Edgar Filing: FINDEX COM INC

Form 10-QSB/A March 31, 2004

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

Amendment No. 1

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004.

[_]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________.

Commission File Number: 0-29963

FINDEX.COM, INC.

(Exact name of 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)	(Zip Code)

(402) 333-1900

(Issuer’s telephone number, including area code)

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 September 29, 2005.

Transitional Small Business Disclosure Format (check one): Yes [_] No [X]

Explanatory Note

We are filing this Amendment Number 1 to our Quarterly Report on Form 10-QSB for the three months ended March 31, 2004 to restate our financial statements for the quarter then ended to reflect certain issues identified during a regulatory review of our financial statements associated with a certain registration statement filed with the SEC on November 22, 2004 on Form SB-2 and which is pending effectiveness as of the date of this filing of Amendment Number 1 to Form 10-QSB for the quarter ended March 31, 2004. There was no net effect on either cash provided by operating activities, cash used by investing activities or cash used by financing activities as a result of the corrections to the financial statements for the period covered by this report. Our management and our board of directors have concluded that these restatements are necessary to reflect the following changes.

Revisions affecting our condensed consolidated statements of operations:

In June 1999 we entered into a certain software license agreement with Parsons Technology, Inc. to manufacture, distribute and sell a variety of software titles, including QuickVerse^®and Membership Plus^®, by far our two largest selling titles. During the quarter ended June 30, 2002, we reached a tentative settlement agreement in an arbitration arising out of the 1999 license with The Learning Company (“TLC”), the licensor-assignee at the time. The tentative settlement agreement forgave the final, unpaid installment due on the 1999 license and extended the term from 10 years to 50 years. We originally recorded the final, unpaid installment ($1,051,785) as an offset against the recorded historical cost of the 1999 license and recalculated the amortization based on this reduced amount and the extension of the useful life to 50 years. Although paragraph 6 of Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, which guides the recognition and measurement of intangible assets, provides that the measurement of an asset in which the consideration given is cash is measured by the amount of cash paid, our management has since concluded that too much time had elapsed between the date of the 1999 license and the date of the tentative settlement agreement for such an offset to be appropriate. Therefore, we have recognized the extinguishment of the liability owed to TLC as income in our consolidated statement of operations for the year ended December 31, 2002. This adjustment reduced our retained deficit at the year ended December 31, 2003 from that which was originally reported but had no effect on the condensed consolidated statements of operations or consolidated statements of cash flows for the period ended March 31, 2004.

During the quarter ended December 31, 2003, we reached a final settlement agreement in a second dispute arising out of the 1999 license with Zondervan and TLC. This final settlement extended the life of the 1999 license, and the trademarks included therein, indefinitely. We originally reassessed the useful life of the 1999 license to be indefinite, based on the guidelines provided by paragraphs 11 and 53 of SFAS No. 142, Goodwill and Other Intangible Assets. Our management has since concluded a 10 year life is appropriate based on our going concern opinion for the years ended December 31, 2002 and 2003. Therefore, we have restored the estimated economic useful life to the original 10 years and have recalculated annual amortization accordingly. This adjustment increased the retained deficit at December 31, 2003 (for the prior years’ amortization and related income tax effects) and decreased net income for the three months ended March 31, 2004. There was no net effect on our consolidated statements of cash flows for the three months ended March 31, 2003 and 2004, respectively.

Revisions resulting in reclassifications or clarification with no net effect on our condensed consolidated statements of operations:

During the year ended December 31, 2003, we decided to no longer provide support for and to destroy all remaining inventory of certain of our. We originally recorded this as a non-recurring item in the “Other income (expense)” section of our consolidated statements of operations for the year ended December 31, 2003. We have revised our condensed consolidated statement of operations for the three months ended March 31, 2003 to reflect this obsolete inventory in the “Cost of Sales” section.

During the three months ended March 31, 2004, and as a direct result of the final settlement agreement with Zondervan and TLC, we wrote-off certain inventory containing Zondervan-owned content. Though not technologically obsolete, we were unable to sell the inventory under the final settlement agreement. We originally recorded this event as a non-recurring item in the “Other income (expense)” section of our condensed consolidated statement of operations. We have revised our condensed consolidated statement of operations for the three months ended March 31, 2004 to reflect this inventory adjustment in “Cost of Sales” section.

-i-

We had previously and erroneously treated our 2004 rebates reserve adjustment as an expense recovery in operating expenses. The more appropriate presentation should have been, and is now, as an adjustment to revenue, as provided by EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

Rebates payable to a third-party processor were overstated on our consolidated financial statements for the year ended December 31, 2000. We discovered this error during the preparation of our condensed consolidated financial statements for the three months ended March 31, 2004. We originally recorded the error correction as an adjustment to the beginning retained earnings of the year ended December 31, 2003 on our Forms 10-QSB and 10-KSB for the year ended December 31, 2004. We have revised our consolidated statement of operations for the year ended December 31, 2000 to reflect an adjustment to revenue and reported the correction on our Form 10-KSB/A for the year then ended. This revision had no net effect on the net income (loss) for the three months ended March 31, 2004 and 2003 or retained earnings (deficit) at March 31, 2004 and 2003.

We also have reclassified various other expense items in our condensed consolidated statements of operations for the three months ended March 31, 2004 and 2003 to conform with the presentation in our consolidated statements of operations for the years ended December 31, 2004 and 2003, respectively. There was no net effect on net income from these reclassifications for the three months ended March 31, 2004 and 2003, respectively.

A discussion of the restatement for the quarter ended March 31, 2004 is included in Note 11 of the condensed consolidated financial statements included in this Amendment Number 1 to Form 10-QSB for the quarter ended March 31, 2004. Changes have also been made to the following items as a result of the restatement:

Part I Item 1 Financial Statements.

Item 2 Management’s Discussion and Analysis of Financial Condition or Plan of Operations.

