FINDEX COM INC - Quarter Report: 2011 September (Form 10-Q)

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Nevada		88-0379462
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
18151 Lafayette Avenue, Elkhorn, Nebraska		68022
(Address of principal executive offices)		(Zip Code)

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PART I - FINANCIAL INFORMATION:
Item 1.    Financial Statements:	F-1
Balance Sheets – September 30, 2011 (unaudited) and December 31, 2010	F-1
Statements of Operations (unaudited) for the three and nine months ending September 30, 2011 and for the three and nine months ending September 30, 2010	F-2
Statements of Cash Flows (unaudited) for the nine months ending September 30, 2011 and for the nine months ending September 30, 2010	F-3
Notes to Unaudited Financial Statements	F-4
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.    Quantitative and Qualitative Disclosures About Market Risk	7
Item 4T.  Controls and Procedures	7
PART II - OTHER INFORMATION:	8
Item 1.    Legal Proceedings	8
Item 1A. Risk Factors	8
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3.    Defaults Upon Senior Securities	8
Item 4.    (Removed and Reserved)	8
Item 5.    Other Information	8
Item 6.    Exhibits	8
Signatures	11

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
		September 30, 2011				December 31, 2010
		(Unaudited)				(Audited)
Assets
Current assets:
Cash and cash equivalents		$	305,729			$	22,027
Accounts receivable, trade, net			104,046				109,243
Inventories, net			5,958				64,662
Other current assets			22,095				28,417
Total current assets			437,828				224,349
Property and equipment, net			2,982				7,709
Intangible assets, net			96,586				384,553
Other assets			18,781				53,516
Total assets		$	556,177			$	670,127
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Current portion of term debt		$	37,529			$	61,265
Accounts payable, trade			190,088				428,723
Accounts payable, related party			11,000				75,786
Accrued royalties			11,397				951,136
Accrued payroll			98,187				110,476
Other current liabilities			73,537				178,118
Other current liabilities from discontinued operations			271,816				---
Total current liabilities			693,554				1,805,504
Long-term debt, net			---				---
Deferred income taxes, net			401				2,400
Commitments and contingencies (Note 9)
Stockholders’ equity (deficit):
Preferred stock, $.001 par value
5,000,000 shares authorized
-0- and -0- shares issued and outstanding, respectively
Common stock, $.001 par value
120,000,000 shares authorized,
68,868,930 and 67,349,153 shares issued and outstanding, respectively			68,869				67,349
Paid-in capital			8,017,314				7,988,833
Retained (deficit)			(8,223,961	)			(9,193,959	)
Total stockholders’ equity (deficit)			(137,778	)			(1,137,777	)
Total liabilities and stockholders’ equity (deficit)		$	556,177			$	670,127
See accompanying notes.

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues, net of reserves and allowances		$	6,779			$	31,524			$	44,019			$	125,907
Cost of sales			14,345				9,450				30,915				51,520
Gross profit			(7,566	)			22,074				13,104				74,387
Operating expenses:
Sales and marketing			(18,639	)			800				37,335				81,451
General and administrative			75,219				213,961				525,322				769,601
Impairment expense			---				---				217,972				---
Total operating expenses			56,580				214,761				780,629				851,052
Loss from operations			(64,146	)			(192,687	)			(767,525	)			(776,665	)
Other income (expenses), net			(541	)			(4,563	)			(10,038	)			(12,421	)
Gain on debt settlement			190,358				---				558,409				---
Income (loss) from continuing operations before income taxes			125,671				(197,250	)			(219,154	)			(789,086	)
Income tax benefit			342,346				---				405,619				---
Income (loss) from continuing operations		$	468,017			$	(197,250	)		$	186,465			$	(789,086	)
Discontinued operations (Note 11):
Income from operations of discontinued component			31,570				59,696				217,068				334,309
Gain on sale of software product line			972,082				---				972,082				---
Income tax (provision)			(342,346	)			---				(405,619	)			---
Income from discontinued operations, net of taxes			661,306				59,696				783,531				334,309
Net income (loss)		$	1,129,323			$	(137,554	)		$	969,996			$	(454,777	)
Net earnings (loss) per share - Basic & Diluted:
Net income (loss) per share from continuing operations		$	0.01			$	0.00			$	0.00			$	(0.01	)
Net income per share from discontinued operations		$	0.01			$	0.00			$	0.01			$	0.01
Net income (loss) per share		$	0.02			$	0.00			$	0.01			$	0.00
Weighted average shares outstanding:
Weighted average shares used in computing basic and diluted income (loss) per share			68,868,930				63,968,097				68,335,147				61,053,949
See accompanying notes.

