feasibility
and marketability and after general release to the public and charged to expense
were $67,243 and $43,696 for the six months ended June 30, 2005 and 2004
respectively.
We
capitalize costs related to the development of computer software developed
or
obtained for internal use in accordance with the American Institute of Certified
Public Accountants Statement of Position (“SOP”) 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use.
Software obtained for internal use has generally been enterprise level business
and finance software that we customize to meet our specific operational needs.
We have not sold, leased, or licensed software developed for internal use to
our
customers and have no intention of doing so in the future.
We
capitalize costs related to the development and maintenance of our Website
in
accordance with Financial Accounting Standard Board’s (“FASB’s”) Emerging Issues
Task Force (“EITF”) Issue No. 00-2, Accounting
for Website Development Costs.
Under
EITF Issue No. 00-2, costs expensed as incurred are as follows:
|
§
|
planning
the Website,
|
|
§
|
developing
the applications and infrastructure until technological feasibility
is
established,
|
|
§
|
developing
graphics such as borders, background and text colors, fonts, frames,
and
buttons, and
|
|
§
|
operating
the site such as training, administration and
maintenance.
|
Capitalized
costs include those incurred to:
|
§
|
obtain
and register an Internet domain name,
|
|
§
|
develop
or acquire software tools necessary for the development
work,
|
|
§
|
develop
or acquire software necessary for general Website
operations,
|
|
§
|
develop
or acquire code for web applications,
|
|
§
|
develop
or acquire (and customize) database software and software to integrate
applications such as corporate databases and accounting systems into
web
applications,
|
|
§
|
develop
HTML web pages or templates,
|
|
§
|
install
developed applications on the web server,
|
|
§
|
create
initial hypertext links to other Websites or other locations within
the
Website, and
|
|
§
|
test
the Website applications.
|
We
amortize Website development costs on a straight-line basis over the estimated
life of the site, generally 36 months. Total cumulative Website development
costs, included in other assets on our condensed consolidated balance sheets,
were $98,309, less accumulated amortization of $32,803 at June 30,
2005.
NET
REVENUE
We
derive
revenues from the sale of packaged software products, product support and
multiple element arrangements that may include any combination of these items.
We recognize software revenue for software products and related services in
accordance with SOP 97-2, Software
Revenue Recognition,
as
modified by SOP 98-9,
Modification of SOP 97-2, With Respect to Certain Transactions.
We
recognize revenue when persuasive evidence of an arrangement exists (generally
a
purchase order), we have delivered the product, the fee is fixed or determinable
and collectibility is probable.
In
some
situations, we receive advance payments from our customers. We defer revenue
associated with these advance payments until we ship the products or offer
the
support.
In
accordance with EITF Issue No. 01-9, Accounting
for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s
Product,
we
generally account for cash considerations (such as sales incentives - rebates
and coupons) that we give to our customers as a reduction of revenue rather
than
as an operating expense.
Product
Revenue
We
typically recognize revenue from the sale of our packaged software products
when
we ship the product. We sell some of our products on consignment to a limited
number of resellers. We recognize revenue for these consignment transactions
only when the end-user sale has occurred. Revenue for software distributed
electronically via the Internet is recognized when the customer has been
provided with the access codes that allow the customer to take immediate
possession of the software on its hardware and evidence of the arrangement
exists (web order).
Some
of
our software arrangements involve multiple copies or licenses of the same
program. These arrangements generally specify the number of simultaneous users
the customer may have (multi-user license), or may allow the customer to use
as
many copies on as many computers as it chooses (a site license). Multi-user
arrangements, generally sold in networked environments, contain fees that vary
based on the number of users that may utilize the software simultaneously.
We
recognize revenue when evidence of an order exists and upon delivery of the
authorization code to the consumer that will allow them the limited simultaneous
access. Site licenses, generally sold in non-networked environments, contain
a
fixed fee that is not dependent on the number of simultaneous users. Revenue
is
recognized when evidence of an order exists and the first copy is delivered
to
the consumer.
Many
of
our software products contain additional content that is “locked” to prevent
access until a permanent access code, or “key,” is purchased. We recognize
revenue when evidence of an order exists and the customer has been provided
with
the access code that allows the customer immediate access to the additional
content. All of the programs containing additional locked content are fully
functional and the keys are necessary only to access the additional content.
The
customer’s obligation to pay for the software is not contingent on delivery of
the “key” to access the additional content.
We
reduce
product revenue for estimated returns and price protections that are based
on
historical experience and other factors such as the volume and price mix of
products in the retail channel, trends in retailer inventory and economic trends
that might impact customer demand for our products. We also reduce product
revenue for the estimated redemption of end-user rebates on certain current
product sales. Our rebate reserves are estimated based on the terms and
conditions of the specific promotional rebate program, actual sales during
the
promotion, the amount of redemptions received and historical redemption trends
by product and by type of promotional program. We did not offer any rebate
programs to our customers during the six months ended June 30, 2005 and 2004
and
maintain a reserve for rebate claims remaining unpaid from 2000.
Service
Revenue
We
offer
several technical support plans and recognize support revenue over the life
of
the plans, generally one year.
Multiple
Element Arrangements
We
also
enter into certain revenue arrangements for which we are obligated to deliver
multiple products or products and services (multiple elements). For these
arrangements, which include software products, we allocate and defer revenue
for
the undelivered elements based on their vendor-specific objective evidence
(“VSOE”) of fair value. VSOE is generally the price charged when that element is
sold separately.
In
situations where VSOE exists for all elements (delivered and undelivered),
we
allocate the total revenue to be earned under the arrangement among the various
elements, based on their relative fair value. For transactions where VSOE exists
only for the undelivered elements, we defer the full fair value of the
undelivered elements and recognize the difference between the total arrangement
fee and the amount deferred for the undelivered items as revenue (residual
method). If VSOE does not exist for undelivered items that are services, we
recognize the entire arrangement fee ratably over the remaining service period.
If VSOE does not exist for undelivered elements that are specified products,
we
defer revenue until the earlier of the delivery of all elements or the point
at
which we determine VSOE for these undelivered elements.
We
recognize revenue related to the delivered products or services only if (i)
the
above revenue recognition criteria are met, (ii) any undelivered products or
services are not essential to the functionality of the delivered products and
services, (iii) payment for the delivered products or services is not contingent
upon delivery of the remaining products or services, and (iv) we have an
enforceable claim to receive the amount due in the event that we do not deliver
the undelivered products or services.
Shipping
and Handling Costs
We
record
the amounts we charge our customers for the shipping and handling of our
software products as product revenue and we record the related costs as cost
of
sales on our condensed consolidated statements of operations.
Customer
Service and Technical Support
Customer
service and technical support costs include the costs associated with performing
order processing, answering customer inquiries by telephone and through
Websites, e-mail and other electronic means, and providing technical support
assistance to our customers. In connection with the sale of certain products,
we
provide a limited amount of free technical support assistance to customers.
We
do not defer the recognition of any revenue associated with sales of these
products, since the cost of providing this free technical support is
insignificant. The technical support is provided within one year after the
associated revenue is recognized and free product enhancements (bug fixes)
are
minimal and infrequent. We accrue the estimated cost of providing this free
support upon product shipment and include it in cost of sales.
INCOME
TAXES
We
utilize SFAS No. 109, Accounting
for Income Taxes.
SFAS
No. 109 requires the use of the asset and liability method of accounting for
income taxes. Under this method, deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis
of
our assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.
EARNINGS
PER SHARE
We
follow
SFAS No. 128, Earnings
Per Share,
to
calculate and report basic and diluted earnings per share (“EPS”). Basic EPS is
computed by dividing income available to common shareholders by the weighted
average number of shares of common stock outstanding for the period. Diluted
EPS
is computed by giving effect to all dilutive potential shares of common stock
that were outstanding during the period. For us, dilutive potential shares
of
common stock consist of the incremental shares of common stock issuable upon
the
exercise of stock options and warrants for all periods, convertible notes
payable and the incremental shares of common stock issuable upon the conversion
of convertible preferred stock.