This Amendment Number 1 to Form 10-QSB for the quarter ended March 31, 2004 does not otherwise change or update the disclosures set forth in the Form 10-QSB as originally filed and does not otherwise reflect events occurring after the filing of the form 10-QSB. For a description of our business and the risks related to our business, see our Annual Report on Form 10-KSB/A for the year ended December 31, 2004.

-ii-

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		March 31, 2004			March 31, 2003
		(Restated)			(Restated)
Assets
Current assets:
Cash and cash equivalents	$	30,584		$	1,508
Accounts receivable, trade		443,781			208,325
Inventory		173,000			315,200
Other current assets		23,670			39,448
Total current assets		671,035			564,481
Property and equipment, net		69,703			86,263
Software license, net		2,643,413			3,146,921
Software development, net		506,121			306,155
Restricted cash		100,354			38,636
Other assets		68,818			39,495
Total assets	$	4,059,444		$	4,181,951

Liabilities and stockholders’ equity
Current liabilities:
Notes payable	$	89,999		$	749,999
Accrued royalties		1,398,570			2,132,263
Accounts payable, trade		737,358			912,741
Current maturities of long-term notes payable		128,344			58,125
Other current liabilities		939,563			1,161,729
Total current liabilities		3,293,834			5,014,857
Long-term note payable		54,612			34,069
Non-current deferred taxes		747,464			886,998
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51
Common stock		21,011			19,811
Paid-in capital		7,080,629			7,029,079
Retained (deficit)		(7,138,157	)		(8,802,914	)
Total stockholders’ equity		(36,466	)		(1,753,973	)
Total liabilities and stockholders’ equity	$	4,059,444		$	4,181,951

See accompanying notes.

F-1

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended March 31		2004			2003
		(Restated)			(Restated)

Revenues, net of reserves and allowances	$	1,566,393		$	1,068,841
Cost of sales		468,659			298,821
Gross profit		1,097,734			770,020
Operating expenses:
Sales and marketing		242,599			178,685
General and administrative		555,679			469,806
Bad debts		2,500			---
Depreciation and amortization		135,452			137,100
Total operating expenses		936,230			785,591
Earnings (loss) from operations		161,504			(15,571	)
Other income		---			989
Other expenses, net		(14,330	)		(14,801	)
Income (loss) before income taxes		147,174			(29,383	)
Provision for income taxes		(30,311	)		56,616
Net income		116,863			27,233
Retained (deficit) at beginning of year		(7,255,020	)		(8,830,147	)
Retained (deficit) at end of period	$	(7,138,157	)	$	(8,802,914	)


Net earnings per share:
Basic	$	0.01		$	---
Diluted	$	0.01		$	---

Weighted average shares outstanding:
Basic		21,011,438			19,811,437
Diluted		23,090,892			22,047,255

See accompanying notes.

F-2

Findex.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended March 31		2004			2003
		(Restated)			(Restated)
Cash flows from operating activities:
Cash received from customers	$	1,450,002		$	1,084,519
Cash paid to suppliers and employees		(1,353,784	)		(1,029,165	)
Other operating activities, net		(13,921	)		29,648
Net cash provided by operating activities		82,297			85,002
Cash flows from investing activities:
Acquisition of property and equipment		(13,674	)		(3,820	)
Software development costs		(73,628	)		(66,075	)
Website development costs		(4,516	)		(11,054	)
Deposits made		(484	)		(500	)
Net cash (used) by investing activities		(92,302	)		(81,449	)
Cash flows from financing activities:
Proceeds from line of credit, net		16,605			11,790
Payments made on long-term notes payable		(17,684	)		(13,850	)
Net cash (used) by financing activities		(1,079	)		(2,060	)
Net increase (decrease) in cash and cash equivalents		(11,084	)		1,493
Cash and cash equivalents, beginning of year		41,668			15
Cash and cash equivalents, end of period	$	30,584		$	1,508

Reconciliation of net income to cash flows from operating activities:
Net income	$	116,863		$	27,233
Adjustments to reconcile net income to net cash
provided by operating activities:
Software development costs amortized		152,213			40,422
Provision for bad debts		2,500			---
Depreciation and amortization		135,452			137,100
Change in assets and liabilities:
(Increase) decrease in accounts receivable		(80,478	)		19,916
Decrease in inventories		99,600			101,500
Decrease in refundable income taxes		---			29,148
(Increase) decrease in prepaid expenses		(1,750	)		18,102
Increase (decrease) in accrued royalties		(100,436	)		1,650
(Decrease) in accounts payable		(251,996	)		(158,822	)
Increase (decrease) in deferred taxes		30,311			(56,616	)
(Decrease) in other liabilities		(19,982	)		(74,631	)
Net cash provided by operating activities	$	82,297		$	85,002

See accompanying notes.

F-3

FindEx.com, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2004

(UNAUDITED)

NOTE 1 - 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, 2003.

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 basis and adjusted on a per-item basis.

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 has been established, at which time such costs are capitalized until the product is available for general release to customers. Capitalized costs are amortized on a product-by-product basis using the greater of the straight-line method over the estimated product life or on the ratio of current revenues to total projected product revenues. The Company generally considers technological feasibility is established with the release of a beta version for testing. Total capitalized software development costs of current releases at March 31, 2004 were $1,072,979, less accumulated amortization of $566,858. Research and development costs incurred and charged to expense were $16,174 and $67,791 for the three months ended March 31, 2004 and 2003, respectively.

NOTE 2 - INVENTORIES (Restated)

At March 31, 2004 and 2003, inventories consisted of the following:

		2004		2003
Raw materials	$	67,000	$	93,000
Finished goods		106,000		222,200
	$	173,000	$	315,200

During the three months ended March 31, 2004 and 2003, we wrote-off obsolete inventory with a carried cost totaling $31,892 and $31,892, respectively. This has been included in cost of sales.

