Nevada
|
7372
|
88-0379462
|
(State
or other Jurisdiction
Incorporation
or Organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
TITLE
OF SECURITIES TO BE REGISTERED
|
|
AMOUNT
TO BE REGISTERED(1)
|
PROPOSED
MAXIMUM OFFERING
PRICE PER
SHARE
|
PROPOSED
MAXIMUM AGGREGATE
OFFERING
PRICE
|
AMOUNT
OF REGISTRATION
FEE
|
||||||||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
24,341,666
|
(2)
|
|
$
|
0.090
|
(3)
|
$
|
2,190,750
|
$
|
277.57
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
10,937,500
|
(4)
|
|
$
|
0.180
|
(5)
|
$
|
1,968,750
|
$
|
249.44
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
10,937,500
|
(4)
|
|
$
|
0.600
|
(5)
|
$
|
6,562,500
|
$
|
831.47
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
125,000
|
(4)
|
|
$
|
0.148
|
(5)
|
$
|
18,500
|
$
|
2.34
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
250,000
|
(4)
|
|
$
|
0.100
|
(5)
|
$
|
25,000
|
$
|
3.17
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
150,000
|
(4)
|
|
$
|
0.022
|
(5)
|
$
|
3,300
|
$
|
0.42
|
|
||||||||
Common
Stock, par value
|
|||||||||||||||||||
$.001
per share
|
600,000
|
(4)
|
|
$
|
0.150
|
(5)
|
$
|
90,000
|
$
|
11.40
|
|
||||||||
Total
|
47,341,666
|
$
|
10,858,800
|
$
|
1,375.81
|
(6)
|
|
(1)
|
Pursuant
to Rule 416 under the Securities Act, this registration statement
also
covers such indeterminate number of additional shares of common
stock as
may be issuable upon exercise of warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions.
|
|
(2)
|
Represents
24,341,666 outstanding shares of our common stock held by our selling
stockholders.
|
|
(3)
|
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) of the Securities Act, based on the average of the
closing bid
and asked prices for our common stock as reported on the OTC Bulletin
Board on November 19, 2004.
|
|
(4)
|
Represents
the number of shares of our common stock issuable upon exercise
of certain
warrants held by our selling stockholders.
|
|
(5)
|
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(g) of the Securities Act, based on the stated exercise
price.
|
|
(6)
|
The
filing fee of $1,375.81 is offset by the $507.89 credit due to
the
Registrant based upon the prior withdrawn registration statement
on Form
SB-2 filed with the U.S. Securities & Exchange Commission (the “SEC”)
on August 2, 2001 pursuant
to Rule 457(p) of Regulation C, File No.: 333-66570, less (i) the
fee of $27.17 applied to the registration statement on Form S-8
filed with
the SEC on September 24, 2002, File No.: 333-100035 and (ii)
the fee of
$0.82 applied to the registration statement on Form S-8 filed
with the SEC
on November 8, 2002, File No.: 333-101092.
|
The
information contained in this prospectus may be updated from
time to time
by way of post-effective amendment based on material intervening
developments. The selling stockholders may not sell these securities
until
this registration statement filed with the U.S. Securities
and Exchange
Commission is effective. This prospectus is not an offer to
sell these
securities and the selling stockholders are not soliciting
offers to buy
these securities in any state where the offer or sale of these
securities
is not permitted.
|
1
|
|
3
|
|
12
|
|
12
|
|
13
|
|
13
|
|
14
|
|
15
|
|
18
|
|
20
|
|
23 | |
23
|
|
23
|
|
23
|
|
24
|
|
25 | |
25 | |
26 | |
28
|
|
28
|
|
29
|
|
31
|
|
33
|
|
35
|
|
36 | |
37
|
|
37
|
|
37
|
|
39 | |
39 | |
40
|
|
42
|
|
42
|
|
42 | |
43 | |
45 | |
45
|
61
|
|
61
|
|
62
|
|
63
|
|
63
|
|
67
|
|
68
|
|
68
|
|
68
|
|
69
|
|
69
|
|
70
|
|
70
|
|
70
|
|
70
|
|
F-1
|
|
•
|
Bible
Study
|
|
•
|
Financial/Office
Management Products for Churches and other Faith-Based
Ministries
|
|
•
|
Print
& Graphic Products
|
|
•
|
Pastoral
Products
|
|
•
|
Children’s
Products
|
|
•
|
Language
Tutorial Products
|
|
•
|
2,000,000
shares of our common stock issued as of November 16, 2004 upon
conversion
of $240,000 of previously outstanding debt securities;
|
•
|
466,666 shares of our common stock issued as of December 31, 2004 upon conversion of $23,333 of previously outstanding debt securities; and |
|
•
|
1,125,000
shares of our common stock issuable upon exercise of warrants
previously
issued to a number of our consultants/service providers.
|
Total
common stock outstanding prior to this offering
|
|
|
49,788,317
|
|
|
|
|
|
|
Total
common stock offered for resale to the public in this
offering
|
|
|
47,341,666
|
|
|
|
|
|
|
Common
stock outstanding after this Offering
|
|
|
72,788,317
|
|
|
|
|
|
|
Percentage
of common stock outstanding following this offering that
shares being
offered for resale represent
|
|
|
65
|
%
|
•
|
brand
name recognition;
|
•
|
availability
of financial resources;
|
•
|
the
quality of titles;
|
•
|
reviews
received for a title from independent reviewers who publish reviews
in
magazines, Websites, newspapers and other industry publications;
|
•
|
publisher’s
access to retail shelf space;
|
•
|
the
price of each title; and
|
•
|
the
number of titles then available.
|
|
•
|
deliver
a standardized risk disclosure document that provides information
about
penny stocks and the nature and level of risks in the penny stock
market;
|
|
•
|
provide
the customer with current bid and offer quotations for the penny
stock;
|
|
•
|
explain
the compensation of the broker-dealer and its salesperson in the
transaction;
|
|
•
|
provide
monthly account statements showing the market value of each penny
stock
held in the customer’s
account; and
|
|
•
|
make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s written agreement
to the transaction.
|
|
•
|
the
trading volume of our shares;
|
|
•
|
the
number of securities analysts, market-makers and brokers following
our
common stock;
|
|
•
|
changes
in, or failure to achieve, financial estimates by securities analysts;
|
|
•
|
new
products introduced or announced by us or our competitors;
|
|
•
|
announcements
of technological innovations by us or our competitors;
|
|
•
|
our
ability to produce and distribute retail packaged versions of our
software
in advance of peak retail selling seasons;
|
|
•
|
actual
or anticipated variations in quarterly operating results;
|
|
•
|
conditions
or trends in the consumer software and/or Christian products industries;
|
|
•
|
announcements
by us of significant acquisitions, strategic partnerships, joint
ventures,
or capital commitments;
|
|
•
|
additions
or departures of key personnel;
|
|
•
|
sales
of our common stock; and
|
|
•
|
stock
market price and volume fluctuations of publicly-traded, particularly
microcap, companies generally.
|
Product
Development
|
$
|
2,000,000
|
||
Marketing
and Promotion
|
500,000
|
|||
Other
Working Capital Needs
|
5,018,578
|
|||
New
Content License Acquisitions
|
500,000
|
|||
Total
Net Proceeds
|
$
|
8,018,578
|
Statement
of Operations for Nine Months Ended September 30
|
2006
|
2005
|
Change
|
|
%
|
||||||||||
Net
revenues
|
$
|
2,586,197
|
$
|
3,978,019
|
$
|
(1,391,822
|
)
|
35
|
%
|
||||||
Cost
of sales
|
1,361,157
|
1,410,191
|
(49,034
|
)
|
3
|
%
|
|||||||||
Gross
profit
|
$
|
1,225,040
|
$
|
2,567,828
|
$
|
(1,342,788
|
)
|
52
|
%
|
||||||
Total
operating expenses
|
(2,315,591
|
)
|
(3,183,446
|
)
|
867,855
|
27
|
%
|
||||||||
Loss
from operations
|
$
|
(1,090,551
|
)
|
$
|
(615,618
|
)
|
$
|
(474,933
|
)
|
77
|
%
|
||||
Registration
rights penalties
|
(49,314
|
)
|
(277,792
|
)
|
228,478
|
82
|
%
|
||||||||
Gain
(loss) on fair value adjustment of derivatives
|
1,109,548
|
(874,992
|
)
|
1,984,540
|
227
|
%
|
|||||||||
Other
expenses, net
|
(57,929
|
)
|
(12,009
|
)
|
(45,920
|
)
|
382
|
%
|
|||||||
Loss
before income taxes
|
$
|
(88,246
|
)
|
$
|
(1,780,411
|
)
|
$
|
1,692,165
|
95
|
%
|
|||||
Income
tax benefit
|
89,457
|
187,182
|
(97,725
|
)
|
52
|
%
|
|||||||||
Net
income (loss)
|
$
|
1,211
|
$
|
(1,593,229
|
)
|
$
|
1,594,440
|
100
|
%
|
▪
|
our
gross revenues decreased approximately $1,951,000 to approximately
$
2,794,000 for the nine months ended September 30, 2006 from
approximately
$4,745,000 for the nine months ended September 30, 2005.