When
discontinued operations, extraordinary items, and/or the cumulative effect
of an
accounting change are present, income before any of such items on a per share
basis represents the “control number” in determining whether potential shares of
common stock are dilutive or anti-dilutive. Thus, the same number of potential
shares of common stock used in computing diluted EPS for income from continuing
operations is used in calculating all other reported diluted EPS amounts. In
the
case of a net loss, it is assumed that no incremental shares would be issued
because they would be anti-dilutive. In addition, certain options and warrants
are considered anti-dilutive because the exercise prices were above the average
market price during the period. Anti-dilutive shares are not included in the
computation of diluted EPS, in accordance with SFAS No. 128.
RECLASSIFICATIONS
Certain
accounts in the 2004 financial statements have been reclassified for comparative
purposes to conform with the presentation in the 2005 financial
statements.
NOTE
2 - INVENTORIES
At
June
30, 2005, inventories consisted of the following:
Raw
materials
|
|
$
|
138,587
|
|
Finished
goods
|
|
|
87,300
|
|
Inventories
|
|
$
|
225,887
|
|
During
the six months ended June 30, 2004, we wrote-off obsolete inventory with a
carried cost totaling $32,396. This has been included in cost of sales for
2004.
NOTE
3 - INCOME TAXES
The
provision (benefit) for taxes on net income for the three and six months ended
June 30, 2005 and 2004 consisted of the following:
|
|
Three
months ended June 30
|
|
Six
months ended June 30
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
|
Current:
|
Federal
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
$
|
---
|
|
State
|
|
|
---
|
|
|
700
|
|
|
180
|
|
|
700
|
|
|
|
|
---
|
|
|
700
|
|
|
180
|
|
|
700
|
|
Deferred:
|
Federal
|
|
|
(141,093
|
)
|
|
25,001
|
|
|
(282,186
|
)
|
|
50,002
|
|
State
|
|
|
(8,576
|
)
|
|
5,310
|
|
|
(17,152
|
)
|
|
10,620
|
|
|
|
|
(149,669
|
)
|
|
30,311
|
|
|
(299,338
|
)
|
|
60,622
|
|
Total
tax provision (benefit)
|
|
|
($149,669
|
)
|
$
|
31,011
|
|
|
($299,158
|
)
|
$
|
61,322
|
|
NOTE
4 - EARNINGS PER COMMON SHARE
Earnings
per common share are computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the year. Common stock equivalents are the net additional number of shares
that
would be issuable upon the exercise of the outstanding common stock options
and
warrants, assuming that we reinvested the proceeds to purchase additional shares
at market value.
The
following table shows the amounts used in computing earnings per common share
and the effect on income and the average number of shares of dilutive potential
common stock:
For
the Three Months Ended June 30
|
|
2005
|
|
2004
|
|
|
Net
Income
|
|
$ |
(192,643
|
)
|
$ |
(129,871
|
)
|
Preferred
stock dividends
|
|
|
---
|
|
|
---
|
|
Net
income available to common shareholders
|
|
$ |
(192,643
|
)
|
$ |
(129,871
|
)
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
48,619,855
|
|
|
23,276,312
|
|
Dilutive
effect of:
|
Stock
options
|
|
|
---
|
|
|
---
|
|
Convertible
notes payable
|
|
|
---
|
|
|
---
|
|
Convertible
Preferred Series A
|
|
|
---
|
|
|
---
|
|
Convertible
Preferred Series B
|
|
|
---
|
|
|
---
|
|
Warrants
|
|
|
---
|
|
|
---
|
|
Diluted
weighted average shares outstanding
|
|
|
48,619,855
|
|
|
23,276,312
|
|
For
the Six Months Ended June 30
|
|
|
2005
|
|
|
2004
|
|
|
Net
Income
|
|
$ |
(87,966
|
)
|
$ |
(13,008
|
)
|
Preferred
stock dividends
|
|
|
---
|
|
|
---
|
|
Net
income available to common shareholders
|
|
$ |
(87,966
|
)
|
$ |
(13,008
|
)
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
48,619,855
|
|
|
22,143,875
|
|
Dilutive
effect of:
|
Stock
options
|
|
|
---
|
|
|
---
|
|
Convertible
notes payable
|
|
|
---
|
|
|
---
|
|
Convertible
Preferred Series A
|
|
|
---
|
|
|
---
|
|
Convertible
Preferred Series B
|
|
|
---
|
|
|
---
|
|
Warrants
|
|
|
---
|
|
|
---
|
|
Diluted
weighted average shares outstanding
|
|
|
48,619,855
|
|
|
22,143,875
|
|
A
total
of 25,585,000 and 5,008,892 dilutive potential securities for the three and
six
months ended June 30, 2005 and 2004, respectively, have been excluded from
the
computation of diluted earnings per common share, as their inclusion would
be
anti-dilutive.
NOTE 5
- COMMITMENTS AND CONTINGENCIES
We
are
subject to legal proceedings and claims that arise in the ordinary course of
our
business. In the opinion of management, the amount of ultimate liability with
respect to these actions will not materially affect our financial
position.
Our
employment agreements with our management team each contain a provision for
an
annual bonus equal to 1% of our net income (3% total). We accrue this bonus
on a
quarterly basis.
In
2004,
we reduced our reserve for rebates payable based, in part, on our ability to
meet the financial obligation of claims carried forward from our last rebate
program in 2001. As such, we may have a legal obligation to pay rebates in
excess of the liability recorded.
As
part
of the July 2004 financing transaction, we entered into a certain Registration
Rights Agreement with a New York based private investment partnership pursuant
to which we committed to registering all of the shares issued as part of such
transaction, including those issuable under each of the two warrants. Under
the
terms of the Registration Rights Agreement, as amended, we had until November
12, 2004 to file a registration statement covering the shares already issued
in
the transaction, and we had another 150 days thereafter to have caused such
registration statement to become effective. Upon receipt of the requisite
stockholder approval to increase the number of authorized common shares so
as to
be able to deliver the warrants, which was effectively obtained as of November
10, 2004 (and which increase was effectuated on November 10, 2004), we had
30
days in which to file a registration statement covering such shares (which
was
filed November 22, 2004), and another 150 days thereafter to cause such
registration statement to become effective. Any delays in meeting these
obligations results in our being liable to the New York based private investment
partnership in an amount equal to $630,000 per year, pro-rated as appropriate
for the duration of any such delay.
NOTE 6
- RISKS AND UNCERTAINTIES
Our
future operating results may be affected by a number of factors. We depend
upon
a number of major inventory and intellectual property suppliers. If a critical
supplier had operational problems or ceased making material available to us,
operations could be adversely affected.
NOTE 7
- SUBSEQUENT EVENTS
As
of
August 19, 2005, the registration statement filed on November 22, 2004 had
not
yet been declared effective. Pursuant to a verbal agreement reached with the
New
York based private investment partnership in relation to the associated accruing
penalties, we have agreed to cap the penalties and to pay the New York based
private investment partnership an amount in cash that is yet to be determined.
Although there can be no assurance, management is hopeful that we will cause
the
registration statement to be declared effective by September 30, 2005. If we
are
unsuccessful in causing the registration statement to be declared effective
by
the Securities and Exchange Commission (“SEC”) by September 30, 2005, however,
and depending on how long any such delay in causing effectiveness to be declared
by the SEC continues thereafter, it is likely to have a very material adverse
effect on our business, our
financial condition, including liquidity and profitability, and our results
of
operations.