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,		2011				2010
Cash flows from operating activities:
Cash received from customers		$	675,312			$	1,301,778
Cash paid to suppliers and employees			(1,351,505	)			(1,349,277	)
Other operating activities, net			(6,703	)			(6,905	)
Net cash (used) by operating activities			(682,896	)			(54,404	)
Cash flows from investing activities:
Software development costs			---				(114,598	)
Proceeds from sale of software product line			975,000				---
Other investing activities, net			7,170				(9,457	)
Net cash provided (used) by investing activities			982,170				(124,055	)
Cash flows from financing activities:
Contributed capital			22,752				82,500
Payments made on term debt			(38,324	)			(32,986	)
Net cash (used) provided by financing activities			(15,572	)			49,514
Net increase (decrease) in cash and cash equivalents			283,702				(128,945	)
Cash and cash equivalents, beginning of year			22,027				138,539
Cash and cash equivalents, end of period		$	305,729			$	9,594
Reconciliation of net income (loss) to cash flows from operating activities:
Net income (loss)		$	969,996			$	(454,777	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Software development costs amortized			62,135				167,359
Depreciation & amortization			44,257				65,843
Bad debts provision			(17,491	)			---
Stock and warrants issued for services			7,248				16,331
(Gain) on sale of property and equipment			(2,134	)			(685	)
(Gain) on debt settlement			(558,409	)			---
(Gain) on sale of software product line			(972,082	)			---
Loss on impairment expense			217,972
Change in assets and liabilities:
Decrease in accounts receivable			22,688				51,274
Decrease in inventories			58,704				38,926
Decrease in other current assets			17,348				16,217
(Decrease) increase in accrued royalties			(150,850	)			89,537
(Decrease) increase in accounts payable			(301,714	)			49,414
(Decrease) in other liabilities			(80,564	)			(93,843	)
Net cash (used) by operating activities		$	(682,896	)		$	(54,404	)
See accompanying notes.

	▪	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.

	▪	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.

For the Three Months Ended September 30,		2011				2010
Net income (loss) from continuing operations		$	468,017			$	(197,250	)
Preferred stock dividends			---				---
Net income (loss) available to common shareholders		$	468,017			$	(197,250	)
Net income from discontinued operations		$	661,306			$	59,696
Preferred stock dividends			---				---
Net income available to common shareholders		$	661,306			$	59,696
Basic weighted average shares outstanding			68,868,930				63,968,097
Dilutive effect of:
Stock options			---				---
Warrants			---				---
Diluted weighted average shares outstanding			68,868,930				63,968,097

For the Nine Months Ended September 30,		2011				2010
Net loss from continuing operations		$	186,465			$	(789,086	)
Preferred stock dividends			---				---
Net loss available to common shareholders		$	186,465			$	(789,086	)
Net income from discontinued operations		$	783,531			$	334,309
Preferred stock dividends			---				---
Net income available to common shareholders		$	783,531			$	334,309
Basic weighted average shares outstanding			68,335,147				61,053,949
Dilutive effect of:
Stock options			---				---
Warrants			---				---
Diluted weighted average shares outstanding			68,335,147				61,053,949

Raw materials		$	2,724
Finished goods			4,234
Less reserve for obsolete inventory			(1,000	)
Inventories		$	5,958

Balance December 31, 2010		$	21,000
Bad debts provision (included in Sales and marketing expenses)			(17,491	)
Accounts written off			(409	)
Collection of accounts previously written off			---
Balance September 30, 2011		$	3,100