This decrease is
primarily attributable to the following:
|
||
▪
|
an
overall net decrease in unit sales of our QuickVerse®
product line due to a reduction in the perceived value on
the part of
customers of certain upgrades based on the relative frequency
thereof;
|
||
▪
|
the
lack of product releases during the nine months ended September
30, 2006
as compared to the nine months ended September 30, 2005,
including our
annual release of Membership Plus®;
and
|
||
▪
|
the
decreased suggested retail price in those products that were
released
during the nine months ended September 30, 2006 compared
to those released
during the nine months ended September 30, 2005;
|
||
▪
|
our
cost of sales remained relatively high, only decreasing approximately
$49,000 from approximately $1,410,000 for the nine months
ended September
30, 2005 to approximately $1,361,000 for the nine months
ended September
30, 2006 due to the increased amortization of software development
costs;
|
||
▪
|
we
incurred liquidated damage penalties of approximately $49,000
in
connection with our failure to meet certain contractual registration
obligations; and
|
||
▪
|
our
interest expense increased approximately $45,000 for the
nine months ended
September 30, 2006 due to a loan agreement that was entered
into in order
to fund our working capital
deficit.
|
Revenues
for Three Months Ended September 30
|
2006
|
|
|
%
to Sales
|
|
|
|
2005
|
|
|
%
to Sales
|
|
|
|
Change
|
|
|
%
|
|||
Gross
revenues
|
$
|
910,896
|
100
|
%
|
$
|
1,233,389
|
100
|
%
|
$
|
(322,493
|
)
|
26
|
%
|
||||||||
Add
rebate adjustment
|
---
|
0
|
%
|
4,910
|
0
|
%
|
(4,910
|
)
|
100
|
%
|
|||||||||||
Less
reserve for sales returns and allowances
|
(84,769
|
)
|
-9
|
%
|
(214,690
|
)
|
-17
|
%
|
129,921
|
61
|
%
|
||||||||||
Net
revenues
|
$
|
826,127
|
91
|
%
|
$
|
1,023,609
|
83
|
%
|
$
|
(197,482
|
)
|
19
|
%
|
||||||||
Revenues
for Nine Months Ended September 30
|
2006
|
|
|
%
to Sales
|
|
|
|
2005
|
|
|
%
to Sales
|
|
|
|
Change
|
|
|
%
|
|||
Gross
revenues
|
$
|
2,793,594
|
100
|
%
|
$
|
4,744,759
|
100
|
%
|
$
|
(1,951,165
|
)
|
41
|
%
|
||||||||
Add
rebate adjustment
|
---
|
0
|
%
|
14,730
|
0
|
%
|
(14,730
|
)
|
100
|
%
|
|||||||||||
Less
reserve for sales returns and allowances
|
(207,397
|
)
|
-7
|
%
|
(781,470
|
)
|
-16
|
%
|
574,073
|
73
|
%
|
||||||||||
Net
revenues
|
$
|
2,586,197
|
93
|
%
|
$
|
3,978,019
|
84
|
%
|
$
|
(1,391,822
|
)
|
214
|
%
|
▪
|
an
enhanced version of our top financial and data management
product,
Membership Plus®,
including Membership Plus®
Standard Edition, with a suggested retail price of
$149.95, and Membership
Plus®
Deluxe Edition, with a suggested retail price of
$349.95;
|
|
▪
|
an
enhanced version of QuickVerse®
2005 Essentials, with a suggested retail price of
$49.95; and
|
|
▪
|
QuickVerse®
2005 Platinum Edition, with a suggested retail price
of
$799.95.
|
▪
|
QuickVerse®
2006 Macintosh, including QuickVerse®
2006 Macintosh Black Box Edition, with a suggested
retail price of $99.95,
and QuickVerse®
2006 Macintosh White Box Edition, with a suggested
retail price of $49.95;
and
|
|
▪
|
an
enhanced version of Bible
Illustrator®
3.0
entitled Sermon Builder®
4.0,
with a suggested retail price of
$69.95.
|
▪
|
an
enhanced version of our flagship product, QuickVerse®,
including QuickVerse®
2006 Essentials with a suggested retail price of
$49.95,
QuickVerse®
2006 Standard with a suggested retail price of $99.95,
QuickVerse®
2006 Expanded with a suggested retail price of $199.95,
QuickVerse®
2006 Deluxe with a suggested retail price of $299.95
and
QuickVerse®
2006 Platinum with a suggested retail price of
$799.95.
|
▪
|
QuickVerse®
2006 Parable Edition, with a suggested retail price
of $49.95;
and
|
|
▪
|
QuickVerse®
2006 Bible Suite, with a suggested retail price of
$29.95.
|
▪
|
QuickVerse®
2006 Macintosh Gold Box Edition, with a suggested
retail price of $349.95;
and
|
|
▪
|
Holman
Christian Standard Bible®,
with a suggested retail price of
$29.95.
|
▪
|
an
enhanced version of our flagship product, QuickVerse®,
including QuickVerse®
2007 Bible Suite with a suggested retail price of
$39.95,
QuickVerse®
2007 Essentials with a suggested retail price of
$59.95,
QuickVerse®
2007 Standard with a suggested retail price of $129.95,
QuickVerse®
2007 Expanded with a suggested retail price of $249.95,
QuickVerse®
2007 Deluxe with a suggested retail price of $349.95
and
QuickVerse®
2007 Platinum with a suggested retail price of $799.95.
|
▪
|
price
protections afforded to consumers and retailers who
had purchased prior
versions of Membership Plus®
and
QuickVerse®
within
one year or less of our release of upgraded versions
of each of Membership
Plus®,
in February 2005, and QuickVerse®,
in September 2005. Historically, our product upgrades
have extended over
two to three years and therefore, price protections
were not issued;
|
|
▪
|
increased
prices associated with products introduced; and
|
|
▪
|
higher
actual returns on the Membership Plus®
2005 product line due to some then unresolved maintenance
issues and the
loss of our primary developer of Membership Plus®.
|
Cost
of Sales for Nine Months Ended September 30
|
2006
|
|
|
%
to Sales
|
|
|
2005
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
|
||||
Direct
costs
|
$
|
372,033
|
13
|
%
|
$
|
485,674
|
10
|
%
|
$
|
(113,641
|
)
|
23
|
%
|
||||||||
Less
reserve for sales returns and allowances
|
(30,810
|
)
|
-1
|
%
|
(116,940
|
)
|
-2
|
%
|
86,130
|
74
|
%
|
||||||||||
Amortization
of software development costs
|
600,959
|
22
|
%
|
524,989
|
11
|
%
|
75,970
|
14
|
%
|
||||||||||||
Royalties
|
256,737
|
9
|
%
|
300,000
|
6
|
%
|
(43,263
|
)
|
14
|
%
|
|||||||||||
Freight-out
|
76,218
|
3
|
%
|
111,188
|
2
|
%
|
(34,970
|
)
|
31
|
%
|
|||||||||||
Fulfillment
|
86,020
|
3
|
%
|
105,280
|
2
|
%
|
(19,260
|
)
|
18
|
%
|
|||||||||||
Cost
of sales
|
$
|
1,361,157
|
49
|
%
|
$
|
1,410,191
|
30
|
%
|
$
|
(49,034
|
)
|
3
|
%
|
▪
|
sales
of QuickVerse®
2005 editions to a liquidator in the first and third
quarters of 2006 and
no sales to a liquidator in the first and third quarters
of
2005;
|
|
▪
|
our
increased sales focus on the QuickVerse®
product line which have associated royalty fees;
|
|
▪
|
an
increase in retail sales for the QuickVerse®
2007 product line during the month of September 2006
compared to only
upgrade sales for the QuickVerse®
2006 product line during the same time frame in 2005;
and
|
|
▪
|
our
decreased sales focus on the Membership Plus®
product line, which has no associated royalty fees. We
have experienced a
delay in our annual upgrade release of Membership Plus®
2007 and, during the first quarter of 2005, we released
an upgrade to
Membership Plus®
in
February 2005.