Cautionary
Statement Regarding Forward-Looking Statements
This
Form 10-QSB, press releases and certain information provided periodically
in
writing or orally by our officers or our agents contain statements which
constitute forward-looking statements. The words “may”, “would”, “could”,
“will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”
and similar expressions and variations thereof are intended to specifically
identify forward-looking statements. These statements appear in a number
of
places in this Form 10-QSB and include all statements that are not statements
of
historical fact regarding the intent, belief or current expectations of us,
our
directors or our officers, with respect to, among other things (i) our liquidity
and capital resources, (ii) our financing opportunities and plans, (iii)
our
ability to attract customers to generate revenues, (iv) market and other
trends
affecting our future financial condition or results of operations, (v) our
growth strategy and operating strategy, and (vi) the declaration and/or payment
of dividends.
Investors
and prospective investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. The factors that
might cause such differences include, among others, those set forth in Part
I,
Item 2 of this quarterly report on Form 10-QSB, entitled Management’s Discussion
and Analysis of Financial Condition and Results of Operations, including
without
limitation the risk factors contained in the company’s annual report on Form
10-KSB/A for the period ending December 31, 2004. Except as required by law,
we
undertake no obligation to update any of the forward-looking statements in
this
Form 10-QSB after the date of this report.
This
information should be read in conjunction with the financial statements and
the
notes thereto included in Item 1 of Part I of this Quarterly Report
and the
audited financial statements and notes thereto and Management’s Discussion and
Analysis of Financial Condition and Results of Operations contained in the
company’s Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 2004.
MANAGEMENT
OVERVIEW
During
the second quarter of 2005 and for the first time in our operating history,
we
introduced our flagship product, QuickVerse®,
to the
Macintosh®
Operating System platform. QuickVerse®Macintosh
is available in two new editions, QuickVerse®
Macintosh Black which has a suggested retail price of $99.95 and
QuickVerse®Macintosh
White which has a suggested retail price of $49.95. We believe we are now
the
only publisher of Bible reference software for each of the Windows®,
Macintosh®,
PocketPC®
and
Palm®
OS
platforms. We also released an updated version of Bible Illustrator®
3.0
titled Sermon Builder®
4.0
during the second quarter of 2005. Sermon Builder®
4.0 was
the first update to this particular program in over six years and has a
suggested retail price of $69.95. Sermon Builder®
4.0 is
ideal for pastors and teachers who want to create punctuated sermons,
comprehensive lessons, and in-depth Bible studies. Furthermore, during the
first
quarter of 2005, and for the second consecutive year, we released an upgrade
to
our top-selling financial and data management software, Membership
Plus®,
and
introduced two new QuickVerse®
editions, QuickVerse®
2005
Essentials and QuickVerse®
2005
Platinum. QuickVerse®
2005
Essentials appeals to those customers who are seeking their first Bible study
software and it is a great way to begin a Bible study software collection.
It
has a suggested retail price of $49.95. QuickVerse®2005
Platinum is the most comprehensive Bible study edition we have to offer and
appeals to scholars who are serious about Bible study. It has a suggested
retail
price of $799.95. We believe that the unique features of the four new
QuickVerse®editions
will provide us with an opportunity to broaden our customer base as our products
are now available to PC and Macintosh users, and they appeal not only to
those
just beginning their journey into Bible study but also to the scholars who
are
searching for an in-depth knowledge of the Bible. As a result of these releases,
as well as our release in December 2004 of our most recent upgrade to
QuickVerse®,
our
second quarter 2005 revenues were higher than those during the second quarter
of
2004. Our performance during the three months ended June 30, 2005 marks the
second straight year in which we have increased our gross revenues during
our
second quarter, which is typically one of our slower quarters in revenue
growth
due to the seasonality of our products. Although there can be no assurance,
we
believe that we can sustain our revenue growth through the third and fourth
quarters based upon our development schedule which includes an update to
our
QuickVerse®
PDA
software along with an update to our QuickVerse®
Windows
software.
Results
Of Operations for Quarters Ending June 30, 2005 and June 30,
2004
Statement
of Operations for Six Months Ended June 30
|
|
|
2005
|
|
|
2004
|
|
|
Change
|
|
|
%
|
|
Net
Revenues
|
|
$
|
2,954,410
|
|
$
|
2,778,115
|
|
$
|
176,295
|
|
|
6
|
%
|
Cost
of Sales
|
|
$
|
959,778
|
|
$
|
740,069
|
|
$
|
219,709
|
|
|
30
|
%
|
Gross
Profit
|
|
$
|
1,994,632
|
|
$
|
2,038,046
|
|
$
|
(43,414
|
)
|
|
-2
|
%
|
Total
Operating Expenses
|
|
$
|
(2,374,981
|
)
|
$
|
(1,959,214
|
)
|
$
|
(415,767
|
)
|
|
21
|
%
|
Other
Expenses
|
|
$
|
(6,775
|
)
|
$
|
(30,518
|
)
|
$
|
23,743
|
|
|
-78
|
%
|
Income
(loss) before income taxes
|
|
$
|
(387,124
|
)
|
$
|
48,314
|
|
$
|
(435,438
|
)
|
|
-901
|
%
|
Provision
for income taxes
|
|
$
|
299,158
|
|
$
|
(61,322
|
)
|
$
|
360,480
|
|
|
-588
|
%
|
Net
loss
|
|
$
|
(87,966
|
)
|
$
|
(13,008
|
)
|
$
|
(74,958
|
)
|
|
576
|
%
|
Our
software products are highly seasonal. More than 50% of our annual sales
are
expected to occur in the five months of September through January; the five
months of April through August are generally our weakest, generating only
about
33% of our annual sales.
During
the six months ended June 30, 2004, we wrote down a distinct category of
obsolete inventory of approximately $32,000 which is included in cost of
sales.
We also wrote down a reserve for rebates payable due to a change in accounting
estimate of approximately $266,000 which is included as an adjustment to
revenue
in accordance with EITF Issue No. 01-09 for the six months ended June 30,
2004.
These write down items had no effect on the cash flow statement. Our net
income
decreased approximately $63,000 from a net loss of approximately $130,000
for
the three months ended June 30, 2004 to a net loss of approximately $193,000
for
the three months ended June 30, 2005 and decreased approximately $75,000
from a
net loss of approximately $13,000 for the six months ended June 30, 2004
to a
net loss of approximately $88,000 for the six months ended June 30, 2005.
For
the six months ended June 30, 2004, we recognized approximately $44,000 in
non-cash expenses related to issuances of shares of common stock to our board
of
directors and employees as well as warrants issued for services. For the
six
months ended June 30, 2005 we did not recognize any non-cash expenses related
to
shares of common stock and warrants issued for services.
Revenues
We
derive
revenues from the sale of packaged software products, product support and
multiple element arrangements that may include any combination of these items.
Revenue is recognized when persuasive evidence of an arrangement exists
(generally a purchase order), we have delivered the product, the fee is fixed
or
determinable and collectibility is probable. For our packaged software products,
we typically recognize revenue from the sale when we ship the product. We
sell
some of our products on consignment to a limited number of resellers. We
recognize revenue for these consignment transactions only when the end-user
sale
has occurred. Service revenue resulting from technical support plans is
recognized over the life of the plan which is generally one year. Revenue
associated with advance payments from our customers is deferred until we
ship
the product or offer the support service. Revenue for software distributed
electronically via the Internet is recognized when the customer has been
provided with the access codes that allow the customer to take immediate
possession of the software on its hardware and evidence of the arrangement
exists. For revenue arrangements involving multiple elements and include
software products, we allocate and defer revenue for the undelivered elements
based on their vendor-specific objective evidence of fair value, which is
generally the price charged when that element is sold separately.
We
reduce
product revenue for estimated returns and price protections that are based
on
historical experience and other factors such as the volume and price mix
of
products in the retail channel, trends in retailer inventory and economic
trends
that might impact customer demand for our products. Estimated returns are
also
based upon a percentage of total retail and direct sales. Direct sales accounted
for approximately 65% of our 2004 fiscal year revenue. We account for cash
considerations (such as sales incentives - rebates and coupons) that we give
our
customers as a reduction of revenue rather than as an operating expense.