Balance December 31, 2010		$	9,108
Provision for obsolete inventory			65
Obsolete inventory written off			(151	)
Reserve for obsolete inventory from discontinued operations			(8,022	)
Balance September 30, 2011		$	1,000

Balance December 31, 2010		$	115,756
Return provision – sales			(20,779	)
Return provision – cost of sales			(9,345	)
Returns processed			(60,632	)
Balance September 30, 2011		$	25,000

Unsecured term note payable to a finance company due March 2012 in monthly installments of $1,483, including interest at5.89% APR.		$	8,746
Unsecured term note payable to a former shareholder due March 2008 in monthly installments of $10,000, plus interest at 8% APR, through April 2007, and monthly installments of $20,000, plus interest at 8% APR, beginning May 2007. Interest on overdue principal accruing at 15% APR.			---
Unsecured term note payable to a former shareholder due January 2012, plus interest at 5% APR.			28,783
Current portion of debt		$	37,529

		Chief Executive Officer				Chief Technology Officer
Base Annual Salary		$	150,000			$	150,000

		Accrued Base Salary				Vested Deferred Vacation Compensation
Included in Accrued Payroll at September 30, 2011		$	7,233			$	14,424

Liabilities:		September 30, 2011
Accrued royalties		$	271,816
Total liabilities		$	271,816

		Continuing Operations				Discontinued Operations				Total
Gross revenues		$	64,721			$	658,634			$	723,355
Less estimated sales returns and allowances			(20,702	)			40,727				20,025
Net revenues			44,019				699,361				743,380
Cost of sales			30,915				212,677				243,592
Gross profit			13,104				486,684				499,788
Operating expenses:
Advertising and direct marketing			12,749				52,582				65,331
Sales and marketing wages			42,077				59,700				101,777
Bad debt provision			(17,491	)			---				(17,491	)
Total sales and marketing			37,335				112,282				149,617
Personnel costs			195,551				---				195,551
Amortization and depreciation			39,410				4,847				44,257
Research and development			---				142,411				142,411
Rent			20,636				---				20,636
Other general and administrative costs			269,725				10,076				279,801
Total general and administrative			525,322				157,334				682,656
Impairment expense			217,972				---				217,972
Total operating expenses			780,629				269,616				1,050,245
Income (loss) from operations			(767,525	)			217,068				(550,457	)
Other income (expenses), net			(10,038	)			---				(10,038	)
Gain on debt settlement			558,409				---				558,409
Gain on sale of software product line			---				972,082				972,082
Income (loss) before income taxes			(219,154	)			1,189,150				969,996
Income tax benefit (provision)			405,619				(405,619	)			---
Net income (loss)		$	186,465			$	783,531			$	969,996

		Continuing Operations				Discontinued Operations				Total
Gross revenues		$	137,239			$	1,214,590			$	1,351,829
Less estimated sales returns and allowances			(11,332	)			(83,206	)			(94,538	)
Net revenues			125,907				1,131,384				1,257,291
Cost of sales			51,520				448,262				499,782
Gross profit			74,387				683,122				757,509
Operating expenses:
Advertising and direct marketing			23,184				86,680				109,864
Sales and marketing wages			58,267				99,420				157,687
Total sales and marketing			81,451				186,100				267,551
Personnel costs			316,663				---				316,663
Amortization and depreciation			52,761				13,082				65,843
Research and development			---				126,468				126,468
Rent			69,696				---				69,696
Other general and administrative costs			330,481				23,163				353,644
Total general and administrative			769,601				162,713				932,314
Total operating expenses			851,052				348,813				1,199,865
Income (loss) from operations			(776,665	)			334,309				(442,356	)
Other income (expenses), net			(12,421	)			---				(12,421	)
Income (loss) before income taxes			(789,086	)			334,309				(454,777	)
Income taxes			---				---				---
Net income (loss)		$	(789,086	)		$	334,309			$	(454,777	)

Purchase price for the sale of the QuickVerse product line		$	975,000
Assumed liabilities by WORDsearch			93,673
Inventory transferred to WORDsearch, at cost			(42,868	)
Unamortized basis of QuickVerse software license			(9,083	)
Legal and broker fees associated with the Software Product Line Purchase Agreement			(44,640	)
Balance September 30, 2011		$	972,082

