See accompanying notes to unaudited condensed consolidated financial statements.
Notes
to Condensed Consolidated Financial Statements
June
30, 2016
(Unaudited)
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
– FINDEX.cOM, Inc.
Findex.com,
Inc.’s headquarters and operations are based in Lake Park, Florida. The Company is a developer, manufacturer, and marketer
of a proprietary line of specialty industrial glass-based smart surface coatings materials that have a broad range of industrial,
commercial, and consumer applications. The Company’s line of products center 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. Among others, such applications
include:
|
▪
|
Heavy
machinery, equipment and infrastructure throughout each of the construction, oil and gas, and mining industries
|
|
▪
|
Marine
industry, vessels and infrastructure
|
|
▪
|
Industrial
HVAC equipment, commercial refrigeration systems, and power generators
|
|
▪
|
Energy
production equipment, including solar and wind
|
|
▪
|
Hardscapes
|
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, 2015 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, 2015 filed with the Securities
and Exchange Commission on April 14, 2016.
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company
balances and transactions have been eliminated in consolidation.
Reclassifications
Certain
accounts in the Company’s 2015 financial statements have been reclassified for comparative purposes to conform with the
presentation in its 2016 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. Significant estimates include inventory evaluation for slow moving and
obsolete items, collectability of accounts receivable, assessing intangibles for impairment, useful lives of assets, and valuation
of stock based compensation.
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. The Company takes into consideration certain inventory items that are
slow moving and obsolete and calculates a provision for these inventory items.
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.
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, 2016 and 2015, the Company recognized $99,636 and $156,478, respectively,
in research and development costs.
STOCK-BASED
COMPENSATION
The
Company recognizes share-based compensation in accordance with ASC 718,
Compensation – Stock Compensation
, using
the modified prospective method. ASC 718 requires that the Company measure the cost of the employee services received in exchange
for an award for equity instruments based on the grant-date fair value and to recognize this cost over the requisite service period.
See Note 7.
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
calculations of net loss per share for the six months ended June 30, 2016 and 2015 excluded the impact of the following potential
common shares as their inclusion would be anti-dilutive.
For the Six Months Ended June 30,
|
|
2016
|
|
|
2015
|
|
Warrants
|
|
|
600,000
|
|
|
|
3,650,000
|
|
Convertible note payables
|
|
|
99,392,857
|
|
|
|
24,500,000
|
|
Total weighted average anti-dilutive potential common shares
|
|
|
99,992,857
|
|
|
|
28,150,000
|
|
DISCONTINUED
OPERATIONS
On
May 5, 2011, Findex entered into a Software Product Line Purchase Agreement with 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 the QuickVerse
®
product line which centered around Findex’s industry-leading Bible-study software program. The specific assets conveyed
include, among others, the underlying software source code, registered trade names, and existing product inventories. As a result,
the Company has classified any associated liabilities as well as all expenses directly related to the QuickVerse
®
product line as discontinued operations for the six months ended June 30, 2016 and 2015. See Note 10.
RECENT
ACCOUNTING PRONOUNCEMENTS
At
June 30, 2016, there were no recent accounting pronouncements that the Company believed would have a material impact on its condensed
consolidated financial statements.
NOTE
2 – GOING CONCERN
The
accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplates the Company’s continuation as a going concern. However, as
of June 30, 2016, the Company had negative working capital of $2,542,232 and had an accumulated deficit of $5,930,116. These factors
raise substantial doubt about the Company’s ability to continue as a going concern. Management has taken several actions
in an attempt to mitigate this risk. These actions include entering into subscription agreements and/or note payable agreements
with investors and related parties. The accompanying condensed consolidated financial statements do not include any adjustments
related to these uncertainties.
NOTE
3 – INVENTORIES
Inventories
consisted of the following:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Raw materials
|
|
$
|
36,083
|
|
|
$
|
24,753
|
|
Finished goods
|
|
|
2,486
|
|
|
|
4,364
|
|
Reserve for obsolete inventory
|
|
|
(9,320
|
)
|
|
|
(9,320
|
)
|
Inventories
|
|
$
|
29,249
|
|
|
$
|
19,797
|
|
NOTE
4 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Office equipment
|
|
$
|
3,466
|
|
|
$
|
3,466
|
|
Warehouse equipment
|
|
|
76,339
|
|
|
|
76,339
|
|
Computer equipment
|
|
|
8,708
|
|
|
|
8,708
|
|
Research lab
|
|
|
9,721
|
|
|
|
---
|
|
Less: accumulated depreciation
|
|
|
(67,249
|
)
|
|
|
(58,519
|
)
|
Property and equipment
|
|
$
|
30,985
|
|
|
$
|
29,994
|
|
For
the six months ended June 30, 2016 and 2015, the Company recorded depreciation expense of $8,730 and $8,730, respectively. For
the six months ended June 30, 2016, the Company invested $9,721 in building out a new research lab within our corporate headquarters
located in the Lake Park, Florida. The new research lab will replace the research lab located in Daytona Beach, Florida which
was relocated in July 2016. See Notes 8 and 11.