Product
revenue is also reduced for the estimated redemption of end-user rebates
on
certain current product sales. We did not have any rebate programs during
the
three and six months ended June 30, 2004 and 2005, respectively.
Trends
that our returns typically follow include (i) the seasonality of sales,
and (ii)
the fact that, generally, relatively higher return rates occur during periods
of
new title or title version releases. Historically, actual returns have
been
within management’s prior estimates, however, we cannot be certain that any
future write-offs exceeding reserves will not occur or that amounts written
off
will not have a material adverse effect on our business, our financial
condition, including liquidity and profitability, and our results of operations.
Management continually monitors and adjusts these allowances to take into
account actual developments and sales results in the marketplace. In the
past,
particularly during title and title version transitions, we have had to
increase
price concessions to our retail customers.
Product
returns from distributors and Christian bookstores are allowed primarily
in
exchange for new products or for credit towards purchases as part of a
stock-balancing program. These returns are subject to certain limitations
that
may exist in the contract. Under certain circumstances, such as termination
or
when a product is defective, distributors and bookstores could receive
a cash
refund if returns exceed amounts owed. Returns from sales made directly
to the
consumer are accepted within 45 days of purchase and are issued a cash
refund.
Product returns or price protection concessions that exceed our reserves
could
materially adversely affect our business and operating results and could
increase the magnitude of quarterly fluctuations in our operating and financial
results. We do anticipate implementing a price protection program within
the
third quarter of 2005 on our current QuickVerse®
2005
titles within the Christian Booksellers Association retail channel in order
to
prepare for our next updated release of QuickVerse®
2006.
QuickVerse®
2006 is
anticipated to be released in late September 2005 or early October 2005,
and we
feel we have reserved appropriately for the anticipated price protections.
Software
products are sold separately, without future performance such as upgrades
enhancements or additional software products, and are sold with post contract
customer support services such as customer service and technical support
assistance. In connection with the sale of certain products, we provide a
limited amount of free technical support assistance to our customers. We
do not
defer the recognition of any revenue associated with sales of these products,
since the cost of providing this free technical support is insignificant.
The
technical support is provided within one year after the associated revenue
is
recognized and free product enhancements (bug fixes) are minimal and infrequent.
We accrue the estimated cost of providing this free support upon product
shipment and include it in cost of sales.
Shipping
and handling costs in connection with our software products are expensed
as
incurred and included in cost of sales.
Revenues
for Three Months Ended June 30
|
|
|
2005
|
|
|
%
to Sales
|
|
|
2004
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
Gross
sales
|
|
$
|
1,527,334
|
|
|
100
|
%
|
|
$
|
1,057,504
|
|
|
100
|
%
|
|
$
|
469,830
|
|
|
44
|
%
|
Add
rebate adjustment
|
|
|
4,910
|
|
|
0
|
%
|
|
|
266,301
|
|
|
25
|
%
|
|
|
(261,391
|
)
|
|
-98
|
%
|
Less
reserve for sales returns and allowances
|
|
|
(255,248
|
)
|
|
-17
|
%
|
|
|
(112,083
|
)
|
|
-11
|
%
|
|
|
(143,165
|
)
|
|
128
|
%
|
Net
sales
|
|
$
|
1,276,996
|
|
|
83
|
%
|
|
$
|
1,211,722
|
|
|
114
|
%
|
|
$
|
65,274
|
|
|
5
|
%
|
Revenues
for Six Months Ended June 30
|
|
|
2005
|
|
|
%
to Sales
|
|
|
2004
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
Gross
sales
|
|
$
|
3,511,370
|
|
|
100
|
%
|
|
$
|
2,772,975
|
|
|
100
|
%
|
|
$
|
738,395
|
|
|
27
|
%
|
Add
rebate adjustment
|
|
|
9,820
|
|
|
0
|
%
|
|
|
326,810
|
|
|
12
|
%
|
|
|
(316,990
|
)
|
|
-97
|
%
|
Less
reserve for sales returns and allowances
|
|
|
(566,780
|
)
|
|
-16
|
%
|
|
|
(321,670
|
)
|
|
-12
|
%
|
|
|
(245,110
|
)
|
|
76
|
%
|
Net
sales
|
|
$
|
2,954,410
|
|
|
84
|
%
|
|
$
|
2,778,115
|
|
|
100
|
%
|
|
$
|
176,295
|
|
|
6
|
%
|
Gross
revenues increased approximately $470,000 from approximately $1,057,000 for
the
three months ended June 30, 2004 to approximately $1,527,000 for the three
months ended June 30, 2005 and increased approximately $738,000 from
approximately $2,773,000 for the six months ended June 30, 2004 to approximately
$3,511,000 for the six months ended June 30, 2005. Such increase is due to
our
releases of an enhanced version of our top financial and data management
product, Membership Plus®,
an
enhanced version of QuickVerse®
Essentials and a new edition to the QuickVerse®
family,
the QuickVerse®
Platinum
edition, during the first quarter of 2005. QuickVerse®
Essentials retails for $49.95. QuickVerse®
Platinum
contains the most Bible translations and reference titles of any
QuickVerse®
edition
and retails for $799.95. During the second quarter of 2005, we introduced
QuickVerse®
Macintosh in two editions, White Box edition at the retail price of $49.95
and
Black Box edition at the retail price of $99.95. This was our first product
release on the Macintosh®Operating System platform. We also released
an enhanced version of Bible Illustrator®
3.0
titled Sermon Builder®
4.0.
This was the first update to this program in over six years and retails for
$69.95. Comparatively, during the six months ended June 30, 2004, we had
only
the one product release of Membership Plus®
8.0
which ranged in price from $199.95 to $299.95. We anticipate that revenues
will
continue to increase throughout the year as we remain on schedule to have
an
updated annual release of our two major product lines, QuickVerse®
and
Membership Plus®.
Sales
returns and allowances increased approximately $144,000 from approximately
$110,000 for the three months ended June 30, 2004 to approximately $254,000
for
the three months ended June 30, 2005 and increased approximately $246,000
from
approximately $319,000 for the six months ended June 30, 2004 to approximately
$565,000 for the six months ended June 30, 2005. As a percentage of gross
sales,
sales returns and allowances increased from approximately 10.4% for the three
months ended June 30, 2004 to approximately 16.7% for the three months ended
June 30, 2005 and increased from approximately 11.5% for the six months ended
June 30, 2004 to approximately 16.1% for the six months ended June 30, 2005.
The upward trend in sales returns and allowances as a percentage
is
attributable to our release of enhanced versions of QuickVerse®
and
Membership Plus®
in
December of 2004 and February of 2005, respectively. The release of these
two
enhanced products resulted in an increased quantity of sales returns and
allowances of prior versions as the last enhancements for both of these titles
was approximately one year. In the past, product enhancements were typically
extended over two to three years. We have also increased our reserve for
sales
returns due to a higher price point in connection with QuickVerse®
Platinum
being released in the first quarter of 2005. Furthermore, due to the resignation
of the primary developer of Membership Plus®
and some
unresolved maintenance issues, we have experienced higher actual returns
on the
Membership Plus®
2005
product line. However, we are currently utilizing both domestic and
international contracted developers to not only resolve the maintenance issues
but to also continue the development for our annual update on the Membership
Plus®
program.
We are on track to continue to release enhanced versions of our products
on an
annual basis; however, we do anticipate the sales return and allowances as
a
percentage to follow a downward trend due to the increased
focus of
our sales efforts to the end-user and our decreased presence in the retail
market. Incidents of return are lower for sales direct to the end-user than
sales into the retail stores.