F-4

NOTE 3 - NOTES PAYABLE (Restated)

At March 31, 2004 and 2003, notes payable consisted of the following:

		2004		2003
Unsecured demand note payable to a corporation, with interest at 9%.	$	---	$	650,000

Note payable to a corporation, due May 31, 2003, with interest compounded monthly at 1.5%. Unsecured. Convertible at the option of the holder into 666,667 restricted common shares.		33,333		33,333

Note payable to a corporation, due May 31, 2003, with interest compounded monthly at 1.5%. Unsecured. Convertible at the option of the holder into 666,667 restricted common shares.		33,333		33,333

Note payable to a corporation, due May 31, 2003, with interest compounded monthly at 1.5%. Unsecured. Convertible at the option of the holder into 466,666 restricted common shares.		23,333		33,333
	$	89,999	$	749,999

NOTE 4 - LONG-TERM NOTES PAYABLE

At March 31, 2004 and 2003, long-term notes payable consisted of the following:

		2004		2003
Unsecured term note payable to a corporation due October 2004 in monthly installments of $5,285, including interest at 8%.	$	53,975	$	92,194
Term note payable to a corporation due December 2005 in monthly installments of $6,833, including interest at 8%. Secured by inventory.		128,981		---
		182,956		92,194
Less current maturities		128,344		58,125
	$	54,612	$	34,069

Principal maturities at March 31, 2004 are as follows:

2005	$	128,344
2006		54,612
	$	182,956

NOTE 5 - INCOME TAXES (Restated)

The provision for taxes on income for the three months ended March 31 consisted of the following:

		2004			2003
Current:
Federal	$	---		$	---
State		---			---
		---			---
Deferred:
Federal		(25,001	)		46,304
State		(5,310	)		10,312
		(30,311	)		56,616
Total tax (expense) benefit	$	(30,311	)	$	56,616

F-5

NOTE 6 - EARNINGS PER COMMON SHARE (Restated)

Earnings per common share are computed by dividing net income by the weighted average number of common shares 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 the Company reinvested the proceeds to purchase additional shares at market value. A total of 4,075,283 and 4,678,450 potentially dilutive securities for the three months ended March 31, 2004 and 2003, respectively, have been excluded from the computation of diluted earnings per share, as their inclusion would be anti-dilutive.

The following table shows the amounts used in computing earnings per share and the effect on income (loss) and the average number of shares of dilutive potential common stock:

Three months ended March 31		2004		2003
Net Income	$	116,863	$	27,233
Preferred stock dividends		---		---
Net income available to common shareholders	$	116,863	$	27,233

Basic weighted average shares outstanding		21,011,438		19,811,437
Dilutive effect of:
Stock options		---		---
Convertible notes payable		1,800,000		2,000,000
Convertible preferred series A		114,000		114,000
Convertible preferred series B		40,000		40,000
Warrants		125,454		81,818
Diluted weighted average shares outstanding		23,090,892		22,047,255

Earnings per share:
Basic	$	0.01	$	0.00
Diluted	$	0.01	$	0.00

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position of the Company.

On November 14, 2001, The Zondervan Corporation elected to enforce a court order and served notice that we cease selling, marketing and manufacturing all products containing their copyrighted material. We are abiding by the court order and are no longer shipping products containing Zondervan’s copyrighted material.

The Company previously reached tentative settlement in a dispute with TLC over various provisions of several agreements, including the software license agreement. Disposition of this tentative settlement was contingent upon settlement of negotiations with The Zondervan Corporation.

In March 2004, the Company finalized the settlement with The Zondervan Corporation and TLC. The Settlement Agreement was effective October 20, 2003 and calls for FindEx to pay Zondervan a total of $500,000, plus 5% simple interest, in installments of $150,000, plus interest, due November 15, 2003 and January 30, 2004 (which have been paid), and installments of $100,000, plus interest, due April 30, 2004 (which has been paid) and July 30, 2004. This agreement is secured by all rights, title and interest in QuickVerse^® together will all proceeds produced by QuickVerse^®. In addition, the Agreement provides for the transfer of ownership of QuickVerse^®, including; (i) the object and source code, and (ii) patents, trademarks, trade names, etc., from TLC to FindEx.

On February 28, 2003, the Internal Revenue Service approved the Company’s request to pay back payroll taxes in monthly installments of $10,000 through May 5, 2003. This was extended through January 5, 2004. The monthly installments increase to $45,000 beginning February 5, 2004 and continuing through July 5, 2004. In April 2004, the Internal Revenue Service approved the Company’s request to reduce the monthly installments from $45,000 to $20,000 beginning May 5, 2004.

F-6

NOTE 8 - RISKS AND UNCERTAINTIES

The Company’s future operating results may be affected by a number of factors. The Company is dependent upon a number of major inventory and intellectual property suppliers. If a critical supplier had operational problems or ceased making material available to the Company, operations could be adversely affected. The Company is also dependent upon a few major customers. If any of these customers experienced operational problems or ceased placing orders with the Company, operations could also be adversely affected.

NOTE 9 - GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has a negative current ratio and total liabilities in excess of total assets. Those factors, as well as uncertainty in securing financing for continued operations, create an uncertainty about the Company’s ability to continue as a going concern. Management of the Company has developed a plan to reduce its liabilities through sales of new releases of the Company’s flagship software titles. The ability of the Company to continue as a going concern is dependent on the acceptance of the plan by the Company’s creditors and the plan’s success. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 10 - SUBSEQUENT EVENTS

In April 2004, the Company committed to issue a total of 1,519,349 common shares to executive management in lieu of cash as payment of their 2003 accrued performance bonus. The Company also committed to issue 637,500 common shares to non-executive employees. Both are subject to a one-year lockup agreement.

In April 2004, the Company committed to issue a warrant to purchase 150,000 common shares at $.022 per share to a law firm for corporate legal services. This warrant will be currently exercisable and will expire in April 2009.