|
Software
Development Costs for
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|||
Beginning
balance
|
$
|
487,849
|
$
|
931,103
|
$
|
707,067
|
$
|
701,289
|
|||||
Capitalized
|
173,728
|
171,990
|
412,108
|
766,151
|
|||||||||
Amortized
(Cost of sales)
|
143,361
|
160,642
|
600,959
|
524,989
|
|||||||||
Ending
Balance
|
$
|
518,216
|
$
|
942,451
|
$
|
518,216
|
$
|
942,451
|
|||||
Research
and development expense (General and administrative)
|
$
|
47,393
|
$
|
63,164
|
$
|
131,013
|
$
|
130,407
|
Sales,
General and Administrative Costs for Nine Months Ended September
30
|
2006
|
|
|
%
to Sales
|
|
|
2005
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
|||||
Selected
expenses:
|
|||||||||||||||||||||
Commissions
|
$
|
151,499
|
5
|
%
|
$
|
611,653
|
13
|
%
|
$
|
(460,154
|
)
|
75
|
%
|
||||||||
Advertising
and direct marketing
|
156,537
|
6
|
%
|
419,217
|
9
|
%
|
(262,680
|
)
|
63
|
%
|
|||||||||||
Sales
and marketing wages, reclassified
|
272,648
|
10
|
%
|
266,966
|
6
|
%
|
5,682
|
2
|
%
|
||||||||||||
Total
sales and marketing
|
$
|
580,684
|
21
|
%
|
$
|
1,297,836
|
27
|
%
|
$
|
(717,152
|
)
|
55
|
%
|
||||||||
Research
and development
|
131,013
|
5
|
%
|
130,407
|
3
|
%
|
606
|
0
|
%
|
||||||||||||
Personnel
costs
|
564,825
|
20
|
%
|
572,688
|
12
|
%
|
(7,863
|
)
|
1
|
%
|
|||||||||||
Legal
|
83,539
|
3
|
%
|
157,970
|
3
|
%
|
(74,431
|
)
|
47
|
%
|
|||||||||||
Accounting
|
48,505
|
2
|
%
|
22,031
|
0
|
%
|
26,474
|
120
|
%
|
||||||||||||
Rent
|
74,260
|
3
|
%
|
57,387
|
1
|
%
|
16,873
|
29
|
%
|
||||||||||||
Telecommunications
|
28,967
|
1
|
%
|
42,605
|
1
|
%
|
(13,638
|
)
|
32
|
%
|
|||||||||||
Corporate
services
|
54,000
|
2
|
%
|
73,972
|
2
|
%
|
(19,972
|
)
|
27
|
%
|
|||||||||||
Investor
services
|
55,000
|
2
|
%
|
---
|
0
|
%
|
55,000
|
0
|
%
|
||||||||||||
Other
general and administrative costs
|
270,231
|
10
|
%
|
361,997
|
8
|
%
|
(91,766
|
)
|
25
|
%
|
|||||||||||
Total
general and administrative
|
$
|
1,310,340
|
47
|
%
|
$
|
1,419,057
|
30
|
%
|
$
|
(108,717
|
)
|
8
|
%
|
Working
Capital at September 30
|
2006
|
|||
Current
assets
|
$
|
658,101
|
||
Current
liabilities
|
$
|
2,866,445
|
||
Retained
deficit
|
$
|
(7,750,886
|
)
|
Cash
Flows for Nine Months Ended September 30
|
2006
|
|
|
2005
|
|
|
Change
|
|
|
%
|
|
||||
Cash
flows provided by operating activities
|
$
|
291,051
|
$
|
479,934
|
$
|
(188,883
|
)
|
39
|
%
|
||||||
Cash
flows (used) by investing activities
|
$
|
(425,063
|
)
|
$
|
(750,851
|
)
|
$
|
325,788
|
43
|
%
|
|||||
Cash
flows provided (used) by financing activities
|
$
|
15,444
|
$
|
(30,604
|
)
|
$
|
46,048
|
150
|
%
|
2006
|
$
|
20,333
|
||
2007
|
31,248
|
|||
Total
future minimum rental payments
|
$
|
51,581
|
2006
|
$
|
3,432
|
||
2007
|
13,726
|
|||
2008
|
13,726
|
|||
2009
|
12,582
|
|||
2010
|
---
|
|||
Total
minimum lease payments
|
43,466
|
|||
Less:
Amount representing interest
|
7,282
|
|||
Total
obligations under capital lease
|
36,184
|
|||
Less:
Current installments of obligations under capital
lease
|
10,023
|
|||
Long-term
obligation under capital lease
|
$
|
26,161
|
Statement
of Operations for Years Ended December 31
|
2005
|
2004
|
Change
|
|
%
|
||||||||||
Net
revenues
|
$
|
5,337,342
|
$
|
5,322,842
|
$
|
14,500
|
0
|
%
|
|||||||
Cost
of sales
|
|
1,973,944
|
|
1,721,298
|
|
252,646
|
15
|
%
|
|||||||
Gross
profit
|
|
3,363,398
|
|
3,601,544
|
|
(238,146
|
)
|
-7
|
%
|
||||||
Total
operating expenses
|
|
(4,425,429
|
)
|
|
(4,177,705
|
)
|
|
(247,724
|
)
|
6
|
%
|
||||
Other
income
|
|
14,855
|
|
1,012,744
|
|
(997,889
|
)
|
-99
|
%
|
||||||
Other
adjustments
|
|
(436,686
|
)
|
|
(154,569
|
)
|
|
(282,117
|
)
|
183
|
%
|
||||
Loss
on fair value adjustment of derivatives
|
|
(33,797
|
)
|
|
(291,672
|
)
|
|
257,875
|
-88
|
%
|
|||||
Other
expenses
|
|
(12,898
|
)
|
|
(42,148
|
)
|
|
29,250
|
-69
|
%
|
|||||
Loss
before income taxes
|
|
(1,530,557
|
)
|
|
(51,806
|
)
|
|
(1,478,751
|
)
|
2854
|
%
|
||||
Provision
for income taxes
|
|
(50,709
|
)
|
|
1,015,859
|
|
(1,066,568
|
)
|
-105
|
%
|
|||||
Net
income (loss)
|
$
|
(1,581,266
|
)
|
$
|
964,053
|
$
|
(2,545,319
|
)
|
-264
|
%
|
1) |
For
the year ended December 31, 2004:
|
§ |
a
reserve for rebates payable from a change in accounting
estimate of
approximately $142,000 (and recognized as an adjustment
to revenue);
|
§ |
actual
rebates payable of approximately $61,000 due to an overstatement
(and
recognized as an adjustment to revenue); and
|
§ |
obsolete
inventory of approximately $32,000 (which is included in
cost of
sales);
|
2)
|
For
the year ended December 31, 2005:
|
Revenues
for Years Ended December 31
|
2005
|
|
|
%
to Sales
|
|
|
2004
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
|
||||
Gross
sales
|
$
|
6,309,017
|
100
|
%
|
$
|
5,786,427
|
100
|
%
|
$
|
522,590
|
9
|
%
|
|||||||||
Add
rebate adjustment
|
19,640
|
0
|
%
|
203,313
|
4
|
%
|
(183,673
|
)
|
0
|
%
|
|||||||||||
Less
reserve for sales returns and allowances
|
(991,315
|
)
|
-16
|
%
|
(666,898
|
)
|
-12
|
%
|
(324,417
|
)