Cost
of Sales
Cost
of
sales consists primarily of royalties to third party providers of intellectual
property and the direct costs and manufacturing overhead required to reproduce,
package, fulfill and ship the software products. Direct costs and manufacturing
overhead also include the amortized software development costs and the
non-capitalized technical support wages. The direct costs and manufacturing
overhead increased approximately $123,000 from approximately $229,000 for
the
three months ended June 30, 2004 to approximately $352,000 for the three
months
ended June 30, 2005 and increased approximately $99,000 from approximately
$625,000 for the six months ended June 30, 2004 to approximately $724,000
for
the six months ended June 30, 2005. As a percentage of gross revenues, the
direct costs and manufacturing overhead slightly increased approximately
1% for
the three months ended June 30, 2005 and slightly decreased approximately
2% for
the six months ended June 30, 2005. The six months ended June 30, 2004 include
the write down of a distinct category of obsolete inventory of approximately
$32,000. Fulfillment costs from a third-party warehouse and included in the
manufacturing overhead costs noted above decreased approximately $15,000
from
approximately $47,000 for the six months ended June 30, 2004 to approximately
$32,000 for the six months ended June 30, 2005 as we moved our retail
fulfillment to a new outside entity in late October 2004. The steady percentage
of cost of sales reflects the continual software development cycle of enhancing
our two major product lines within a one year timeframe and the amortization
of
those software development costs. The amortization recognized during the
six
months ended June 30, 2004 resulted from several new software releases in
late
2003 and early 2004 including QuickVerse®
8.0 and
Membership Plus®
8.0.
Similarly, the amortization recognized during the six months ended June 30,
2005
resulted from the December 2004 release of QuickVerse®
2005,
the February 2005 release of Membership Plus®
2005,
the late June 2005 releases of QuickVerse®
Macintosh and Sermon Builder®
4.0 and
the remainder of QuickVerse®
8.0 and
Membership Plus®
8.0. The
direct costs and manufacturing overhead percentage are expected to continue
at
the 2005 levels as working capital remains more consistent and as more
development projects are implemented in a shortened timeframe.
Royalties
to third party providers of intellectual property increased approximately
$66,000 from approximately $35,000 for the three months ended June 30, 2004
to
approximately $101,000 for the three months ended June 30, 2005 and increased
approximately $121,000 from approximately $115,000 for the six months ended
June
30, 2004 to approximately $236,000 for the six months ended June 30, 2005.
Royalties also increased as a percentage of gross revenues from approximately
3.3% for the three months ended June 30, 2004 to approximately 6.6% for the
three months ended June 30, 2005 and increased from approximately 4.1% for
the
six months ended June 30, 2004 to approximately 6.7% for the six months ended
June 30, 2005. The increase of royalties reflects the release of the
QuickVerse®
2005
editions in early December 2004, and the three additional QuickVerse®
editions, specifically QuickVerse®
Essentials and QuickVerse®
Platinum, which were released in early March of 2005 and QuickVerse®
Macintosh which was released in June 2005. We also released Sermon
Builder®
4.0 in
June 2005 which was an update to Bible Illustrator®
3.0.
This was the first update to Bible Illustrator®
3.0 in
over six years and included not only technological updates but content
additions. Furthermore, we sold some of the older QuickVerse®
versions
to liquidators at a reduced price throughout the first and second quarter
of
2005 compared to no sales to liquidators during the first and second quarter
of
2004. During the year ended 2004, we renegotiated several royalty contracts
which resulted in some cases in a higher royalty rate along with access to
more
content. The royalty rate as a percentage of gross sales is expected to increase
in the future as sales to new users are expected to increase and as more
development projects are implemented for new and/or enhanced products. However,
upgrade sales will continue to be subject to royalties only on content additions
of the upgraded version.
Software
development costs are expensed as incurred until technological feasibility
and
marketability has been established, at which time development costs are
capitalized until the software title is available for general release to
customers. Development costs include direct production costs (including labor
directly associated with the development projects), indirect costs (including
allocated fringe benefits, payroll taxes, facilities costs and management
supervision), and other direct costs (including costs of outside consultants,
purchased software to be included in the software product being developed,
travel expenses, material and supplies, and other direct costs). Software
development is segregated by title and technology platform. Once a product
has
been successfully released, subsequent revisions and upgrades are considered
development and the costs of the revision and upgrade are capitalized.
Capitalized costs are amortized on a product-by-product basis using the greater
of (i) the straight-line amortization over the estimated life of the product
(generally from 12 to 18 months), or (ii) the ratio of current revenues from
the
product to the total projected revenue over the life of the product. Generally,
we consider technological feasibility to have been established with the release
of a beta version for testing.
Software
development costs are summarized in the table below. The software development
costs, consisting primarily of direct and indirect labor and related overhead
charges, capitalized during the three months ended June 30, 2004 and 2005
were
approximately $104,000 and approximately $330,000, respectively and
approximately $178,000 and $594,000 for the six months ended June 30, 2004
and
2005, respectively. Accumulated amortization of these development costs included
in cost of sales totaled approximately $106,000 and approximately $182,000
for
the three months ended June 30, 2004 and 2005, respectively and approximately
$252,000 and 364,000 for the six months ended June 30, 2004 and 2005,
respectively. The increase in both the capitalization and amortization is
a
direct result of the increase in the number of development projects we have
undertaken in the last two years and the consistent one year turn around
on
enhanced versions of our two major product lines QuickVerse®
and
Membership Plus®.
|
|
Three
Months Ended June
30,
|
Six
Months Ended June
30,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
Beginning
balance
|
|
$
|
783,250
|
|
$
|
506,121
|
|
$
|
701,289
|
|
$
|
584,706
|
|
Capitalized
|
|
|
329,512
|
|
|
104,421
|
|
|
594,161
|
|
|
178,049
|
|
Amortized
(Cost of sales)
|
|
|
181,659
|
|
|
106,045
|
|
|
364,347
|
|
|
258,258
|
|
Ending
Balance
|
|
$ |
931,103
|
|
$
|
504,497
|
|
$
|
931,103
|
|
$
|
504,497
|
|
Research
and development expense (General and administrative)
|
|
$
|
30,164
|
|
$
|
27,522
|
|
$
|
67,243
|
|
$
|
43,696
|
|
Sales,
General and Administrative
Sales,
General and Adminstrative Costs for Six Months Ended June
30
|
|
|
2005
|
|
|
%
to Sales
|
|
|
|
2004
|
|
|
%
to Sales
|
|
|
|
Change
|
|
|
%
|
|
Selected
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
|
|
$
|
478,168
|
|
|
14
|
%
|
|
$
|
345,461
|
|
|
12
|
%
|
|
$
|
132,707
|
|
|
38
|
%
|
Advertising
and direct marketing
|
|
|
256,800
|
|
|
7
|
%
|
|
|
165,040
|
|
|
6
|
%
|
|
|
91,760
|
|
|
56
|
%
|
Total
sales and marketing
|
|
$
|
734,968
|
|
|
21
|
%
|
|
$
|
510,501
|
|
|
18
|
%
|
|
$
|
224,467
|
|
|
44
|
%
|
Research
and development
|
|
$
|
67,243
|
|
|
2
|
%
|
|
$
|
43,696
|
|
|
2
|
%
|
|
$
|
23,547
|
|
|
54
|
%
|
Personnel
costs
|
|
|
693,586
|
|
|
20
|
%
|
|
|
751,967
|
|
|
27
|
%
|
|
|
(58,381
|
)
|
|
-8
|
%
|
Legal
|
|
|
123,280
|
|
|
4
|
%
|
|
|
34,031
|
|
|
1
|
%
|
|
|
89,249
|
|
|
262
|
%
|
Telecommunications
|
|
|
32,152
|
|
|
1
|
%
|
|
|
76,811
|
|
|
3
|
%
|
|
|
(44,659
|
)
|
|
-58
|
%
|
Corporate
services
|
|
|
55,972
|
|
|
2
|
%
|
|
|
28,486
|
|
|
1
|
%
|
|
|
27,486
|
|
|
96
|
%
|
Administration
|
|
|
10,749
|
|
|
0
|
%
|
|
|
53,388
|
|
|
2
|
%
|
|
|
(42,639
|
)
|
|
-80
|
%
|
Other
general and administrative costs
|
|
|
342,813
|
|
|
10
|
%
|
|
|
183,195
|
|
|
7
|
%
|
|
|
159,618
|
|
|
87
|
%
|
Total
general and administrative
|
|
$
|
1,325,796
|
|
|
38
|
%
|
|
$
|
1,171,574
|
|
|
42
|
%
|
|
$
|
154,222
|
|
|
13
|
%
|
Gross
revenues increased approximately $470,000 from approximately $1,057,000 for
the
three months ended June 30, 2004 to approximately $1,527,000 for the three
months ended June 30, 2005 and increased approximately $738,000 from
approximately $2,773,000 for the six months ended June 30, 2004 to approximately
$3,511,000 for the six months ended June 30, 2005. However, sales and marketing
expenses also increased approximately $40,000 from approximately $268,000
for
the three months ended June 30, 2004 to approximately $308,000 for the three
months ended June 30, 2005 and increased approximately $225,000 from
approximately $510,000 for the six months ended June 30, 2004 to approximately
$735,000 for the six months ended June 30, 2005. Included in sales expenses,
commissions to a third-party telemarketing firm increased approximately $133,000
from approximately $345,000 for the six months ended June 30, 2004 to
approximately $478,000 for the six months ended June 30, 2005. Commissions
also
increased as a percentage of gross revenues from approximately 12.5% to
approximately 13.6% for the six months ended June 30, 2004 and 2005,
respectively. This increase is attributed to the increased focus of our sales
to
the direct consumer along with the number of new and enhanced product releases
during the six months ended June 30, 2005 compared with just one product
release
during the six months ended June 30, 2004. Advertising and direct marketing
costs increased approximately $94,000 from approximately $162,000 for the
six
months ended June 30, 2004 to approximately $256,000 for the six months ended
June 30, 2005 and increased as a percentage of gross revenues from approximately
5.8% to 7.3%, respectively. This increase is a direct result in continuing
to
market our products online through multiple sources, continuing to increase
and
focus more on our direct marketing efforts, and the increased number of
publication advertisements due to the new product enhancements of
QuickVerse®
and
Membership Plus®along
with the introduction of the three new QuickVerse®
editions
and the updated Sermon Builder®
4.0
during the six months ended June 30, 2005.