NOTE 11 - RESTATEMENT AND RECLASSIFICATION

We have restated our financial statements for the three months ended March 31, 2004 to reflect issues identified during a regulatory review of our financial statements associated with a registration statement filing on Form SB-2 that is pending effectiveness as of the date of this 10-QSB/A filing. Management and the board of directors concluded these restatements were necessary to reflect the changes described below.

Revisions affecting the condensed consolidated statements of operations:

During the quarter ended June 30, 2002, we reached a tentative settlement agreement in our arbitration with TLC. The tentative settlement agreement forgave the final, unpaid installment due on the 1999 Software License Agreement (“SLA”) and extended the SLA term from 10 years to 50 years. We originally recorded the final, unpaid installment ($1,051,785) of the SLA as an offset against the recorded historical cost of the SLA and recalculated the amortization based on this reduced amount and the extension of the useful life to 50 years. Although paragraph 6 of SFAS No. 141, Business Combinations, which guides the recognition and measurement of intangible assets, provides that the measurement of assets in which the consideration given is cash are measured by the amount of cash paid, our management has since concluded that too much time had passed between the date of the 1999 license (June 1999) and the date of the tentative settlement agreement (May 2002) for such an offset to be appropriate. Therefore, we recognized the extinguishment of the liability owed to TLC as income in the consolidated statement of operations for the year ended December 31, 2002. This adjustment reduced the retained deficit at December 31, 2003 from that originally reported and had no effect on the condensed consolidated statements of operations or consolidated statements of cash flows for the period ended March 31, 2004.

During the quarter ended December 31, 2003, we reached a final settlement agreement in our dispute with Zondervan and TLC. This final settlement extended the life of the SLA, and the trademarks included therein, indefinitely. We originally reassessed the useful life of the SLA to be indefinite, based on the guidelines provided by paragraphs 11 and 53 of SFAS No. 142, Goodwill and Other Intangible Assets. Our management has since concluded a 10 year life is appropriate based on our going concern opinion for 2002 and 2003. Therefore, we restored the estimated economic useful life to the original 10 years and have recalculated annual amortization accordingly. This adjustment increased the retained deficit at December 31, 2003 (for the prior years’ amortization and related income tax effects) and decreased net income for the three months ended March 31, 2004. There was no net effect on the consolidated statements of cash flows for the three months ended March 31, 2003 and 2004, respectively.

F-7

Revisions resulting in reclassifications or clarification with no net effect on the condensed consolidated statements of operations:

During the year ended December 31, 2003, we made the decision to no longer provide support for certain of our products and destroyed all remaining inventory of those products. We originally recorded this as a non-recurring item in the “Other income (expense)” section of the consolidated statements of operations. We revised the condensed consolidated statement of operations for the three months ended March 31, 2003 to reflect this obsolete inventory in cost of sales.

During the three months ended March 31, 2004, and as a direct result of the settlement with Zondervan and TLC, we wrote-off inventory containing content from Zondervan. Though not technologically obsolete, we were unable to sell the inventory under the terms of the settlement. We originally recorded this as a non-recurring item in the “Other income (expense)” section of the condensed consolidated statement of operations. The revised condensed consolidated statement of operations for the three months ended March 31, 2004 reflects this inventory adjustment in cost of sales.

We had previously and erroneously treated the 2004 rebates reserve adjustment as an expense recovery in operating expenses. The more appropriate presentation should have been, and is now, an adjustment to revenue, as provided by EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

Rebates payable to a third-party processor were overstated on the consolidated financial statements for the year ended December 31, 2000. We discovered the error during the preparation of our condensed consolidated financial statements for the three months ended March 31, 2004. We originally recorded the error correction as an adjustment to the beginning retained earnings of the year ended December 31, 2003 on the 2004 quarterly and annual filings. We revised the consolidated statement of operations for the year ended December 31, 2000 to reflect an adjustment to revenue and reported the correction on Form 10-KSB/A for the year then ended. This revision had no net effect on the net income for the three months ended March 31, 2004 and 2003 or retained earnings (deficit) at March 31, 2004 and 2003.

We also reclassified various other expense items in the condensed consolidated statements of operations for the three months ended March 31, 2004 and 2003 to conform to the presentation in the statements of operations for the years ended December 31, 2004 and 2003. There was no net effect on net income from these reclassifications for the three months ended March 31, 2004 and 2003.

F-8

A summary of the effects of these changes is as follows:

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2004
(Unaudited)

		As Originally Reported			As Restated			Change
Assets
Current assets:
Cash and cash equivalents	$	130,938		$	30,584		$	(100,354	)	(a)
Accounts receivable, trade		443,781			443,781			---
Inventory		173,000			173,000			---
Other current assets		23,670			23,670			---
Total current assets		771,389			671,035			(100,354	)
Property and equipment, net		69,703			69,703			---
Software license, net		2,513,158			2,643,413			130,255		(b)
Software development, net		506,121			506,121			---
Restricted cash		---			100,354			100,354		(a)
Other assets		68,818			68,818			---
Total assets	$	3,929,189		$	4,059,444		$	130,255

Liabilities and stockholders’ equity
Current liabilities:
Notes payable	$	89,999		$	89,999		$	---
Accrued royalties		1,398,570			1,398,570			---
Accounts payable, trade		737,358			737,358			---
Current maturities of long-term notes payable		128,344			128,344			---
Other current liabilities		939,563			939,563			---
Total current liabilities		3,293,834			3,293,834			---
Long-term note payable		54,612			54,612			---
Non-current deferred taxes		1,052,128			747,464			(304,664	)	(c)
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51			---
Common stock		21,011			21,011			---
Paid-in capital		7,080,629			7,080,629			---
Retained (deficit)		(7,573,076	)		(7,138,157	)		434,919
Total stockholders’ equity		(471,385	)		(36,466	)		434,919
Total liabilities and stockholders’ equity	$	3,929,189		$	4,059,444		$	130,255

(a) Reclassification of restricted cash held by our merchant banker as non-current asset.
(b) Increase from reclassification of forgiven installment as income net of additional amortization from returning the software license to a 10-year life from indefinite.
(c) Decrease from recalculation of deferred income taxes resulting from changes to the software license agreement accounting.