NOTE
5 – 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.
The
Company’s intangible assets, net of accumulated amortization consisted of the following:
Patents and/or software licenses, net
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Cost
|
|
$
|
697,955
|
|
|
$
|
697,955
|
|
Amortization
|
|
|
(364,837
|
)
|
|
|
(341,081
|
)
|
Net intangible assets
|
|
$
|
333,118
|
|
|
$
|
356,874
|
|
The
SMT assets include a patent, a patent pending, trade secret technology, instructions, manuals and materials on certain manufacturing
processes and know-how. For the six months ended June 30, 2016 and 2015, the Company recorded amortization expense of $23,756
and $23,756, respectively.
NOTE
6 – NOTES PAYABLE AND NOTES PAYABLE RELATED PARTIES
Notes
payable consisted of the following:
|
|
As of June 30, 2016
|
|
|
As of December 31, 2015
|
|
Notes payable
|
|
$
|
451,283
|
|
|
$
|
366,283
|
|
Notes payable, related parties
|
|
|
1,059,000
|
|
|
|
709,000
|
|
Total
|
|
$
|
1,510,283
|
|
|
$
|
1,075,283
|
|
Notes
payable to un-related parties consisted of the following:
|
|
|
|
|
As of June 30, 2016
|
|
|
As of December 31, 2015
|
|
Note payable to a former shareholder past due as of January 2012, together with interest at 5% APR, and with interest on overdue principal accruing at 10% APR.
|
|
|
(a)
|
|
|
$
|
28,783
|
|
|
$
|
28,783
|
|
Note payable to a private investor and shareholder past due as of August 1, 2015, together with interest at 10% APR.
|
|
|
(b)
|
|
|
|
300,000
|
|
|
|
300,000
|
|
Note payable to a private investor and shareholder, payable upon demand, together with imputed interest only, as applicable.
|
|
|
(c)
|
|
|
|
7,500
|
|
|
|
7,500
|
|
Note payable to a private investor and shareholder past due as of October 6, 2015, together with a fixed interest payment of $2,000, and convertible at $0.01 per share of common stock.
|
|
|
(d)
|
|
|
|
20,000
|
|
|
|
20,000
|
|
Note payable to a private investor due September 2016, together with interest at 10% APR, and convertible at $0.02 per share of common stock.
|
|
|
(e)
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Note payable to a private investor and shareholder past due as of April 23, 2016, together with a fixed interest payment of $1,000, and convertible at $0.005 per share of common stock.
|
|
|
(f)
|
|
|
|
10,000
|
|
|
|
---
|
|
Note payable to a private investor due January 20, 2017, together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(g)
|
|
|
|
25,000
|
|
|
|
---
|
|
Note payable to a private investor due March 4, 2017, together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(i)
|
|
|
|
50,000
|
|
|
|
---
|
|
Total
|
|
|
|
|
|
$
|
451,283
|
|
|
$
|
366,283
|
|
As
of June 30, 2016, the Company had outstanding a past due note payable (b) to a shareholder in the amount of $300,000. A previously
outstanding note payable to the same party, that had contained a conversion feature in the amount of $250,000, pre-dated this
note. However, in March 2015, the Company entered into a loan modification agreement which provided that the original note, along
with the attendant conversion feature, be cancelled, and that a replacement note to be issued in its stead at an upwardly adjusted
principal amount of $300,000, but without any associated conversion feature. In accordance with ASC 470-50-40, the Company deemed
the transaction for accounting purposes to be a debt extinguishment due to the substantially different terms, and, as a result,
recorded a gain on debt settlement of $200,000. For the six months ended June 30, 2016, the Company recognized a debt discount
of $9,900 associated with two notes payable as they each carried a beneficial conversion feature. This debt discount has been
fully amortized to interest expense for the six months ended June 30, 2016.
At
June 30, 2016, the Company was in arrears on the unsecured term note payable (a) to a former shareholder, the unsecured term note
payable (b) to a current shareholder, the convertible term note payable (d) to another current shareholder and the convertible
note payable (f) to a third current shareholder. On April 12, 2016, the Company repaid and retired a $10,000 note to a private
investor together with $1,000 in then-accrued interest ($11,000 total).