Research
and development costs include direct production costs (including labor directly
associated with the development projects), indirect costs (including allocated
fringe benefits, payroll taxes, facilities costs and management supervision),
and other direct costs (including costs of outside consultants, purchased
software to be included in the software product being developed, travel
expenses, material and supplies, and other direct costs). Software development
costs related to third-party developers and direct labor expensed as research
and development (see table above) amounted to approximately $28,000 for the
three months ended June 30, 2004 compared to approximately $30,000 incurred
for
the three months ended June 30, 2005 and approximately $44,000 for the six
months ended June 30, 2004 compared to approximately $67,000 for the six
months
ended June 30, 2005. The increase in 2005 reflects more research and development
costs associated with maintenance issues on titles after they are released
to
the general public along with exploring new platforms for future products.
Research and development expenses are expected to increase in future periods
as
we add new products and versions to our product mix along with new platforms
for
our current and future products.
Total
personnel costs decreased approximately $58,000 from approximately $752,000
for
the six months ended June 30, 2004 to approximately $694,000 for the six
months
ended June 30, 2005. However, direct salaries and wages increased approximately
$96,000 from approximately $726,000 for the six months ended June 30, 2004
to
approximately $822,000 for the six months ended June 30, 2005. As a percentage
of gross revenues, direct salaries and wages decreased approximately 2.8%
from
approximately 26.2% for the six months ended June 30, 2004 to approximately
23.4% for the six months ended June 30, 2005. The direct salaries and wages
include approximately $8,000 and $10,000 in expense for upper management
year-end bonus accrual for the year ends December 31, 2004 and 2005,
respectively. Furthermore, we recognized approximately $14,000 of expense
related to 635,000 restricted common shares issued to employees during the
six
months ended June 30, 2004. The increase in direct salaries and wages is
a
direct result of increasing our sales and marketing team and our development
staff. The associated health care costs decreased approximately $5,000 from
approximately $76,000 for the six months ended June 30, 2004 to approximately
$71,000 for the six months ended June 30, 2005 as we restructured our health
benefits plans in late October 2004. The capitalization of direct and indirect
labor and related overhead charges as software development costs (see “Cost of
Sales” above) increased by approximately $158,000 from approximately $90,000 for
the six months ended June 30, 2004 to approximately $248,000 for the six
months
ended June 30, 2005. This increase is due to the addition of development
staff
and the increased amount of new development projects. It is anticipated that
personnel costs will increase in future periods as operating capital is
available to fund full staffing of our product development team and expansion
of
the direct sales staff.
Direct
legal costs increased approximately $89,000 for the six months ended June
30,
2005 as the company continues to work through the registration process for
the
SB-2 registration statement. It is anticipated that legal costs will continue
at
increased levels as we pursue our business plan for growth by acquiring
companies that are synergistic with our current product line and customer
base.
Telecommunications costs decreased approximately $45,000 for the six months
ended June 30, 2005 as we switched our local and long distance carriers in
order
to take advantage of the provider’s current technology. Our increased call
volume enabled us to change our service to dedicated T-1 lines which in turn
reduced the long distance charges. Furthermore, we invested in internet protocol
phones for our remote locations which reduced the overall local and long
distance charges in our Illinois and Iowa locations. The increased call volume
in the technical support and customer service departments resulted from the
release of the two major product upgrades in December 2004 and February 2005
along with the two new product releases during the second quarter of 2005.
Corporate service fees increased approximately $27,000 for the six months
ended
June 30, 2005. These fees are related to the hiring of an outside consultant
and
the expense for a 2004 issuance of a warrant to purchase 600,000 shares of
common stock allocated over the term of the consulting contract. Administration
expenses decreased approximately $43,000 for the six months ended June 30,
2005
due to not incurring interest and penalty fees on back payroll taxes as we
did
during the six months ended June 30, 2004. Interest expense for the six months
ended June 30, 2005 decreased by approximately $25,000 compared to 2004.
This is
due to our continuing efforts to reduce our trade payables and meet the
scheduled terms and the reduced loans and long-term note payables. Finally,
bad
debt expense increased approximately $20,000 for the six months ended June
30,
2005 as we were notified by one of our liquidation customers of the possibility
that they will not be able to pay on their full balance due to us.
Other
Income and Expenses
On
July
19, 2004, we completed an equity financing in the amount of $1,750,000 through
a
private placement with Barron Partners, L.P. where Barron purchased 21,875,000
restricted shares of common stock and received two warrants to purchase up
to an
additional 21,875,000 shares of common stock. As part of the financing
transaction, we also entered into a certain Registration Rights Agreement
with
Barron pursuant to which we became committed to registering all of the shares
issued as part of such transaction, including those issuable under the warrants.
On November 22, 2004, we filed a registration statement on Form SB-2 covering
the shares issued to Barron, as well as the shares underlying the warrants
issued to Barron. Under the terms of the Registration Rights Agreement, as
amended, we had until April 22, 2005 to cause such registration statement
to be
declared effective by the SEC. In accordance with the terms of the Registration
Rights Agreement, any delays in meeting this obligation subjected us
to
liability to Barron in an amount equal to $1,726 per day for the duration
of any
such delay. As of June 30, 2005, we had accrued a total
of $119,000 in registration rights penalties for not causing the
registration statement to be declared effective by the SEC. This
has been
included with general and administrative expenses. Pursuant to a verbal
agreement reached with Barron in relation to the associated accruing penalties,
we have agreed to cap the penalties and to pay Barron an amount in cash that
is
yet to be determined. Although there can be no assurance, we are hopeful
that we
will cause the registration statement to be declared effective by September
30,
2005. If we are unsuccessful in causing the registration statement to be
declared effective by the SEC by September 30, 2005, however, and depending
on
how long any such delay in causing effectiveness to be declared by the SEC
continues thereafter, it is likely to have a very material adverse effect
on our
business, our financial condition, including liquidity and profitability,
and
our results of operations.
