Notes
to Condensed Consolidated Financial Statements
March
31, 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:
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▪
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Heavy
machinery, equipment and infrastructure throughout each of the construction, oil and gas, and mining industries
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▪
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Marine
industry, vessels and infrastructure
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▪
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Industrial
HVAC equipment, commercial refrigeration systems, and power generators
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▪
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Energy
production equipment, including solar and wind
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▪
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Hardscapes
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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.
Beneficial
conversion feature
The
Company from time to time may issue convertible note agreements that may have conversion prices which create an embedded beneficial
conversion feature pursuant to the Emerging Issues Task Force (EITF) guidance on beneficial conversion features. A beneficial
conversion feature exists on the date a convertible note agreement is issued and the fair value of the underlying common stock
to which the note agreement is convertible into is in excess of the remaining unallocated proceeds of the note agreement after
first considering the allocation of a portion of the note agreement proceeds to the fair value of any attached equity instruments,
if any related equity instruments were granted with the debt. In accordance with the EITF guidance, the intrinsic value of the
beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt
discount is amortized to interest expense over the life of the note agreement using the effective interest method. In the case
of no termination date of the note agreement, the debt discount is fully expensed to interest expense.
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 three months ended March 31, 2016 and 2015, the Company recognized $47,985 and $102,693, 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 three months ended March 31, 2016 and 2015 excluded the impact of the following potential
common shares as their inclusion would be anti-dilutive.
For the Three Months Ended March 31
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2016
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2015
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Stock options
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---
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|
|
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---
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Warrants
|
|
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1,350,000
|
|
|
|
3,100,000
|
|
Convertible note payables
|
|
|
71,892,857
|
|
|
|
24,500,000
|
|
Total weighted average anti-dilutive potential common shares
|
|
|
73,242,857
|
|
|
|
27,600,000
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|
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 from July 24, 2014 through December 31, 2014 as discontinued operations for the three months ended March 31, 2016
and 2015. See Note 10.
RECENT
ACCOUNTING PRONOUNCEMENTS
At
March 31, 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 March 31, 2016, the Company had negative working capital of $2,356,439 and had an accumulated deficit of $5,716,801. 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 the merger as well as entering into subscription agreements
and/or note payable agreements with investors. The accompanying condensed consolidated financial statements do not include any
adjustments related to these uncertainties.
NOTE
3 – INVENTORIES
Inventories
consisted of the following:
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|
March 31, 2016
|
|
|
December 31, 2015
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Raw materials
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|
$
|
27,381
|
|
|
$
|
24,753
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|
Finished goods
|
|
|
3,972
|
|
|
|
4,364
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|
Reserve for obsolete inventory
|
|
|
(9,320
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)
|
|
|
(9,320
|
)
|
Inventories
|
|
$
|
22,033
|
|
|
$
|
19,797
|
|
NOTE
4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Office equipment
|
|
$
|
3,466
|
|
|
$
|
3,466
|
|
Warehouse equipment
|
|
|
76,339
|
|
|
|
76,339
|
|
Computer equipment
|
|
|
8,708
|
|
|
|
8,708
|
|
Less: accumulated depreciation
|
|
|
(62,884
|
)
|
|
|
(58,519
|
)
|
Property and equipment
|
|
$
|
25,629
|
|
|
$
|
29,994
|
|
For
the three months ended March 31, 2016 and 2015, the Company recorded depreciation expense of $4,365 and $4,365, respectively.
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
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Cost
|
|
$
|
697,955
|
|
|
$
|
697,955
|
|
Amortization
|
|
|
(352,959
|
)
|
|
|
(341,081
|
)
|
Net intangible assets
|
|
$
|
344,996
|
|
|
$
|
356,874
|
|
The
SMT assets include a patent, a patent pending, trade secret technology, instructions, manuals and materials on certain
manufacturing processes know-how knowledge of these, otherwise fixed assets or expenses. For the three months ended March 31,
2016 and 2015, the Company recorded amortization expense of $11,878 and $11,878, respectively.