NOTES
PAYABLE RELATED PARTIES
Notes
payable, related parties consisted of the following:
|
|
|
|
|
As of June 30, 2016
|
|
|
As of December 31, 2015
|
|
Note payable, past due as of August 3, 2016 together with imputed interest only, as applicable.
|
|
|
(a)
|
|
|
$
|
239,000
|
|
|
$
|
239,000
|
|
Note payable to a company controlled by an outside director, (also a shareholder), due on demand together with interest at 4.5% APR, and convertible at $0.01 per share of common stock.
|
|
|
(b)
|
|
|
|
60,000
|
|
|
|
60,000
|
|
Note payable to the Company’s outside general counsel (also a shareholder, which note is due on demand together with interest at 4.5% APR, and convertible at $0.01 per share of common stock.
|
|
|
(c)
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Note payable to an outside director, who is also a shareholder, which note is due on demand together with interest at 4.5% APR, and convertible at $0.01 per share of common stock.
|
|
|
(d)
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Note payable to the Company’s outside general counsel, who is also a shareholder, which note is due on demand together with interest at 4.5% APR, and convertible at $0.007 per share of common stock.
|
|
|
(e)
|
|
|
|
120,000
|
|
|
|
120,000
|
|
Note payable to the Company’s outside general counsel (also a shareholder), due on demand together with interest at 12% APR, and convertible at $0.008 per share of common stock.
|
|
|
(f)
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Note payable to a private investor, due November 13, 2018 together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(g)
|
|
|
|
100,000
|
|
|
|
100,000
|
|
Note payable to a private investor, due March 18, 2019 together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(h)
|
|
|
|
100,000
|
|
|
|
---
|
|
Note payable to a private investor, due May 12, 2019 together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(i)
|
|
|
|
50,000
|
|
|
|
---
|
|
Note payable to a private investor, due June 7, 2019 together with interest at 10% APR, and convertible at $0.01 per share of common stock.
|
|
|
(j)
|
|
|
|
200,000
|
|
|
|
---
|
|
Total
|
|
|
|
|
|
$
|
1,059,000
|
|
|
$
|
709,000
|
|
As
of June 30, 2016, no principal payments had been made on note (a). Notes (b) and (d) reflect amounts due to an outside director,
who is also a shareholder, based on such director having (i) made certain vendor obligation payments directly on behalf of and
for the benefit of the Company and (ii) having advanced certain funds to the Company at various dates for general working capital
purposes. In addition, the Company has recorded accounts payable, related parties, in the amount of $39,621 to the holder of notes
(b) and (d). Notes (c) and (e) reflect payment obligations owed to its outside general counsel for legal services incurred by
the Company for the years ended December 31, 2015 and 2014. Note (f) reflects a private investment loan made by the Company’s
outside general counsel to the Company. Notes (g), (h), (i), and (j) reflect repayment obligations to a significant shareholder
for private investments made from time to time as indicated. See Note 9.
For
the six months ended June 30, 2016, the Company received proceeds from the issuance of convertible notes payable in the amount
of $95,000 and an additional $350,000 from the issuance of convertible notes payable with related parties (total $445,000).
NOTE
7 – STOCKHOLDERS’ EQUITY (DEFICIT)
In
June 2016, a private investor entered into a common stock subscription agreement to purchase from the Company a total of 3,500,000
restricted shares of common stock at a price of $0.006 per share, which resulted in proceeds of $21,000 to the Company.
COMMON
STOCK WARRANTS
The
Company did not issue any warrants for the six months ended June 30, 2016. For the six months ended June 30, 2015, the Company
issued warrants to individuals in connection with common stock subscription agreements that each individual entered into with
the Company. Each such warrant provides for the option to purchase an additional 100,000 (3,650,000 in total) shares of common
stock for a period of up to one year at an exercise price of $0.10 per share. For the six months ended June 30, 2016 and 2015,
no warrants were exercised. Twelve warrants totaling 3,650,000 shares of common stock expired during the six months ended June
30, 2016.
NOTE
8 – 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 Company’s
Chief Executive Officer has a base annual salary rate of $162,500. 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.
As of June 30, 2016 and 2015 no amounts for bonuses have been earned or accrued under this agreement.
In
addition to the bonus provision and the annual base salary, the Chief Executive Officer’s employment agreement provides
for payment of previously accrued base salary in the amount of $376,052 and vested deferred vacation compensation in the amount
of $12,501 as of June 30, 2016 and are included in accrued payroll.
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
our Vice President of Research and Development
in March 2015. Among other terms and provisions, the employment agreement provides 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, our Vice President of Research and
Development 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 our Vice President of Research and Development has assigned
to the Company. For the six months ended June 30, 2016 and 2015, the Company has made payments to a company owned by our Vice
President of Research and Development under these arrangements. As of June 30, 2016, the Company has accrued $49,000 in wages
and approximately $7,566 in accrued royalties under this agreement. See Note 9.