Amortization
Amortization
expense increased approximately $12,000 for the six months ended June 30,
2005.
The software license acquired from The Learning Company in July of 1999 is
amortized over a 10 year useful life. Amortization expense for 2005 reflects
the
continual amortization of the software license along with the amortization
for
the launch of our website, www.quickverse.com, during the second quarter
of
2004.
Income
Tax Benefits
Our
effective tax rate differs from the statutory federal rate due to differences
between income and expense recognition prescribed by the Internal Revenue
Code
and Generally Accepted Accounting Principles. We utilize different methods
and
useful lives for depreciating property and equipment. Changes in estimates
(reserves) are recognized as expense for financial reporting but are not
deductible for income tax purposes.
We
have
recognized a net deferred tax asset whose realization depends on generating
future taxable income. At June 30, 2005, management established the valuation
allowance based on the assessment that the company will produce sufficient
income in the future to realize its net deferred tax asset. The resulting
deferred tax liability reflects income taxes payable in future periods on
the
net deductible differences related to the software license agreement. We
currently have net operating loss carryforwards, for income tax purposes,
of
approximately $7,648,000. The carryforwards are the result of income tax
losses
generated in 2000 ($2,480,000 expiring in 2020) and 2001 ($5,168,000 expiring
in
2021). We will need to achieve a minimum annual taxable income, before deduction
of operating loss carryforwards, of approximately $450,000 to fully utilize
the
current loss carryforwards. We believe this is achievable through careful
expense management and continued introduction of new products and enhanced
versions of our existing products.
Although
there can be no assurance, management expects the deductible temporary
differences (reserves) to reverse sometime beyond the next fiscal year.
Our
primary needs for liquidity and capital resources are the funding of our
continued operations, which includes the ongoing internal development of
new
products and expansion and upgrade of existing products. We believe our future
cash provided by operations will be sufficient to fund our continued operations.
However, our pursuit of future strategic product line and/or corporate
acquisitions and licensing will require funding from outside sources. Funding
from outside sources may include but are not limited to the exercise of
outstanding warrants and pursuit of other financing options such as commercial
loans, common stock and/or preferred stock issuances and convertible notes.
At
this time, we have no legally committed funds for future capital expenditures
including software development.
Working
Capital at June 30
|
|
|
2005
|
|
|
|
2004
|
|
|
|
Change
|
|
|
%
|
Current
assets
|
|
$
|
1,298,981
|
|
|
$
|
503,834
|
|
|
$
|
795,147
|
|
|
158
|
%
|
Current
liabilites
|
|
$
|
1,451,309
|
|
|
$
|
2,857,185
|
|
|
$
|
(1,405,876
|
)
|
|
-49
|
%
|
Retained
deficit
|
|
$
|
(5,967,127
|
) |
|
$
|
(6,957,257
|
)
|
|
$
|
990,130
|
|
|
-14
|
%
|
As
of
June 30, 2005, we had $1,298,981 in current assets, $1,451,309 in current
liabilities and a retained deficit of $5,967,127. We had a loss before income
taxes of $342,312 for the three months ended June 30, 2005 and a loss before
income taxes of $387,124 for the six months ended June 30, 2005. In comparison,
as of June 30, 2004 we had $503,834 in current assets, $2,857,185 in current
liabilities and a retained deficit of $6,957,257.
Cash
Flows for Six Months Ended June 30
|
|
2005
|
|
|
2004
|
|
|
Change
|
|
|
%
|
Cash
flows provided by operating activities
|
|
$
|
357,278
|
|
|
$
|
202,213
|
|
|
$
|
155,065
|
|
|
77
|
%
|
Cash
flows used by investing activities
|
|
$
|
(574,161
|
)
|
|
$
|
(228,982
|
)
|
|
$
|
(345,179
|
)
|
|
151
|
%
|
Cash
flows used by financing activities
|
|
$
|
(28,535
|
)
|
|
$
|
(53,889
|
)
|
|
$
|
25,354
|
|
|
-47
|
%
|
Net
cash
provided by operating activities was approximately $202,000 for the six months
ended June 30, 2004 and approximately $357,000 for the six months ended June
30,
2005. The increase in cash provided was primarily due to an increase in the
amounts received from customers resulting from increased sales along with
a
decrease in the amount paid out to suppliers and employees.
Net
cash
used in investing activities was approximately $229,000 for the six months
ended
June 30, 2004 and approximately $574,000 for the six months ended June 30,
2005.
The increase in cash used for investing activities results from capitalizing
costs associated with software development and Website development along
with
upgrading our internal computer equipment and software in order to increase
our
operating efficiency capabilities. Furthermore, during the three months ended
June 30, 2005 the restriction on the cash held in reserve by our merchant
banker
was lifted and made available to us.
Net
cash
used by financing activities was approximately $54,000 for the six months
ended
June 30, 2004 and approximately $29,000 for the six months ended June 30,
2005.
Cash used by financing activities reflects payments made on long-term note
payables.
As
part
of the financing transaction with Barron Partners, L.P. dated July 19, 2004,
we
also entered into a certain Registration Rights Agreement pursuant to which
we
became committed to registering all of the shares issued as part of such
transaction, including those issuable under the warrants. On November 22,
2004,
we filed a registration statement on Form SB-2 covering the shares issued
to
Barron, as well as the shares underlying the warrants issued to Barron. Under
the terms of the Registration Rights Agreement, as amended, we had until
April
22, 2005 to cause such registration statement to be declared effective by
the
SEC. In accordance with the terms of the Registration Rights Agreement, any
delays in meeting this obligation subjected us to liability to Barron
in an
amount equal to $1,726 per day for the duration of any such delay. As
of June 30, 2005, we had accrued a total of $119,000
in
registration rights penalties for not causing the registration statement
to be
declared effective by the SEC. Pursuant to a verbal agreement reached
with
Barron in relation to the associated accruing penalties, we have agreed to
cap
the penalties and to pay Barron an amount in cash that is yet to be determined.
Although there can be no assurance, we are hopeful that we will cause the
registration statement to be declared effective by September 30, 2005. If
we are
unsuccessful in causing the registration statement to be declared effective
by
the SEC by September 30, 2005, however, and depending on how long any such
delay
in causing effectiveness to be declared by the SEC continues thereafter,
it is
likely to have a very material adverse effect on our business, our financial
condition, including liquidity and profitability, and our results of operations.
See Exhibits 10.10, 10.11, 10.12, and 10.13.
Contractual
Liabilities
We lease
office space/warehouse facilities in Omaha, Nebraska under an operating lease
with a third-party with terms extending through 2007. We
are responsible for all taxes, insurance and utility expenses associated
with this lease. There is no lease renewal option contained in the lease.
We lease
office space in Naperville, Illinois under an operating lease with a third-party
with terms extending through March 2006. We are responsible
for all
insurance expenses associated with this lease.