 

 

 

 

 

 

 

 

 

 

 

Statements of Continuing Operations for Quarters Ending September 30		2011				2010				Change
Net revenues		$	44,019			$	125,907			$	(81,888	)
Cost of sales			(30,915	)			(51,520	)			20,605
Gross profit		$	13,104			$	74,387			$	(61,283	)
Sales, marketing and general and administrative expenses			(562,657	)			(851,052	)			288,395
Impairment expense			(217,972	)			---				(217,972	)
Loss from operations		$	(767,525	)		$	(776,665	)		$	9,140
Other income (expenses), net			(10,038	)			(12,421	)			2,383
Gain on debt settlement			558,409				---				558,409
Loss before income taxes		$	(219,154	)		$	(789,086	)		$	569,932
Income tax benefit			405,619				---				405,619
Net income (loss)		$	186,465			$	(789,086	)		$	975,551

	▪	a decrease in net revenues attributable to the following:
		▪	a sharp fall-off in demand in the retail channel;
		▪	a lack of a new product release for the FormTool® product line; and
		▪	the current relatively lackluster U.S. domestic market for consumer software generally;
	▪	an off-setting decrease in sales, marketing and general and administrative expenses resulting from our continued cost-cutting initiatives;
	▪	a large decrease in personnel expenses, which are included in sales, marketing and general and administrative expenses, due to the transfer of the QuickVerse® product line’s business operations over to WORDsearch;
	▪	an impairment expense for the decrease in net realizable value on the intangible assets related to the QuickVerse® product line including capitalized software development costs, capitalized raw material packaging costs, and capitalized website development costs; and
	▪	a gain on debt settlement as we negotiated with certain royalty content vendors to accept a reduction in accrued royalty balance owed to them as well as certain vendors to accept a reduction in trade payables owed to them.

																Change
Revenues for Continuing Operations for Nine Months Ending September 30		2011			% to Sales				2010			% to Sales				$				%
Gross revenues		$	64,721			100	%		$	137,239			100	%		$	(72,518	)		53	%
Less estimated sales returns and allowances			(20,702	)		32	%			(11,332	)		8	%			(9,370	)		83	%
Net revenues		$	44,019			68	%		$	125,907			92	%		$	(81,888	)		65	%

																Change
Sales, General and Administrative Costs for Continuing Operations for Nine Months Ending September 30		2011			% to Sales				2010			% to Sales				$				%
Selected expenses:
Advertising and direct marketing			12,749			20	%			23,184			17	%			(10,435	)		45	%
Sales and marketing wages			42,077			65	%			58,267			42	%			(16,190	)		28	%
Bad debt provision			(17,491	)		27	%			---			0	%			(17,491	)		0	%
Total sales and marketing		$	37,335			58	%		$	81,451			59	%		$	(44,116	)		54	%
Personnel costs		$	195,551			302	%		$	316,663			231	%		$	(121,112	)		38	%
Amortization and depreciation			39,410			61	%			52,761			38	%			(13,351	)		25	%
Rent			20,636			32	%			69,696			51	%			(49,060	)		70	%
Other general and administrative costs			269,725			417	%			330,481			241	%			(60,756	)		18	%
Total general and administrative		$	525,322			812	%		$	769,601			561	%		$	(244,279	)		32	%
Total sales, marketing, general and administrative		$	562,657			869	%		$	851,052			620	%		$	(288,395	)		34	%

Working Capital		September 30, 2011				December 31, 2010
Current assets		$	437,828			$	224,349
Current liabilities		$	693,554			$	1,805,504
Retained deficit		$	8,223,961			$	9,193,959

Cash Flows for Nine Months Ending September 30		2011				2010				Change				%
Cash flows (used) by operating activities		$	(682,896	)		$	(54,404	)		$	(628,492	)			1155	%
Cash flows provided (used) by investing activities		$	982,170			$	(124,055	)		$	1,106,225				892	%
Cash flows (used) provided by financing activities		$	(15,572	)		$	49,514			$	(65,086	)			131	%