|
49
|
%
|
|||||||||
Net
sales
|
$
|
5,337,342
|
84
|
%
|
$
|
5,322,842
|
92
|
%
|
$
|
14,500
|
0
|
%
|
▪
|
an
enhanced version of our top financial and data management
product,
Membership Plus®,
including Membership Plus®
Standard Edition (retail price: $149.95) and Membership
Plus®
Deluxe Edition (retail price of $349.95); and
|
|
▪
|
an
enhanced version of QuickVerse®
2005 Essentials (retail price: $49.95) and QuickVerse®
2005 Platinum Edition (retail price: $799.95).
|
▪
|
our
first product release on the Macintosh®
Operating System platform, QuickVerse®
Macintosh, including QuickVerse®
Macintosh White Box edition, (retail price: $49.95) and
QuickVerse®
Macintosh Black Box edition (retail price: $99.95) and
;
|
|
▪
|
an
enhanced version of Bible Illustrator®
3.0 titled Sermon Builder®
4.0 (retail price: $69.95), which marked the first update
to this program
in over six years.
|
▪
|
an
upgrade to our flagship product, QuickVerse®
(three months earlier within the calendar year than our
2004 upgrade
release of this product, and the first QuickVerse®
upgrade
release in over five years that was shipped early enough
to be in retail
stores prior to the beginning of the holiday sales season),
including
QuickVerse®
2006 Starter Edition (retail price: $9.95), QuickVerse®
2006 Parable®
Edition (retail price: $49.95), QuickVerse®
2006 Bible Suite (retail price: $29.95), QuickVerse®
2006 Essentials (retail price: $49.95), QuickVerse®
2006 Standard (retail price: $99.95), QuickVerse®
2006 Expanded (retail price: $199.95), QuickVerse®
2006 Deluxe (retail price: $299.95), and QuickVerse®
2006 Platinum (retail price:
$799.95).
|
▪
|
an
upgrade to our four editions of QuickVerse®
2006 Mobile, including Standard (retail price: $29.95),
Deluxe (retail
price: $39.95), Platinum Edition (retail price: $69.95),
and Life
Application Study Bible (retail price:
$39.95).
|
▪
|
price
protections afforded to consumers and retailers who had
purchased prior
versions of Membership Plus®
and
QuickVerse®
within
one year or less of our release of upgraded versions
of each of Membership
Plus®,
in February 2005, and QuickVerse®,
in September 2005. Historically, our product upgrades
have extended over
two to three years and therefore, price protections were
not
issued;
|
|
▪
|
a
single return from a liquidator of approximately $42,000
during the fourth
quarter of the year ended December 31, 2005, which although
we were not
obligated to accept, we did accept based on a conclusion
that it was in
our best interest to do so;
|
|
▪
|
the
unexpected loss of our primary developer for Membership
Plus®
in
May 2005, together with certain unresolved maintenance
issues at the time
led to higher actual returns on the Membership Plus®
2005 product line; and
|
|
▪
|
increased
price points associated with recently introduced
products.
|
Cost
of Sales For Years Ended December 31
|
2005
|
|
|
%
to Sales
|
|
|
|
2004
|
|
|
%
to Sales
|
|
|
|
Change
|
|
|
%
|
|
||
Direct
costs
|
$
|
601,156
|
13
|
%
|
$
|
579,946
|
15
|
%
|
$
|
21,210
|
4
|
%
|
|||||||||
Less
reserve for sales returns and allowances
|
(148,245
|
)
|
-3
|
%
|
(99,255
|
)
|
-3
|
%
|
(48,990
|
)
|
49
|
%
|
|||||||||
Amortization
of software development costs
|
806,531
|
17
|
%
|
575,480
|
15
|
%
|
231,051
|
40
|
%
|
||||||||||||
Royalties
|
471,651
|
10
|
%
|
417,604
|
11
|
%
|
54,047
|
13
|
%
|
||||||||||||
Freight-out
|
171,904
|
4
|
%
|
172,634
|
4
|
%
|
(730
|
)
|
0
|
%
|
|||||||||||
Fulfillment
|
70,947
|
1
|
%
|
74,889
|
2
|
%
|
(3,942
|
)
|
-5
|
%
|
|||||||||||
Cost
of sales
|
$
|
1,973,944
|
42
|
%
|
$
|
1,721,298
|
44
|
%
|
$
|
252,646
|
15
|
%
|
▪
|
the
release of the QuickVerse®
2005 editions in early December 2004;
|
|
▪
|
the
release of three additional QuickVerse®
2005 editions , QuickVerse®
Essentials, QuickVerse®
Platinum, and QuickVerse®
Macintosh;
|
|
▪
|
the
release of Sermon Builder®
4.0 in June 2005, which was an update to Bible Illustrator®
3.0, and the first update to Bible Illustrator®
3.0 in over six years (including not only technological updates
but
content additions);
|
|
▪
|
the
release of the QuickVerse®
2006 editions in September of 2005, which was three months
earlier in the
calendar year than was the case in 2004, and which allowed
us to
capitalize much more upon the holiday selling season;
and
|
|
▪
|
the
release of the QuickVerse®
2006 Mobile editions in October of 2005.
|
Software
Development Costs For Years Ended December 31
|
2005
|
2004
|
||||
Beginning
balance
|
$
|
701,289
|
$
|
584,706
|
||
Capitalized
|
812,309
|
692,063
|
||||
Amortized
(cost of sales)
|
806,531
|
575,480
|
||||
Ending
balance
|
$
|
707,067
|
$
|
701,289
|
||
Research
and development expense (General and administrative)
|
$
|
216,397
|
$
|
64,653
|
Sales,
General and Administrative Costs for Years Ended December
31
|
2005
|
|
|
%
to Sales
|
|
|
2004
|
|
|
%
to Sales
|
|
|
Change
|
|
|
%
|
|
||||
Selected
expenses:
|
|||||||||||||||||||||
Commissions
|
$
|
695,914
|
15
|
%
|
$
|
814,623
|
21
|
%
|
$
|
(118,709
|
)
|
-15
|
%
|
||||||||
Advertising
and direct marketing
|
577,317
|
12
|
%
|
466,138
|
12
|
%
|
111,179
|
24
|
%
|
||||||||||||
Total
sales and marketing
|
$
|
1,273,231
|
27
|
%
|
$
|
1,280,761
|
33
|
%
|
$
|
(7,530
|
)
|
-1
|
%
|
||||||||
Research
and development
|
$
|
216,397
|
5
|
%
|
$
|
64,653
|
2
|
%
|
$
|
151,744
|
235
|
%
|
|||||||||
Personnel
costs
|
1,237,706
|
26
|
%
|
1,310,506
|
34
|
%
|
(72,800
|
)
|
-6
|
%
|
|||||||||||
Legal
|
187,499
|
4
|
%
|
71,003
|
2
|
%
|
116,496
|
164
|
%
|
||||||||||||
Accounting
|
27,735
|
1
|
%
|
10,709
|
0
|
%
|
17,026
|
159
|
%
|
||||||||||||
Rent
|
82,172
|
2
|
%
|
75,555
|
2
|
%
|
6,617
|
9
|
%
|
||||||||||||
Telecommunications
|
53,092
|
1
|
%
|
149,443
|
4
|
%
|
(96,351
|
)
|
-64
|
%
|
|||||||||||
Corporate
services
|
73,972
|
2
|
%
|
87,223
|
2
|
%
|
(13,251
|
)
|
-15
|
%
|
|||||||||||
Administration
|
18,762
|
0
|
%
|
118,474
|
3
|
%
|
(99,712
|
)
|
-84
|
%
|
|||||||||||
Other
general and administrative costs
|
535,332
|
11
|
%
|
422,272
|
11
|
%
|
113,060
|
27
|
%
|
||||||||||||
Total
general and administrative
|
$
|
2,432,667
|
51
|
%
|
$
|
2,309,838
|
59
|
%
|
$
|
122,829
|
5
|
%
|
▪
|
American
Bible Society (content provider)
|
|
▪
|
David
Epstein (content provider)
|
|
▪
|
Depository
Trust Company (corporate services)
|
|
▪
|
Explorer’s
Bible Study (content provider)
|
|
▪
|
Genesis
Marketing Group (sales services)
|
|
▪
|
Historical
Exegetical Electronic Publishing (content provider)
|
|
▪
|
Innovative
Church Marketing Group (advertising services)
|
|
▪
|
Interactive