The
Company occupies an office building for its corporate headquarters located in Lake Park, Florida. In January 2015, the Company
renewed a lease agreement with a shareholder for 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 $7,105. 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 for a research facility located in Daytona Beach, Florida. The Company
leases this 3,200 square foot facility under a month to month lease agreement ending on December 31, 2016. The monthly rent, including
sales and use taxes, is $2,929. In accordance with the terms of the leasehold agreement, we are responsible for all utilities,
repairs and maintenance. In June 2016, the Company provided notice that we were terminating this lease agreement effective July
31, 2016. There were no termination fees incurred due to the lease being a month to month lease agreement, and the Company expects
to have its deposit of $2,500 fully reimbursed. The Company relocated all property and equipment as well as personnel for this
research facility to our corporate headquarters located in Lake Park, Florida. See Note 11.
Total
rent expense, before adjustments of reclassified facilities cost for research and development, for the six months ended June 30,
2016 and 2015 for these facilities totaled $60,849 and $57,975, respectively.
NOTE
9 – RELATED PARTY TRANSACTIONS
The
Company’s executive officers and employees, from time to time, make payments for 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. The
Company does not provide its employees or executive officers with corporate credit cards. Amounts due these officers and directors
(including one of the Company’s directors, the Company’s CEO, and controller) are included in Accounts payable, related
parties, on the Consolidated Balance Sheets.
The
accounts payable due to related parties also includes amounts owed to the Company’s current contractors/employees for past
earnings and out of pocket travel expenses. This includes amounts owed to our Vice President of Research and Development (See
Note 8) and a contractor who was President of one of EcoSmart’s divisions prior to the merger with EcoSmart and a current
shareholder.
As
of June 30, 2016, the Company had outstanding a $239,000 note payable to a current shareholder, which note came due on August
3, 2016. As of June 30, 2016, no principal payments had been made on this note. See Note 6.
As
of June 30, 2016, one of the Company’s directors held two convertible notes payable by the Company. These convertible notes
reflect a portion of the amount that the outside director is owed for certain vendor payments made on the Company’s behalf
and for funds previously loaned to the Company for working capital. One of them, in the face amount of $60,000, has been issued
to a company controlled by the director, is due on demand, together with interest at 4.5% APR, and is convertible at $0.01 per
share of common stock. The second, issued directly to the director personally, is in the face amount of $30,000, is due on demand,
together with interest at 4.5% APR, and is convertible at $0.01 per share of common stock. See Note 6.
As
of June 30, 2016, the Company’s outside general counsel held three convertible notes payable. One such note reflected an
amount due for legal services provided for the year ended December 31, 2014 in the amount of $150,000. This note is payable by
the Company on demand, together with interest at 4.5% APR, and is convertible at $0.01 per share of common stock. Another of these
notes reflected an amount due to for legal services provided for the year ended December 31, 2015 in the amount of $120,000. This
note is payable on demand, together with interest at 4.5% APR, and is convertible at $0.007 per share of common stock. A third
note is in the amount of $10,000, which reflects funds loaned to the Company for working capital. It is due on demand, together
with interest at 12% APR, and is convertible at $0.008 per share of common stock. See Note 6.
As
of June 30, 2016, the Company had issued a total of four (4) convertible notes to a certain private investor and shareholder.
The first such note is in the amount of $100,000, is due on November 13, 2018, together with interest at 10% APR, and is convertible
at $0.01 per share of common stock. The second such note is in the amount of $100,000, is due on March 18, 2019, together with
interest at 10% APR, and is convertible at $0.01 per share of common stock. The third such note is in the amount of $50,000, is
due on May 12, 2019, together with interest at 10% APR, and is convertible at $0.01 per share of common stock. And the fourth
such note is in the amount of $100,000, is due on June 7, 2019, together with interest at 10% APR, and is convertible at $0.01
per share of common stock. See Note 6.
During
the six months ended June 30, 2016 and 2015, the Company recorded revenue for sales to shareholders in the amount of $47,782 and
$8,258, respectively. For the six months ended June 30, 2016, one shareholder accounted for approximately 18% of the Company’s
revenue and as a group the sales to shareholders accounted for approximately 27% of the Company’s revenues. These revenues
are recorded as revenue, related party on the Company’s Condensed Consolidated Statements of Operations.
NOTE
10 – 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, 2016 and 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, 2016
|
|
|
December 31, 2015
|
|
Accrued royalties
|
|
$
|
114,368
|
|
|
$
|
114,368
|
|
Other current liabilities from discontinued operations
|
|
$
|
114,368
|
|
|
$
|
114,368
|
|
NOTE
11 – SUBSEQUENT EVENTS
In July 2016, one of our significant private
investor shareholders advanced funds to be used for working capital to the Company in the amount of $300,000. Any use of proceeds
will incur interest at 10% APR. As of the date of this filing, the Company has not utilized any of the funds.
On
July 31, 2016, the Company terminated the lease agreement for a research facility located in Daytona Beach, Florida. The Company
relocated all property and equipment as well as personnel for this research facility to our corporate headquarters located in
Lake Park, Florida.