F-9

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2003
(Unaudited)

		As Originally Reported			As Restated			Change
Assets
Current assets:
Cash and cash equivalents	$	40,144		$	1,508		$	(38,636	)	(a)
Accounts receivable, trade		208,325			208,325			---
Inventory		315,200			315,200			---
Other current assets		39,448			39,448			---
Total current assets		603,117			564,481			(38,636	)
Property and equipment, net		86,263			86,263			---
Software license, net		2,543,646			3,146,921			603,275		(b)
Software development, net		306,155			306,155			---
Restricted cash		---			38,636			38,636		(a)
Other assets		39,495			39,495			---
Total assets	$	3,578,676		$	4,181,951		$	603,275

Liabilities and stockholders’ equity
Current liabilities:
Notes payable	$	749,999		$	749,999		$	---
Accrued royalties		2,132,263			2,132,263			---
Accounts payable, trade		1,011,688			912,741			(98,947	)	(c)
Current maturities of long-term notes payable		58,125			58,125			---
Other current liabilities		1,161,729			1,161,729			---
Total current liabilities		5,113,804			5,014,857			(98,947	)
Long-term note payable		34,069			34,069			---
Non-current deferred taxes		1,076,194			886,998			(189,196	)	(d)
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51			---
Common stock		19,811			19,811			---
Paid-in capital		7,029,079			7,029,079			---
Retained (deficit)		(9,694,332	)		(8,802,914	)		891,418
Total stockholders’ equity		(2,645,391	)		(1,753,973	)		891,418
Total liabilities and stockholders’ equity	$	3,578,676		$	4,181,951		$	603,275

(a) Reclassification of restricted cash held by our merchant banker as non-current asset.
(b) Increase from reclassification of forgiven installment as income net of additional amortization from returning the software license to a 10-year life from indefinite.
(c) Decrease from correction of fiscal 2000 error.
(d) Decrease from recalculation of deferred income taxes resulting from changes to the software license agreement accounting.

F-10

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2004
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	1,537,264		$	1,566,393		$	29,129		(a)
Cost of sales		397,689			468,659			70,970		(b)
Gross profit		1,139,575			1,097,734			(41,841	)
Operating expenses:
Sales and marketing		217,016			242,599			25,583		(c)
General and administrative		590,703			555,679			(35,024	)	(d)
Nonrecurring items		32,396			---			(32,396	)	(e)
Bad debts		2,500			2,500			---
Depreciation and amortization		9,575			135,452			125,877		(f)
Total operating expenses		852,190			936,230			84,040
Earnings from operations		287,385			161,504			(125,881	)
Other income		---			---			---
Other expenses, net		(14,330	)		(14,330	)		---
Income before income taxes		273,055			147,174			(125,881	)
Provision for income taxes		(800	)		(30,311	)		(29,511	)	(g)
Net income	$	272,255		$	116,863			(155,392	)

Net earnings per share:
Basic	$	0.01		$	0.01		$	---
Diluted	$	0.01		$	0.01		$	---

Weighted average shares outstanding:
Basic		21,011,438			21,011,438			---
Diluted		22,945,438			23,090,892			145,454		(h)

(a) Increase from reclassification of rebate reserve adjustment from Sales and marketing expenses and reclassification of cost of estimated returns to Cost of sales.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, reclassification of fulfillment costs from Sales and marketing expenses, reclassification of Inventory write down expense from operating expenses and decrease from reclassification of cost of estimated returns.
(c) Increase from reclassification of rebate reserve adjustment to Revenues and reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Decrease from reclassification to Cost of sales.
(f) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(g) Increase from effects of additional amortization of the software license agreement.
(h) Increase from recalculation of potentially dilutive common stock warrants and correction of a math error.

F-11

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2003
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	1,062,366		$	1,068,841		$	6,475		(a)
Cost of sales		247,655			298,821			51,166		(b)
Gross profit		814,711			770,020			(44,691	)
Operating expenses:
Sales and marketing		163,997			178,685			14,688		(c)
General and administrative		497,294			469,806			(27,488	)	(d)
Nonrecurring items		31,892			---			(31,892	)	(e)
Depreciation and amortization		24,972			137,100			112,128		(f)
Total operating expenses		718,155			785,591			67,436
Earnings (loss) from operations		96,556			(15,571	)		(112,127	)
Other income		989			989			---
Other expenses, net		(14,801	)		(14,801	)		---
Income (loss) before income taxes		82,744			(29,383	)		(112,127	)
Provision for income taxes		8,700			56,616			47,916		(g)
Net income	$	91,444		$	27,233			(64,211	)

Net earnings per share:
Basic	$	---		$	---		$	---
Diluted	$	---		$	---		$	---

Weighted average shares outstanding:
Basic		19,811,437			19,811,437			---
Diluted		21,945,437			22,047,255			101,818		(h)

(a) Increase from reclassification of rebate reserve adjustment from Sales and marketing expenses and reclassification of cost of estimated returns to Cost of sales.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, reclassification of fulfillment costs from Sales and marketing expenses, and reclassification of Inventory write down expense from operating expenses and decrease from reclassification of cost of estimated returns.
(c) Increase from reclassification of rebate reserve adjustment to Revenues and reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Decrease from reclassification to Cost of sales.
(f) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(g) Increase from effects of additional amortization of the software license agreement.
(h) Increase from recalculation of potentially dilutive common stock warrants and correction of a math error.