NOTE
6 – NOTES PAYABLE AND NOTES PAYABLE RELATED PARTY
At
March 31, 2016, notes payable consisted of the following:
|
|
2016
|
|
Notes payable
|
|
$
|
458,148
|
|
Notes payable, related party
|
|
|
809,000
|
|
Total
|
|
$
|
1,267,148
|
|
At
March 31, 2016, notes payable consisted of the following:
|
|
|
|
2016
|
|
Unsecured term note payable to a former shareholder due January 2012, plus interest at 5% APR. Interest on overdue principal accruing at 10% APR.
|
|
(a)
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|
$
|
28,783
|
|
Unsecured term note payable to a current shareholder due August 1, 2015, plus interest at 10% APR.
|
|
(b)
|
|
|
300,000
|
|
Unsecured term note payable to a current shareholder, no due date, non-interest bearing.
|
|
(c)
|
|
|
7,500
|
|
Convertible term note payable to a current shareholder due October 6, 2015, plus interest of $2,000, convertible at $0.01 per share of common stock.
|
|
(d)
|
|
|
20,000
|
|
Convertible term note payable to an individual due September 2016, plus interest at 10% APR, convertible at $0.02 per share of common stock.
|
|
(e)
|
|
|
10,000
|
|
Convertible term note payable to a current shareholder due April 23, 2016, plus interest of $1,000, convertible at $0.005 per share of common stock.
|
|
(f)
|
|
|
10,000
|
|
Convertible term note payable to an individual due January 20, 2017, plus interest at 10% APR, convertible at $0.01 per share of common stock.
|
|
(g)
|
|
|
25,000
|
|
Convertible term note payable to a current shareholder due April 12, 2016, plus interest of $1,000, convertible at $0.005 per share of common stock.
|
|
(h)
|
|
|
10,000
|
|
Convertible term note payable to an individual due March 4, 2017, plus interest at 10% APR, convertible at $0.01 per share of common stock.
|
|
(i)
|
|
|
50,000
|
|
Debt discount related to note payable (f) and (h) due to beneficial conversion feature.
|
|
|
|
|
(3,135
|
)
|
Total
|
|
|
|
$
|
458,148
|
|
As
of March 31, 2016, the Company held a note payable (b) with a current shareholder. The original note payable contained a conversion
feature in the amount of $250,000. However, in March 2015, the Company entered into a loan modification agreement which called
for the original note payable, along with the conversion feature, to be cancelled. Furthermore, the loan modification called for
a replacement note to be entered into at the adjusted principal amount of $300,000, but without any conversion feature exercisable
on the part of the holder. In accordance with ASC 470-50-40, the Company deemed the transaction to be a debt extinguishment due
to the substantially different terms. As a result, the company recorded a gain on debt settlement of $200,000. The Company recognized
a debt discount of $3,135 associated with note payable (f) and (h) as they each carried a beneficial conversion feature. See Note
1.
At
March 31, 2016, the Company was in arrears on the unsecured term note payable (a) to the former shareholder, the unsecured term
note payable (b) to a current shareholder, and the convertible term note payable (d) to a current shareholder. The Company paid
in full the note payable to an individual (h) plus $1,000 in interest ($11,000 total) on April 12, 2016.
NOTES
PAYBLE RELATED PARTY
At
March 31, 2016, the notes payable, related party consisted of the following:
|
|
|
|
2016
|
|
Non-interest bearing note payable, due August 3, 2016.
|
|
(a)
|
|
$
|
239,000
|
|
Convertible note payable to a company controlled by an outside director, whom is also a current shareholder, due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock.
|
|
(b)
|
|
|
60,000
|
|
Convertible note payable to the Company’s current corporate counsel, whom is also a current shareholder, due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock.
|
|
(c)
|
|
|
150,000
|
|
Convertible note payable to an outside director, whom is also a current shareholder, due on demand, plus interest at 4.5% APR, convertible at $0.01 per share of common stock.
|
|
(d)
|
|
|
30,000
|
|
Convertible note payable to the Company’s current corporate counsel for legal services, whom is also a current shareholder, due on demand, plus interest at 4.5% APR, convertible at $0.007 per share of common stock
|
|
(e)
|
|
|
120,000
|
|
Convertible note payable to the Company’s current corporate counsel, whom is also a current shareholder, due on demand, plus interest at 12% APR, convertible at $0.008 per share of common stock
|
|
(f)
|
|
|
10,000
|
|
Convertible note payable to a current shareholder, due November 13, 2018, plus interest at 10% APR, convertible at $0.01 per share of common stock.
|
|
(g)
|
|
|
100,000
|
|
Convertible note payable to a current shareholder, due March 18, 2019, plus interest at 10% APR, convertible at $0.01 per share of common stock.
|
|
|
|
|
100,000
|
|
Total
|
|
|
|
$
|
809,000
|
|
As
of March 31, 2016, no principle payments have been made on note (a). Note payables (b) and (d) are agreements with an outside
director, whom is also a current shareholder, and cover a portion of the amount that the outside director was owed for certain
vendor payments made directly by the outside director’s personal credit card and/or for funds previously loaned to the Company
for working capital. 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 payable (c) and (e) are agreements with the Company’s current corporate counsel, whom is also
a current shareholder, and covers the amount that was due its corporate counsel for legal expenses the Company incurred for the
years ended December 31, 2015 and 2014. See Note 9.