Pictures Corporation (content provider)
|
|
▪
|
InterVarsity
Press (content provider)
|
|
▪
|
Ivy
Hill/Warner Media Services (manufacturing
services)
|
▪
|
Lernout
& Hauspie Speech Products (content provider)
|
|
▪
|
MicroBytes,
Inc. (CD duplication services)
|
|
▪
|
Moody
Publishers (content provider)
|
|
▪
|
National
Council of the Churches of Christ in the United States
of America (content
provider)
|
|
▪
|
NavPress
Publishing Group (content provider)
|
|
▪
|
Oxford
University Press (content provider)
|
|
▪
|
Pillsbury,
Madison & Sutro LLP (legal services)
|
|
▪
|
Rutledge
Hill Press (content provider)
|
|
▪
|
Sonopress
(manufacturing services)
|
|
▪
|
Standard
Publishing (content provider)
|
|
▪
|
The
Lockman Foundation (content provider)
|
|
▪
|
World
Publishing (content provider)
|
Working
Capital at December 31
|
|
|
2005
|
|
|
|
2004
|
|
|
|
Change
|
|
|
%
|
|
Current
assets
|
$
|
867,750
|
$
|
1,551,447
|
$
|
(683,697
|
)
|
-44
|
%
|
||||||
Current
liabilities
|
$
|
3,893,447
|
$
|
3,351,893
|
$
|
541,554
|
16
|
%
|
|||||||
Retained
deficit
|
$
|
(7,752,097
|
)
|
$
|
(6,170,831
|
)
|
$
|
(1,581,266
|
)
|
26
|
%
|
Cash
Flows for Years Ended December 31
|
|
|
2005
|
|
|
|
2004
|
|
|
|
Change
|
|
Cash
flows provided (used) by operating activities
|
$
|
612,345
|
$
|
(643,668
|
)
|
$
|
1,256,013
|
|||||
Cash
flows (used) by investing activities
|
$
|
(801,422
|
)
|
$
|
(746,932
|
)
|
$
|
(54,490
|
)
|
|||
Cash
flows provided (used) by financing activities
|
$
|
(32,722
|
)
|
$
|
1,690,291
|
$
|
(1,723,013
|
)
|
2006
|
$
|
81,331
|
||
2007
|
31,248
|
|||
Total
future minimum rental payments
|
$
|
112,579
|
2006
|
$
|
13,726
|
||
2007
|
13,726
|
|||
2008
|
13,726
|
|||
2009
|
12,582
|
|||
2010
|
---
|
|||
Total
minimum lease payments
|
53,760
|
|||
Less:
Amount representing interest
|
10,788
|
|||
Total
obligations under capital lease
|
42,972
|
|||
Less:
Current installments of obligations under capital lease
|
9,185
|
|||
Long-term
obligation under capital lease
|
$
|
33,787
|
•
|
planning
the Website,
|
•
|
developing
the applications and infrastructure until technological feasibility
is
established,
|
|
•
|
developing
graphics such as borders, background and text colors, fonts,
frames, and
buttons, and
|
|
•
|
operating
the site such as training, administration and
maintenance.
|
•
|
obtain
and register an Internet domain
name,
|
•
|
develop
or acquire software tools necessary for the development
work,
|
|
•
|
develop
or acquire software necessary for general Website
operations,
|
•
|
develop
or acquire code for web
applications,
|
•
|
develop
or acquire (and customize) database software and software
to integrate
applications such as corporate databases and accounting
systems into web
applications,
|
|
•
|
develop
HTML web pages or templates,
|
|
•
|
install
developed applications on the web server,
|
|
•
|
create
initial hypertext links to other Websites or other locations
within the
Website, and
|
|
•
|
test
the Website applications.
|
•
|
our
developers work collaboratively, sharing development techniques,
software
tools, software engines and useful experience, to form a strong
collective
and creative environment;
|
•
|
the
ability to re-focus efforts quickly to meet the changing needs
of key
projects;
|
•
|
more
control over product quality, scheduling and costs; and
|
•
|
our
developers are not subject to the competing needs of other software
publishers.
|
▪
|
prior
year or season selling rates for existing and competitive
products;
|
|
▪
|
known
or estimated growth rates for existing and competitive
products;
|
|
▪
|
new
market opportunities for products, product categories, or
product
platforms;
|
|
▪
|
competitive
products and known competitive strategies;
|
|
▪
|
general
consumer market and consumer economic sentiments including
past, present,
and projected future conditions and/or events;
|
|
▪
|
technological
changes, improvements, new platforms, and platform market
share
shifts;
|
|
▪
|
general
distribution channels and customer feedback;
|
|
▪
|
current
and perceived corporate cash flow;
|
|
▪
|
availability
and limitations related to knowledgeable/expert talent and
workforce;
and
|
|
▪
|
known
or projected risks associate with each of these
factors.
|
|
•
|
Bible
Study
|
|
•
|
Financial/Office
Management Products for Churches and other Faith-Based
Ministries
|
|
•
|
Print
& Graphic Products
|
|
•
|
Pastoral
Products
|
|
•
|
Children’s
Products
|
|
•
|
Language
Tutorial Products.
|
▪
|
QuickVerse®
Bible Suite (which contains 8 Bibles and 40 reference titles,
retail
price: $39.95);
|
|
▪
|
QuickVerse®
Essentials Edition (which includes 10 Bibles and 44 reference
titles,
retail price: $59.95);
|
|
▪
|
QuickVerse®
Standard Edition (which includes 15 Bibles and 63 reference
titles, retail
price: $129.95);
|
|
▪
|
QuickVerse®
Expanded Edition (which includes 17 Bibles and 100 reference
titles,
retail price: $249.95);
|
|
▪
|
QuickVerse®
Deluxe Edition (which includes 23 Bibles and 154 reference
titles, retail
price: $349.95); and
|
|
▪
|
QuickVerse®
Platinum Edition (which includes 25 Bibles and 272 reference
titles,
retail price: $799.95).
|
▪
|
Standard
Edition (which includes 3 Bibles and 6 reference titles,
retail price:
$29.95);
|
|
▪
|
Deluxe
Edition (which includes 6 Bibles and 9 reference titles,
retail price:
$39.95); and
|
|
▪
|
Platinum
Edition (which includes 8 Bibles and 13 reference titles,
retail price:
$69.95).
|
▪
|
QuickVerse®
White Box Edition (which includes 9 Bibles and 40 reference
titles, retail
price: $59.95);
|
|
▪
|
QuickVerse®
Black Box Edition (which includes 12 Bibles and 56 reference
titles,
retail price: $129.95); and
|
|
▪
|
QuickVerse®
Gold Box Edition (which includes 19 Bibles and 143 reference
titles,
retail price: $349.95).
|
•
|
Sermon
Builder®
4.0 Deluxe (retail price: $69.95), which is a database compilation
of
illustrations, anecdotes, quotations, proverbs and bits of humor
from
general topics like children and angels to specific Bible passages,
which
users can use to bring messages to a congregation or classroom.
|
|
•
|
Ministry
Notebook®
2.0 (retail price: $29.95), which is an organizational tool for
users to
keep better track of ministry-related paperwork including sermons,
prayer
requests, personal libraries, telephone contacts, and expense
reports.
|
|
•
|
Today’s
Best Sermons®
(retail price: $99.95), which is a three volume collection of
the best
sermons from the Preaching
Today
monthly audiotape series, which users can use to gain spiritual
refreshment and strengthen their
preaching.