F-12

Findex.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2004
(Unaudited)

		As Originally Reported			As Restated			Change
Cash flows from operating activities:
Cash received from customers	$	1,481,382		$	1,450,002		$	(31,380	)	(a)
Cash paid to suppliers and employees		(1,385,164	)		(1,353,784	)		31,380		(a)
Other operating activities, net		(13,921	)		(13,921	)		---
Net cash provided by operating activities		82,297			82,297			---
Cash flows from investing activities:
Acquisition of property and equipment		(13,674	)		(13,674	)		---
Software development costs		(73,628	)		(73,628	)		---
Website development costs		(4,516	)		(4,516	)		---
Deposits made		(484	)		(484	)		---
Net cash (used) by investing activities		(92,302	)		(92,302	)		---
Cash flows from financing activities:
Proceeds from line of credit, net		16,605			16,605			---
Payments made on long-term notes payable		(17,684	)		(17,684	)		---
Net cash (used) by financing activities		(1,079	)		(1,079	)		---
Net (decrease) in cash and cash equivalents		(11,084	)		(11,084	)		---
Cash and cash equivalents, beginning of year		142,022			41,668			(100,354	)	(b)
Cash and cash equivalents, end of period	$	130,938		$	30,584		$	(100,354	)

Reconciliation of net income to cash flows from operating activities:
Net income	$	272,255		$	116,863		$	(155,392	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Software development costs amortized		152,213			152,213			---
Provision for bad debts		2,500			2,500			---
Depreciation and amortization		9,575			135,452			125,877		(c)
Change in assets and liabilities:
(Increase) in accounts receivable		(80,478	)		(80,478	)		---
Decrease in inventories		99,600			99,600			---
(Increase) in prepaid expenses		(1,750	)		(1,750	)		---
(Decrease) in accrued royalties		(100,436	)		(100,436	)		---
(Decrease) in accounts payable		(251,996	)		(251,996	)		---
Increase in deferred taxes		800			30,311			29,511		(d)
(Decrease) in other liabilities		(19,986	)		(19,982	)		4		(e)
Net cash provided by operating activities	$	82,297		$	82,297		$	---

(a) Reclassified effects of change in deferred revenue from cash paid for liability to cash received.
(b) Reclassification of restricted cash held by our merchant banker as non-current asset.
(c) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(d) Increase from effects of additional amortization of the software license agreement.
(e) Rounding difference.

F-13

Findex.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2003
(Unaudited)

		As Originally Reported			As Restated			Change
Cash flows from operating activities:
Cash received from customers	$	1,080,633		$	1,084,519		$	3,886		(a)
Cash paid to suppliers and employees		(1,025,279	)		(1,029,165	)		(3,886	)	(a)
Other operating activities, net		29,648			29,648			---
Net cash provided by operating activities		85,002			85,002			---
Cash flows from investing activities:
Acquisition of property and equipment		(3,820	)		(3,820	)		---
Software development costs		(66,075	)		(66,075	)		---
Website development costs		(11,054	)		(11,054	)		---
Deposits made		(500	)		(500	)		---
Net cash (used) by investing activities		(81,449	)		(81,449	)		---
Cash flows from financing activities:
Proceeds from line of credit, net		11,790			11,790			---
Payments made on long-term notes payable		(13,850	)		(13,850	)		---
Net cash (used) by financing activities		(2,060	)		(2,060	)		---
Net increase in cash and cash equivalents		1,493			1,493			---
Cash and cash equivalents, beginning of year		38,651			15			(38,636	)	(b)
Cash and cash equivalents, end of period	$	40,144		$	1,508		$	(38,636	)

Reconciliation of net income to cash flows from operating activities:
Net income	$	91,444		$	27,233		$	(64,211	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		24,972			137,100			112,128		(c)
Software development costs amortized		40,422			40,422			---
Change in assets and liabilities:
Decrease in accounts receivable		19,916			19,916			---
Decrease in inventories		101,500			101,500			---
Decrease in refundable income taxes		29,148			29,148			---
Decrease in prepaid expenses		18,102			18,102			---
Increase in accrued royalties		1,650			1,650			---
(Decrease) in accounts payable		(158,822	)		(158,822	)		---
(Decrease) in deferred taxes		(8,700	)		(56,616	)		(47,916	)	(d)
(Decrease) in other liabilities		(74,630	)		(74,631	)		(1	)	(e)
Net cash provided by operating activities	$	85,002		$	85,002		$	---

(a) Reclassified effects of change in deferred revenue from cash paid for liability to cash received.
(b) Reclassification of restricted cash held by our merchant banker as non-current asset.
(c) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(d) Increase from effects of additional amortization of the software license agreement.
(e) Rounding difference.

F-14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATIONS.

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 within the meaning of Section 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934; and the Private Securities Litigation Reform Act of 1995. 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 or Plan of Operation, including without limitation the risk factors contained in the Company’s annual report on Form 10-KSB/A for the period ending December 31, 2003. Except as required by law, we undertake no obligation to update any of the forward-looking statements in this Form 10-QSB/A after the date of this report.

GENERAL

Findex.com, Inc. (“Findex” or the “Company”, and collectively referred to as “we”, “us” or “our”, in each case as required by the context) is a developer, publisher, and distributor/seller of off-the-shelf consumer and organizational software products. The common thread among the Company’s products is a customer constituency that shares a devotion to or interest in Christianity and faith-based “inspirational” values. We are focused on becoming the premier provider of Bible study and related faith-based software products and content to the domestic and international markets through ongoing internal development of new products, expansion and upgrade of existing products, and strategic product line and/or corporate acquisitions and licensing.

Our religious software titles are currently divided among the following six categories:

·	Bible Study

·	Financial/Office Management Products for Churches and other Faith-Based Ministries

·	Print & Graphic Products

·	Pastoral Products

·	Children’s Products

·	Language Tutorial Products.

RESULTS OF OPERATIONS

Our software products have a significant seasonality to their revenues. 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 expected to be the weakest, historically generating only about 33% of our annual sales.

Our net income increased approximately $90,000 from a net income of approximately $27,000 for the three months ended March 31, 2003 to a net income of approximately $117,000 for the three months ended March 31, 2004. By excluding our interest, taxes, depreciation, and amortization from net income, our EBITDA increased approximately $174,000 from EBITDA earnings of approximately $123,000 for the three months ended March 31, 2003 to EBITDA earnings of approximately $297,000 for the three months ended March 31, 2004. Such increase is due to the Company’s release of an enhanced version of our flagship product, QuickVerse^®, in late fourth quarter of 2003 and the release of an enhanced version of our top financial and data management product, Membership Plus^®, during the first quarter of 2004.