NOTE
7 – STOCKHOLDERS’ EQUITY (DEFICIT)
For
the three months ended March 31, 2016, the Company had no stockholder’s equity transactions.
COMMON
STOCK WARRANTS
The
Company did not issue warrants for the three months ended March 31, 2016. For the three months ended March 31, 2015, the Company
issued warrants to individuals in connection with common stock subscription agreements that each individual entered into with
the Company. Each warrant provides for the option to purchase an additional 100,000 (2,900,000 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 three months ended March 31, 2016 and 2015, no
warrants were exercised. A total of ten warrants totaling 2,900,000 shares of common stock expired during the three months ended
March 31, 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 March 31, 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 $354,603 and vested deferred vacation compensation in the amount
of $12,501 as of March 31, 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 three months ended March 31, 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 March 31, 2016, the Company has accrued $49,000
in wages and approximately $4,300 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.
Total
rent expense, before adjustments of reclassified facilities cost for research and development, for the three months ended March
31, 2016 and 2015 for these facilities totaled $21,638 and $21,000, 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 March 31, 2016, the Company held a non-interest bearing promissory note with a current shareholder. The note payable is due
on August 3, 2016 and totals $239,000. As of March 31, 2016, no principle payments have been made on this note. See Note 6.
As
of March 31, 2016, one of the Company’s directors held two convertible note payable agreements with the Company. These convertible
note payable agreements cover a portion of the amount that the outside director was owed for certain vendor payments made on the
Company’s behalf and for funds previously loaned to the Company for working capital. The first convertible note payable
agreement is between the Company and a company controlled by the director and is in the amount of $60,000. It is due on demand,
plus interest at 4.5% APR and convertible at $0.01 per share of common stock. The second convertible note payable agreement is
between the Company and the director and is in the amount of $30,000. It is due on demand, plus interest at 4.5% APR and convertible
at $0.01 per share of common stock. See Note 6.
As
of March 31, 2016, the Company’s current corporate counsel held three convertible note payable agreements with the Company.
The first note payable agreement covered the amount that was due to the Company’s corporate counsel for legal services provided
for the year ended December 31, 2014 in the amount of $150,000. This convertible note payable agreement is due on demand, plus
interest at 4.5% APR and convertible at $0.01 per share of common stock. The second convertible note payable agreement covered
the amount that was due to the Company’s corporate counsel for legal services provided for the year ended December 31, 2015
in the amount of $120,000. This convertible note payable agreement is due on demand, plus interest at 4.5% APR and convertible
at $0.007 per share of common stock. The final convertible note payable agreement is in the amount of $10,000 for funds loaned
to the Company for working capital. It is due on demand plus interest at 12% APR and convertible at $0.008 per share of common
stock. See Note 6.
As
of March 31, 2016, one of the Company’s current shareholders entered into a convertible note payable agreement with the
Company in the amount of $100,000. The note payable agreement is due on November 13, 2018, plus interest at 10% APR and convertible
at $0.01 per share of common stock. On March 18, 2016, the same current shareholder entered into a second convertible note payable
agreement with the Company in the amount of $100,000. The note payable is due on March 18, 2019, plus interest at 10% APR and
convertible at $0.01 per share of common stock. See Note 6.
During
the three months ended March 31, 2016 and 2015, the Company recorded revenue for sales to shareholders in the amount of $22,897
and $2,332, respectively. For the three months ended March 31, 2016, one shareholder accounted for approximately 35% of the Company’s
revenue and as a group the sales to shareholders accounted for approximately 46% 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 three months ended March 31, 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:
|
|
March 31, 2016
|
|
Accrued royalties
|
|
$
|
114,368
|
|
Other current liabilities from discontinued operations
|
|
$
|
114,368
|
|
NOTE
11 – SUBSEQUENT EVENTS
In
April 2016, the Company repaid a convertible note payable plus interest to a current shareholder in the total amount of $11,000.
See Note 6.
On
May 12, 2016, the Company issued a convertible promissory note to an individual in the amount of $50,000. The convertible promissory
note has a term of twelve months, plus interest at 10% APR and is convertible into shares of common stock at $0.01 per share.