|
•
|
our
Website (www.quickverse.com) and the Internet sites of
others;
|
•
|
print
advertising;
|
•
|
opt-in
e-mail campaigns;
|
•
|
product
sampling through demonstration software;
|
•
|
in-store
promotions, displays and retailer assisted co-operative advertising;
|
•
|
publicity
activities; and
|
•
|
trade
shows.
|
•
|
brand
name recognition;
|
•
|
availability
of financial resources;
|
•
|
the
quality of titles;
|
•
|
reviews
received for a title from independent reviewers who publish reviews
in
magazines, Websites, newspapers and other industry publications;
|
•
|
publisher’s
access to retail shelf space;
|
•
|
the
price of each title; and
|
•
|
the
number of titles then available.
|
|
•
|
Logos
Research Systems, Inc. - Logos Series X®
|
|
•
|
Biblesoft,
Inc.- BibleSoft PC Bible Study®
Version 4
|
|
•
|
Thomas
Nelson, Inc. - Nelson eBible®
|
|
•
|
WordSearch
Bible Publishers - WordSearch®
7
|
•
|
Zondervan
- Zondervan Bible Study Library®
|
▪
|
Laridian
- My Bible®
|
|
▪
|
Thomas
Nelson, Inc. - Nelson eBible®
for PDA
|
|
▪
|
Zondervan
- NIV Bible Study Suite PDA®
|
|
▪
|
WordSearch
Bible Publishers - Life Application Bible Pocket Library®
|
|
▪
|
Olive
Tree Bible Publishers - Olive Tree Bible Software®
|
▪
|
Zondervan
- Zondervan Bible Study Suite®
for Macintosh®
|
|
▪
|
Oak
Tree Software, Inc. - Accordance Bible Software®
|
|
•
|
ACS
Technologies®
|
|
•
|
CCIS
Church Software®
|
|
•
|
Church
Data Master Plus®
|
|
•
|
Church
Windows/Computer Helper®
|
|
•
|
Church
Office®
|
|
•
|
Logos
Management Software®
|
|
•
|
Power
Church Software®
|
|
•
|
Servant
PC®
|
|
•
|
Shelby
Systems®
|
|
•
|
Shepard’s
Staff®
(Concordia Publishing House)
|
|
•
|
Specialty
Software®
|
Name
|
|
Age
|
Position
|
||||||
Steven
Malone
|
|
40
|
|
Director,
Chairman of the Board and President
|
|||||
John
A. Kuehne, CA
|
|
49
|
|
Director
|
|||||
Kirk
R. Rowland, CPA
|
|
46
|
|
Director
and Chief Financial Officer
|
|||||
William
Terrill
|
|
50
|
|
Chief
Technology Officer
|
|||||
Brittian
Edwards
|
|
43
|
|
Vice
President, CBA Sales and
Licensing
|
|
Long
Term Compensation Awards
|
||||||||||||||||||||||||
|
Annual
Compensation
|
Awards
|
Payouts
|
||||||||||||||||||||||
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Other
Annual
Compensation
|
Restricted
Stock Awards
|
Securities
Underlying Options/SARs (#)
|
|
LTIP
Payouts
|
All
Other Compensation
|
||||||||||||||||
Steven Malone, |
2005
|
$ | 150,000 | $ | --- | $ |
---
|
$ | --- | $ | --- | $ |
---
|
$ |
---
|
||||||||||
President
and Chief Executive Officer
|
2004
|
$
|
150,000
|
$
|
22,192
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
|
2003
|
$
|
150,000
|
$
|
18,079
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
|
2002
|
$
|
150,000
|
$
|
2,203
|
$
|
---
|
$
|
37,306
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
William Terrill |
2005
|
$ | 150,000 | $ | --- | $ |
---
|
$ | --- | $ | --- | $ |
---
|
$ |
---
|
||||||||||
Chief
Technology Officer
|
2004
|
$
|
150,000
|
$
|
22,192
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
|
2003
|
$
|
150,000
|
$
|
18,079
|
$
|
---
|
$
|
14,536
|
$
|
500,000
|
$
|
---
|
$
|
---
|
||||||||||
|
2002
|
$
|
72,115
|
$
|
2,203
|
$
|
---
|
$
|
---
|
$
|
500,000
|
$
|
---
|
$
|
---
|
||||||||||
Kirk R. Rowland |
2005
|
$ | 110,000 | $ | --- | $ |
---
|
$ | --- | $ | --- | $ |
---
|
$ |
---
|
||||||||||
Chief
Financial Officer
|
2004
|
$
|
108,846
|
$
|
22,192
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
|
2003
|
$
|
82,306
|
$
|
18,079
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
||||||||||
|
2002
|
$
|
80,000
|
$
|
---
|
$
|
---
|
$
|
31,807
|
$
|
---
|
$
|
---
|
$
|
---
|
Name
|
Number
of Securities Underlying
Options/SARs Granted
(#)
|
|
Percent
of Total Options/SARs
Granted to Employees
in Fiscal Year
|
Exercise
or
Base Price($/Sh)
|
|
Expiration
Date
|
||||||||||
Steven
Malone
|
---
|
---
|
$
|
---
|
N/A
|
|||||||||||
William
Terrill
|
---
|
---
|
$
|
---
|
N/A
|
|||||||||||
Kirk
R. Rowland
|
---
|
---
|
$
|
---
|
N/A
|
Name
|
Shares
Acquired
on Exercise
(#)
|
|
Value
Realized
($)
|
|
Number
of Unexercised
Options/SARs
at Fiscal
Year End
|
Value
of Unexercised “In-The-Money”Options/SARs
at Fiscal Year
End
|
|||||||
Steven
Malone
|
---
|
$
|
---
|
250,000
|
$
|
---
|
|||||||
William
Terrill
|
---
|
$
|
---
|
1,000,000
|
$
|
50,000
|
|||||||
Kirk
R. Rowland
|
---
|
$
|
---
|
150,000
|
$
|
---
|
|
•
|
each
person known by us to be the beneficial owner of more than 5% of
our
common stock;
|
|
•
|
each
of our directors and executive officers; and
|
|
•
|
all
of our directors and executive officers as a group.
|
Name
of Beneficial Owner
|
Amount
and Nature
of Beneficial
Owner
|
Percent
of Class
|
|||||
Barron
Partners, LP (1)
|
43,750,000
|
60.1
|
%
|
|
(1)
|
Consists
of warrants to acquire up to 21,875,000 shares of common stock, all
of
which are presently exercisable, and 21,875,000 common shares directly
owned.
|
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial
Owner
|
Percent
of Class
|
|||||
Steven
Malone (1)
|
2,203,111
|
3
.0
|
%
|
||||
John
A. Kuehne (2)
|
2,464,157
|
3 .4
|
%
|
||||
Kirk
R. Rowland (3)
|
1,819,111
|
2
.5
|
%
|
||||
William
Terrill (4)
|
1,751,127
|
2
.4
|
%
|
||||
All
officers and directors as a group of (4 persons)
|
8,237,506
|
11.3
|
%
|
|
(1)
|
Consists
of stock options to acquire up to 250,000 shares of common stock,
all of
which are presently exercisable, 1,719,111 common shares directly
owned,
and stock options to acquire up to 110,000 shares of common stock
all of
which are presently exercisable and 124,000 common shares indirectly
owned
through spouse.
|
|
(2)
|
Consists
of stock options to acquire up to 175,000 shares of common
stock, all of
which are presently exercisable and 2,289,157 common shares
directly
owned.
|
|
(3)
|
Consists
of stock options to acquire up to 150,000 shares of common stock,
all of
which are presently exercisable and 1,669,111 common shares directly
owned.
|
|
(4)
|
Consists
of stock options to acquire up to 1,000,000 shares of common stock,
all of
which are presently exercisable and 751,127 common shares directly
owned.
|
•
|
2,000,000
shares of our common stock issued as of November 16, 2004 upon conversion
of $240,000 of previously outstanding debt securities;
|
|
•
|
466,666
shares of our common stock issued as of December 31, 2004 upon
conversion of $23,333 of previously outstanding debt securities;
and
|
•
|
1,125,000
shares of our common stock issuable upon exercise of warrants previously
issued to a number of our consultants/service providers.
|
Selling
Stockholder
|
Number
of Shares
Beneficially
Owned
Prior to
Offering
|
Number
of Shares
Being Registered
For Sale
in this Prospectus
|
Number
of Shares
to be Beneficially
Owned
After the
Offering
|
Percentage
of
Outstanding
Shares
to be
Owned
After the
Offering(1)
|
|
||||||||
Barron
Partners, LP (2)
|
43,750,000
|
43,750,000
|
---
|
*
|
|||||||||
|
|||||||||||||
C.