At
June
30, 2005, the future minimum rental payments required under these leases
are as
follows:
2005
|
|
$
|
40,665
|
2006
|
|
|
69,451
|
2007
|
|
|
27,288
|
Total
future minimum rental payments
|
|
$
|
137,404
|
We lease
telephone equipment under a capital lease expiring in November 2009. The
asset
and liability under the capital lease are recorded at the present value of
the
minimum lease payments. The asset is depreciated over a 5 year life. Minimum
future lease payments under capital leases as of June 30, 2005 for each of
the
next five years and in the aggregate are:
2005
|
|
$
|
6,863
|
2006
|
|
|
13,726
|
2007
|
|
|
13,726
|
2008
|
|
|
13,726
|
2009
|
|
|
12,582
|
Total
minimum lease payments
|
|
|
60,623
|
Less:
Amount representing interest
|
|
|
13,444
|
Total
obligations under capital lease
|
|
|
47,179
|
Less:
Current installments of obligations under capital lease
|
|
|
8,667
|
Long-term
obligation under capital lease
|
|
$
|
38,512
|
The
Potential Impact of Known Facts, Commitments, Events and Uncertainties on
Future
Operating Results or Future Liquidity Requirements
New
Accounting Pronouncements
In
the
past, we have applied Accounting Principles Board (“APB”) Opinion No. 25,
Accounting
for Stock Issued to Employees,
and
related interpretations in accounting as allowed by SFAS No 123, Accounting
for Stock Based Compensation,
for
various forms of share-based awards including incentive and nonqualified
stock
options and stock appreciation rights attached to stock options; and therefore,
no compensation cost had been recognized. However, in December 2004, the
FASB
issued SFAS No 123 (R), Share-Based
Payment,
which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123 (R)
requires compensation costs related to share-based payment transactions to
be
recognized in the financial statements. With limited exceptions, the amount
of
compensation cost will be measured based on the fair value on the grant date
of
the equity or liability instruments issued. Compensation cost will be recognized
over the period that the service is provided for that award. This new standard
will be effective for the company the first quarter of fiscal 2006. We did
not
grant any form of share-based awards during the six months ended June 30,
2005.
(a) Evaluation
of Disclosure Controls and Procedures.
Our
CEO
and CFO have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the fiscal
quarter
covered by this report on Form 10-QSB. Based on this evaluation, our CEO
and CFO
have concluded that these disclosure controls and procedures are effective
and
designed to ensure that the information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934, as amended,
is
recorded, processed, summarized and reported within the requisite time periods.
(b) Changes
In Internal Controls Over Financial Reporting.
As
of the
date of this report, there were no pending material legal proceedings to
which
we were a party and we were not aware that any were contemplated. There can
be
no assurance, however, that we will not be made a party to litigation in
the
future. Moreover, there can be no assurance that our insurance coverage will
prove adequate to cover all liabilities arising out of any claims that may
be
initiated against us in the future. Any finding of liability imposed against
us
coupled with a lack of corresponding insurance coverage is likely to have
an
adverse effect on our business, financial condition, and operating
results.
Subsequent
to December 31, 2004, the company restored a stale check that was issued
to
Business Investor Services, Inc. as payment in full of a note payable. This
resulted in the conversion of the note payable into 466,666 shares of common
stock. The conversion of such securities was effected without registration
under
the Securities Act of 1933, as amended, based on their being exempted securities
under Section 3(a)(9) thereof. There were no underwriters or placement agents
involved in this issuance and no commissions were paid.
There
were no reportable events under this Item 3 during the quarterly period ended
June 30, 2005.
There
were no reportable events under this Item 4 during the quarterly period ended
June 30, 2005.
The
Annual Meeting of the Stockholders of Findex.com, Inc. will be held on
December
9, 2005. Stockholders of record who wish to submit a proposal at the 2005
Annual
Meeting must provide written notice to the Secretary of the company in
accordance with Article IX of our Articles of Incorporation. Under our Articles
of Incorporation, such notice must be received by the Secretary no earlier
than
October 10, 2005, and no later than November 9, 2005.
There
were no material changes to the procedures by which security holders may
recommend nominees to our board of directors.
No.
|
Description
of Exhibit
|
|
|
2.1
|
Share
Exchange Agreement between Findex.com, Inc. and the stockholders
of Reagan
Holdings, Inc. dated March 7, 2000, incorporated by reference
to Exhibit
2.1 on Form 8-K filed March 15, 2000.
|
|
|
3(i)(1)
|
Articles
of Incorporation of Findex.com, Inc., 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
12, 2004
incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed
November
12, 2004.
|
|
|
3(ii)
|
By-Laws
of Findex.com, Inc., incorporated by reference to Exhibit 3.3
on Form 8-K
filed March 15, 2000.
|
|
|
10.1
|
Stock
Incentive Plan of Findex.com, Inc. dated May 7, 1999, incorporated
by
reference to Exhibit 10.1 on Form 10-KSB/A filed May 13,
2004.
|
|
|
10.2
|
Share
Exchange Agreement between Findex.com, Inc. and the stockholders
of Reagan
Holdings Inc., dated March 7, 2000, incorporated by reference
to Exhibit
2.1 on Form 8-K filed March 15, 2000.
|
|
|
10.3
|
License
Agreement between Findex.com, Inc. and Parsons Technology, Inc.
dated June
30, 1999, incorporated by reference to Exhibit 10.3 on Form 10-KSB/A
filed
May 13, 2004.
|
|
|
10.4
|
Employment
Agreement between Findex.com, Inc. and Steven Malone dated July
25, 2003,
incorporated by reference to Exhibit 10.4 on Form 10-KSB/A filed
May 13,
2004.
|
|
|
10.5
|
Employment
Agreement between Findex.com, Inc. and Kirk Rowland dated July
25, 2003,
incorporated by reference to Exhibit 10.5 on Form 10-KSB/A filed
May 13,
2004.
|
|
|
10.6
|
Employment
Agreement between Findex.com, Inc. and William Terrill dated
June 7, 2002,
incorporated by reference to Exhibit 10.6 on Form 10-KSB/A filed
May 13,
2004.
|
|
|
10.7
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and John
A. Kuehne
dated July 25, 2003, incorporated by reference to Exhibit 10.7
on Form
10-KSB/A filed May 13, 2004.
|
|
|
10.8
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and Henry
M.
Washington dated July 25, 2003, incorporated by reference to
Exhibit 10.8
on Form 10-KSB/A filed May 13, 2004.
|
|
|
10.9
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and William
Terrill
dated July 25, 2003, incorporated by reference to Exhibit 10.9
on Form
10-KSB/A filed May 13, 2004.
|
|
|
10.10
|
Stock
Purchase Agreement, including the form of warrant agreement,
between
Findex.com, Inc. and Barron Partners, LP dated July 19, 2004,
incorporated
by reference to Exhibit 10.1 on Form 8-K filed July 28,
2004.
|
|
|
10.11
|
Amendment
No. 1 to Barron Partners, LP Stock Purchase Agreement dated September
30,
2004, incorporated by reference to Exhibit 10.3 on Form 8-K filed
October
6, 2004.
|
|
|
10.12
|
Registration
Rights Agreement between Findex.com, Inc. and Barron Partners,
LP dated
July 26, 2004, incorporated by reference to Exhibit 10.2 on Form
8-K filed
July 28, 2004.
|
|
|
10.13
|
Waiver
certificate between Findex.com, Inc. and Barron Partners, LP
dated
September 16, 2004, incorporated by reference to Exhibit 10.4
on Form 8-K
filed October 6, 2004.
|
|
|
31.1
|
Certification
of Findex.com, Inc. Chief Executive Officer, Steven Malone, required
by
Rule 13a-14(a) or Rule 15d-14(a), and dated August 22, 2005.
FILED
HEREWITH.
|
|
|
31.2
|
Certification
of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland,
required by
Rule 13a-14(a) or Rule 15d-14(a), and dated August 22, 2005.
FILED
HEREWITH.
|
|
|
32.1
|
Certification
of Findex.com, Inc. Chief Executive Officer, Steven Malone, required
by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
63 of Title
18 of the United States Code (18 U.S.C. 1350), and dated August
22, 2005.
FILED HEREWITH.
|
|
|
32.2
|
Certification
of Findex.com, Inc. Chief Financial Officer, Kirk R. Rowland,
required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
63 of Title
18 of the United States Code (18 U.S.C. 1350), and dated August
22, 2005.
FILED HEREWITH.
|
|
|
Signatures
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
FINDEX.COM,
INC.
|
|
|
|
|
|
Date:
August 22, 2005
|
By
|
/s/
Steven Malone
|
|
|
|
Steven
Malone
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
Date:
August 22, 2005
|
By
|
/s/
Kirk R. Rowland
|
|
|
|
Kirk
R. Rowland, CPA
|
|
|
|
Chief
Financial Officer
|
|