-1-

Overall, interest expense for the three months ended March 31, 2004 decreased by approximately $10,000 compared to the three months ended March 31, 2003. This is due to the Company reducing its payroll liability by continuously meeting its scheduled payments. Furthermore, the note liabilities interest was reduced due to the reclassification of the note payable in the fourth quarter of 2003. Amortization expense related to the software license remained constant and is amortized over a 10 year useful life. Amortization expense related to the software development costs increased approximately $112,000 for the three months ended March 31, 2004 compared to the three months ended March 31, 2003. This is a direct result from QuickVerse^® 8.0 shipping in late December 2003.

Revenues

We recognize software revenue net of estimated returns and allowances for returns, price discounts and rebates, upon shipment of product, which is when title passes, provided that collection of the resulting receivable is probable and we have no significant obligations. Revenue from inventory out on consignment is recognized when the consignee sells the product. Revenue associated with advance payments from customers is deferred until products are shipped. Revenue for software distributed electronically via the Internet is recognized upon delivery.

Product return reserves are based upon a percentage of total retail and direct sales for the period and may increase or decrease as actual returns are processed. 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. 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 that we have with them. 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.

Software products are sold separately, without future performance such as upgrades or maintenance, and are sold with post contract customer support (PCS) services, 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 revenue associated with sales of these products, since the cost of providing this free technical support is insignificant. We accrue the estimated associated costs of providing this free support upon product shipment. We also offer several plans under which customers are charged for technical support assistance. For plans where we collect fees in advance, we recognize revenue over the period of service, which is generally one year.

Shipping and handling costs in connection with our software products are expensed as incurred and included in cost of goods sold.

Gross revenues increased approximately $540,000 from approximately $1,176,000 for the three months ended March 31, 2003 to approximately $1,716,000 for the three months ended March 31, 2004. Such increase is due to the Company’s release of an enhanced version of our flagship product, QuickVerse^®, in late fourth quarter of 2003 and the release of an enhanced version of our top financial and data management product, Membership Plus^®, during the first quarter of 2004. Although there was a new product release during the first quarter of 2003, the retail value of the product was significantly lower than the QuickVerse^® and Membership Plus^® titles and ranged from $19.95 to $29.95.

Sales returns and allowances increased approximately $77,000 from approximately $133,000 for the three months ended March 31, 2003 to approximately $210,000 for the three months ended March 31, 2004 and slightly increased as a percentage of gross sales from approximately 11.3% for the three months ended March 31, 2003 to approximately 12.2% for the three months ended March 31, 2004. The increase in sales returns and allowances as a percentage is attributable to post-Christmas stock balancing by our secular customers and several of our CBA customers.

-2-

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 and the non-capitalized technical support wages. The direct costs and manufacturing overhead increased from 21.1% of gross revenues in 2003 to 24.5% of gross revenues in 2004. The three months ended March 31, 2003 and 2004 include the write down of two distinct categories of obsolete inventory of approximately $32,000, respectively. The increase in direct costs and manufacturing overhead resulted directly from an increase in fulfillment costs and amortization of software development costs. Fulfillment costs from a third-party warehouse increased approximately $23,000 as we had an increased amount of retail sales during the three months ended March 31, 2004 due to the enhanced releases of QuickVerse^® and Membership Plus^®. The amortization recognized during the three months ended March 31, 2003 resulted from several new software releases in 2003 and the continued amortization of those products released in 2002. Furthermore, the amortization increase for the three months ended March 31, 2004 corresponds with the December release of QuickVerse^® 8.0. The direct costs and manufacturing overhead percentage is expected to continue at the 2004 levels as working capital remains more consistent and as more development projects are implemented.

Royalties to third party providers of intellectual property increased approximately $29,000 from approximately $51,000 for the three months ended March 31, 2003 to approximately $80,000 for the three months ended March 31, 2004. The royalty rate as a percentage of gross revenues increased slightly from 4.3% of gross revenues in 2003 to 4.6% of gross revenues in 2004. The increase of royalties reflects the release of the QuickVerse^® 8.0 editions in late December 2003 and Membership Plus^® 8.0 in late January 2004.

Software development costs, consisting primarily of direct and indirect labor and related overhead charges, capitalized during the three months ended March 31, 2003 and 2004 were approximately $66,000 and approximately $74,000, respectively. Accumulated amortization of these development costs included in cost of sales totaled approximately $41,000 and approximately $152,000 for the three months ended March 31, 2003 and 2004, respectively. The increase in both the capitalization and amortization is a direct result of the increase in the number of development projects.

	Three Months Ended March 31,
		2003		2004
Beginning balance	$	280,502	$	584,706
Capitalized		66,075		73,628
Amortized (cost of sales)		40,422		152,213
Ending balance	$	306,155	$	506,121

Research and development expense (General and administrative)	$	67,791	$	16,174

SALES, GENERAL AND ADMINISTRATIVE

Sales expenses increased approximately $64,000 from approximately $179,000 for the three months ended March 31, 2003 to approximately $243,000 for the three months ended March 31, 2004. Included in Sales expenses, Commissions to a third-party telemarketing firm increased approximately $43,000 as our sales focus to the direct consumer increased along with the number of new and enhanced product releases during late 2003 and early 2004. Advertising costs also increased approximately $18,000 with the new and enhanced product releases, and Customer Service costs increased approximately $4,000 as we continue to expand our sales efforts and focus more towards the consumer instead of the retail store.