James Jensen (3)
|
1,000,000
|
1,000,000
|
---
|
*
|
|||||||||
|
|||||||||||||
2030
Investors, LLC (4)
|
1,000,000
|
1,000,000
|
---
|
*
|
|||||||||
|
|||||||||||||
Robert
Chamberlain (5)
|
62,500
|
62,500
|
---
|
*
|
|||||||||
Kevin Reagan (6) | 62,500 | 62,500 | --- | * | |||||||||
|
|||||||||||||
Michael
M. Membrado (7)
|
150,000
|
150,000
|
---
|
*
|
|||||||||
|
|||||||||||||
Ronald
Ardt (8)
|
1,891,599
|
716,666
|
1,174,933
|
1.60
|
% | ||||||||
|
|||||||||||||
Joseph
Abrams (9)
|
600,000
|
600,000
|
---
|
*
|
|||||||||
|
|||||||||||||
Total
|
48,516,599
|
47,341,666
|
1,174,933
|
1.60
|
% |
|
(1)
|
Assumes
that the selling stockholders will resell all of the registered
shares.
Because the selling stockholders may sell all, some or none of
their
shares or may acquire or dispose of other shares of common stock,
no
reliable estimate can be made of the aggregate number of shares
that will
be sold pursuant to this offering or the number or percentage of
shares of
common stock that each stockholder will own upon completion of
this
offering.
|
|
(2)
|
Includes
21,875,000 unregistered common shares issued to an accredited
investor
pursuant to the private offering exemption of Section 4(2)
of the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder, for consideration
in the
amount of $1,750,000, as based on the value of our securities
on the date
of issuance. Further includes two unregistered common stock
warrants each
issued to an accredited investor pursuant to the private offering
exemption of Section 4(2) of the Securities Act and/or the
private
offering safe harbor provision of Rule 506 of Regulation D
promulgated
thereunder, each for consideration in the amount of $576,042,
as based on
the value of our securities on the date of issuance. The first
warrant
would entitle the holder to purchase up to 10,937,500 common
shares at a
price of $0.18 per share, subject
to standard adjustment provisions and the second warrant would
entitle the holder to purchase up to 10,937,500 additional
common shares
at a price of $0.60 per share, also subject
to standard adjustment provisions. By virtue of these holdings,
Barron Partners, LP is deemed to be an “affiliate” of ours and is
therefore subject to certain regulations not otherwise applicable.
Voting
and/or investment power over these common shares and warrants
is held by
Andrew Barron Worden, a principal in the general partnership
of Barron
Partners, LP. Barron
Partners, LP has represented to us that it was neither a broker-dealer
nor
an affiliate of any broker-dealer at the time of the acquisition
and had
no agreements, understandings or arrangements with any other
persons,
either directly or indirectly, to dispose of any of the securities
being
registered
hereunder.
|
|
(3)
|
Includes
1,000,000 unregistered common shares acquired as of November
16, 2004 upon
conversion of a promissory note, in accordance with Section 3(a)(9),
which
note was originally issued September 30, 2004 to an accredited
investor
pursuant to the private offering exemption of Section 4(2) of
the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder, for consideration
in the
amount of $120,000, as based on the value of our securities on
the date of
issuance, in connection with a loan to us in the same amount.
C. James
Jensen has represented to us that he was not affiliated with
any
broker-dealer at the time of the acquisition and had no agreements,
understandings or arrangements with any other persons, either
directly or
indirectly, to dispose of any of the securities being registered
hereunder.
|
|
(4)
|
Includes
1,000,000 unregistered common shares acquired as of November
16, 2004 upon
conversion of a promissory note, in accordance with Section 3(a)(9)
of the
Securities Act, which note was originally issued September 30,
2004
pursuant to the private offering exemption of Section 4(2) of
the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder, for consideration
in the
amount of $120,000, as based on the value of our securities on
the date of
issuance, in connection with a loan to us in the same amount.
Voting
and/or investment power over these common shares is held by Ellison
Morgan
of 2030 Investors, LLC. 2030
Investors, LLC has represented to us that it was neither a broker-dealer
nor an affiliate of any broker-dealer at the time of the acquisition
and
had no agreements, understandings or arrangements with any other
persons,
either directly or indirectly, to dispose of any of the securities
being
registered
hereunder.
|
|
(5)
|
Includes
a single unregistered warrant to purchase a total of 62,500
common shares
at a price of $0.148 per share issued as of February 19, 2001
under the
private offering exemption of Section 4(2) of the Securities
Act and/or
the private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in partial consideration of certain
business
consulting services. The value attributed to the warrant was
$19,750, as
based on the value of our securities on the date of issuance.
Mr.
Chamberlain has represented to us that he was not affiliated
with any
broker-dealer at the time of the acquisition and had no agreements,
understandings or arrangements with any other persons, either
directly or
indirectly, to dispose of any of the securities being registered
hereunder.
|
|
(6)
|
Includes
a single unregistered warrant to purchase a total of 62,500
common shares
at a price of $0.148 per share issued as of February 19, 2001
under the
private offering exemption of Section 4(2) of the Securities
Act and/or
the private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in partial consideration of certain
business
consulting services. The value attributed to the warrant was
$19,750, as
based on the value of our securities on the date of issuance.
Mr. Reagan
has represented to us that he was not affiliated with any broker-dealer
at
the time of the acquisition and had no agreements, understandings
or
arrangements with any other persons, either directly or indirectly,
to
dispose of any of the securities being registered
hereunder.
|
|
(7)
|
Includes
a single unregistered warrant to purchase up to 150,000 common
shares at a
price of $0.022 per share issued as of April 7, 2004 pursuant
to the
private offering exemption of Section 4(2) of the Securities
Act and/or
the private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in consideration of the granting of
extension of
payment terms on amounts previously owed. The value attributable
to the
warrant was $3,300, as based on the value of our securities
on the date of
issuance. Mr. Membrado is the sole principal of M.M. Membrado,
PLLC our
corporate legal counsel. Voting and/or investment power over
this warrant
is held by Michael M. Membrado of M.M. Membrado, PLLC. Mr.
Membrado has represented to us that he was not affiliated with
any
broker-dealer at the time of the acquisition and had no agreements,
understandings or arrangements with any other persons, either
directly or
indirectly, to dispose of any of the securities being registered
hereunder.
|
|
(8)
|
Includes
the following:
(a)
668,625 common shares beneficially owned directly, including
(i) 35,500
common shares acquired as of April 28, 2000 pursuant to the
private
offering exemption of Section 4(2) of the Securities Act and/or
the
private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in consideration of a cash investment
of $71,000
($2.00 per share), (ii) an additional 22,875 common shares
acquired as of
April 28, 2000 pursuant to the private offering exemption of
Section 4(2)
of the Securities Act and/or the private offering safe harbor
provision of
Rule 506 of Regulation D promulgated thereunder, in consideration
of part
of a 15% placement agent commission payable in connection with
a previous
private offering by us (based on $2.00 per share), (iii) 10,000
common
shares acquired as of August 18, 2000 pursuant to the private
offering
exemption of Section 4(2) of the Securities Act and/or the
private
offering safe harbor provision of Rule 506 of Regulation D
promulgated
thereunder, in consideration of a certain corporate development
consulting
agreement, (iv) 204,000 common shares acquired as of March
7, 2002
pursuant to the private offering exemption of Section 4(2)
of the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder, in consideration
of a
settlement of a claim by Mr. Ardt for failure on our part to
have
fulfilled certain registration obligations associated with
common shares
previously sold to him, (v) a warrant to purchase up to 250,000
common
shares, acquired as of June 3, 2002 pursuant to the private
offering
exemption of Section 4(2) of the Securities Act and/or the
private
offering safe harbor provision of Rule 506 of Regulation D
promulgated
thereunder, in consideration of the satisfaction of $ 27,917.68
in
consulting fees then due, (vi) 137,250 common shares acquired
as of
September 20, 2002 pursuant to the private offering exemption
of Section
4(2) of the Securities Act and/or the private offering safe
harbor
provision of Rule 506 of Regulation D promulgated thereunder,
in further
consideration of the settlement for failure on our part to
have fulfilled
certain registration obligations associated with common shares
previously
sold to Mr. Ardt, and (vii) an additional 9,000 common shares
acquired as
of September 20, 2002 pursuant to the private offering exemption
of
Section 4(2) of the Securities Act and/or the private offering
safe harbor
provision of Rule 506 of Regulation D promulgated thereunder,
in
consideration of delays in issuing shares associated with the
settlement
for failure on our part to have fulfilled certain registration
obligations
associated with common shares previously sold to Mr. Ardt.