-3-

Research and development costs include salaries and benefits of personnel and third parties conducting research and development of software products. Software development costs expensed as research and development (see table above) amounted to approximately $16,000 for the three months ended March 31, 2004 compared to approximately $68,000 incurred for the three months ended March 31, 2003. The decrease in 2004 reflects the early stages of new development projects for the year of 2004. Research and development expenses are expected to increase in future periods as we continue to add new products and Versions to our product mix.

Personnel costs increased approximately $101,000 from approximately $295,000 for the three months ended March 31, 2003 to approximately $396,000 for the three months ended March 31, 2004. This increase is primarily from the addition of staff members and the associated health care costs. Furthermore, the capitalization of direct and indirect labor and related overhead charges as software development costs (see ‘Cost of Sales’ above) decreased by approximately $15,000 from approximately $22,000 for the three months ended March 31, 2003 to approximately $7,000 for the three months ended March 31, 2004. This decrease is due to the early stages of new development projects for the year 2004. 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 technical support and direct marketing staff.

Legal costs increased approximately $5,000 as the disputes with TLC and Zondervan were finalized in March 2004. Rent expense slightly increased as we opened a new product development facility located in Naperville, IL. Travel costs increased approximately $2,000 as we increased our sales staff and our sales efforts to our retail customers as new product lines and enhancements were introduced during late 2003 and early 2004. Telecommunication costs increased approximately $25,000 from approximately $18,000 for the three months ended March 31, 2003 to approximately $43,000 for the three months ended March 31, 2004. This increase results from an increase in technical support calls and customer service calls due to the two new major product releases in late December 2003 and early 2004. Bad debt expense increased approximately $3,000 during 2004 due to the increased amount of outstanding accounts receivable.

Amortization

Amortization expense remained steady at approximately $126,000 for the three months ended March 31, 2003 and 2004, respectively. The software license acquired from TLC in July of 1999 is amortized over a 10 year useful life. Amortization expense reflects the continual amortization of the software license.

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. Amortization of the software license agreement is on a straight-line basis over the estimated useful life for financial reporting while deductible when paid for income tax purposes. 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. Because of this uncertainty, we have recorded a valuation allowance to offset the 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 $8,400,000. The carryforwards are the result of income tax losses generated in 2000 ($2,973,000 expiring in 2020), 2001 ($5,191,000 expiring in 2021) and 2002 ($236,000 expiring in 2022). We will need to achieve a minimum annual taxable income, before deduction of operating loss carryforwards, of approximately $442,000 to fully utilize the current loss carryforwards. We believe this is achievable through continued careful expense management and introduction of new products and enhanced Versions of our existing products.

Management expects the deductible temporary differences (reserves) to reverse sometime beyond the next fiscal year.

-4-

LIQUIDITY AND CAPITAL RESOURCES

To date, Findex has funded its purchase of the Parsons Church Division primarily through operations. Since inception, we have raised approximately $2,250,000 in net proceeds from equity financings to fund the acquisition and working capital needs. We have focused on fulfilling the software license obligation and have been unable to meet our royalty and trade debt obligations. In addition, the dispute with TLC over specific performance provisions of and payments due on the TLC Distribution Agreement has also lead to the shortage of working capital.

As of March 31, 2004, Findex had $671,035 in current assets, $3,293,834 in current liabilities and a retained deficit of $7,138,157. These factors continue to create an uncertainty about our ability to continue as a going concern. We had net income of $116,863 for the three months ended March 31, 2004.

Net cash provided by operating activities was approximately $85,000 and approximately $82,000 for the three months ended March 31, 2003 and 2004, respectively.

Net cash used in investing activities was approximately $82,000 and $92,000 for the three months ended March 31, 2003 and 2004, respectively. The increase in cash used for investing activities results form capitalizing costs associated with software development and upgrading our website to expand our e-commerce capability.

Net cash used by financing activities was approximately $2,000 and approximately $1,000 for the three months ended March 31, 2003 and 2004, respectively. Cash used by financing activities reflects proceeds from our accounts receivable line of credit and payments made on debt obligations.

On March 19, 2001, we entered into an Accounts Receivable Financing Agreement with Alliance Financial Capital, Inc. (“AFC”). Pursuant to this agreement, AFC agrees to purchase selected accounts receivable on a discounted basis, including, without limitation, full power to collect, compromise, sue for, assign, or in any manner enforce collection thereof. The agreement provides for advances of 60% toward the purchase of the invoices with a credit line of $250,000. The terms call for 40% to be held in a reserve account from the collection of each invoice. Invoices not paid by the customer within 90 days of shipment are required to be repurchased by us out of the reserve account. The agreement carries a 12-month term with a minimum monthly fee equal to one half of one percent (.5%). The term renews automatically in 12-month increments unless a written request for termination is received by AFC at least 30 days before the renewal date. During the three months ended March 31, 2004, we transferred accounts receivable totaling $189,459 to a lender for cash advances of $112,673. As accounts are paid, the collected funds (less the amount advanced and appropriate fees) are disbursed to the Company. The transfer agreement includes a repurchase requirement and, accordingly, the proceeds were accounted for as a secured borrowing. At March 31, 2004, the balance of receivables transferred and included in trade receivables was $62,807. The remaining secured borrowing balance of $37,541 is included in accrued expenses.

We do not currently have adequate funds available to fund our operations over the next twelve months. In order to maintain the current level of operations, we will need to secure additional funding sources to meet its operating expenses. Such funding sources may include, but are not limited to, funding pursuant to private placements of common or convertible equities, placement of debt with banks, private or public investors, or other lending institutions.

Although there can be no assurance, we believe that through a combination of outside sources of capital and revenues generated from direct-to-consumer sales, we will have sufficient sources of capital to meet our operating needs. However, any substantial delays in receipt of or failure to obtain such capital and delays in product releases will prevent us from operating as a going concern, given our limited revenues and capital reserves.

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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: September 30, 2005	By	/s/ Steven Malone
		Steven Malone
		President and Chief Executive Officer


Date: September 30, 2005	By	/s/ Kirk R. Rowland
		Kirk R. Rowland, CPA
		Chief Financial Officer

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