(b)
901,666 common shares beneficially owned through Business Investor
Services, Inc., including (i) 60,000 common shares acquired
as of April
28, 2000 pursuant to the private offering exemption of Section
4(2) of the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder, in consideration
of a cash
investment of $71,000 ($2.00 per share), (ii) 15,000 common
shares
acquired as of August 18, 2000 pursuant to the private offering
exemption
of Section 4(2) of the Securities Act and/or the private offering
safe
harbor provision of Regulation D promulgated thereunder, in
consideration
of a certain corporate development consulting agreement, (iii)
360,000
common shares acquired as of March 7, 2002 pursuant to the
private
offering exemption of Section 4(2) of the Securities Act and/or
the
private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in consideration of a settlement of
a claim by
Business Investor Services, Inc. for failure on our part to
have fulfilled
certain registration obligations associated with common shares
previously
sold to it, and (iv) 466,666 common shares acquired pursuant
to Section
3(a)(9) under the Securities Act as of December 31, 2004 upon
partial
conversion (in the amount of $23,333.33) of a convertible promissory
note
in the original face amount of $33,333 originally issued on
May 31, 2002
pursuant to the private offering exemption of Section 4(2)
of the
Securities Act and/or the private offering safe harbor provision
of Rule
506 of Regulation D promulgated thereunder.
(c)
321,308 common shares beneficially owned through Ardt Investment
Management, Inc., including (i) 25,000 common shares acquired
as of August
18, 2000 pursuant to the private offering exemption of Section
4(2) of the
Securities Act and/or the private offering safe harbor provision
of
Regulation D promulgated thereunder, in consideration of a
certain
corporate development consulting agreement, and (ii) a warrant
to purchase
up to 296,308 common shares acquired as of November 8, 2002
pursuant to
the private offering exemption of Section 4(2) of the Securities
Act
and/or the private offering safe harbor provision of Rule 506
of
Regulation D promulgated thereunder, in consideration of the
satisfaction
of $8,869 in consulting fees then due.
Voting
and/or investment power over all of these securities is held
by Ronald
Ardt. At the time of each of these acquisitions except for
that one
occurring in 2004, Mr. Ardt was the owner and securities principal
of
Travis Morgan Securities, Inc. then an NASD registered broker-dealer,
and was a securities principal in an OSJ (Office of Supervisory
Jurisdiction) with RichMark Capital Corporation, also then
an NASD
registered broker-dealer, up until July 16, 2000. Since 2003,
Mr. Ardt has
been a securities principal with Worth Securities Inc. (formerly
ProMark
Securities Inc.). Also at the time of these acquisitions, Mr.
Ardt had no
agreements, understandings or arrangements with any other persons,
either
directly or indirectly, to dispose of any of the securities
being
registered
hereunder.
|
|
(9)
|
Includes
a single unregistered warrant to purchase up to 600,000 common
shares at a
price of $0.15 per share issued as of May 21, 2004 under the
private
offering exemption of Section 4(2) of the Securities Act and/or
the
private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder, in consideration of certain business
consulting
services in an amount equal to $59,915, as based on the value
of our
securities on the date of issuance. Joseph Abrams has represented
to us
that he was not an affiliate of any broker-dealer at the time
of the
acquisition and had no agreements, understandings or arrangements
with any
other persons, either directly or indirectly, to dispose of
any of the
securities being registered
hereunder.
|
2004
|
High
|
Low
|
|||||
First
Quarter
|
$
|
0.055
|
$
|
0.020
|
|||
Second
Quarter
|
$
|
0.400
|
$
|
0.018
|
|||
Third
Quarter
|
$
|
0.250
|
$
|
0.090
|
|||
Fourth
Quarter
|
$
|
0.190
|
$
|
0.060
|
2005
|
High
|
Low
|
|||||
First
Quarter
|
$
|
0.150
|
$
|
0.070
|
|||
Second
Quarter
|
$
|
0.150
|
$
|
0.090
|
|||
Third
Quarter
|
$
|
0.140
|
$
|
0.070
|
|||
Fourth
Quarter
|
$
|
0.170
|
$
|
0.070
|
2006
|
High
|
|
Low
|
|
|||
First
Quarter
|
$
|
0.150
|
$
|
0.090
|
|||
Second
Quarter
|
$
|
0.150
|
$
|
0.040
|
|||
Third
Quarter
|
$
|
0.080
|
$
|
0.030
|
|||
Fourth
Quarter
|
$
|
0.060
|
$
|
0.030
|
•
|
that
a broker or dealer approve a person’s
account for transactions in penny stocks; and
|
•
|
the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
•
|
obtain
financial information and investment experience objectives of the
person;
and
|
•
|
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the
risks of
transactions in penny stocks.
|
•
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
•
|
that
the broker or dealer received a signed, written agreement from
the
investor prior to the transaction.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||
|
|||||||
|
(Unaudited)
|
||||||
|
September
30, 2006
|
December
31, 2005
|
|||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
992
|
$
|
119,560
|
|||
Accounts
receivable, trade, net
|
270,209
|
405,380
|
|||||
Inventory
|
151,013
|
214,604
|
|||||
Other
current assets
|
235,887
|
128,206
|
|||||
Total
current assets
|
658,101
|
867,750
|
|||||
Property
and equipment, net
|
79,985
|
114,191
|
|||||
Software
license, net
|
1,384,645
|
1,762,276
|
|||||
Capitalized
software development costs, net
|
518,216
|
707,067
|
|||||
Other
assets
|
276,568
|
253,001
|
|||||
Total
assets
|
$
|
2,917,515
|
$
|
3,704,285
|
|||
|
|||||||
Liabilities
and stockholders’ equity
|
|||||||
Current
liabilities:
|
|||||||
Note
payable
|
$
|
75,000
|
$
|
---
|
|||
Accounts
payable, trade
|
712,411
|
556,042
|
|||||
Accrued
royalties
|
574,129
|
472,548
|
|||||
Derivative
liabilities
|
952,914
|
2,062,462
|
|||||
Other
current liabilities
|
551,991
|
802,395
|
|||||
Total
current liabilities
|
2,866,445
|
3,893,447
|
|||||
Long-term
obligations
|
156,961
|
52,891
|
|||||
Commitments
and contingencies (Note 8)
|
|||||||
Stockholders’
equity:
|
|||||||
Common
stock
|
49,558
|
48,620
|
|||||
Paid-in
capital
|
7,595,437
|
7,461,424
|
|||||
Retained
(deficit)
|
(7,750,886
|
)
|
(7,752,097
|
)
|
|||
Total
stockholders’ equity
|
(105,891
|
)
|
(242,053
|
)
|
|||
Total
liabilities and stockholders’ equity
|
$
|
2,917,515
|
$
|
3,704,285
|
|||
|
|||||||
See
accompanying notes.
|
Findex.com,
Inc.
|
|||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||
(Unaudited)
|
|||||||||||||
|
|||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
|
September
30,
|
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Revenues,
net of reserves and allowances
|
$
|
826,127
|
$
|
1,023,609
|
$
|
2,586,197
|
$
|
3,978,019
|
|||||
Cost
of sales
|
391,771
|
450,413
|
1,361,157
|
1,410,191
|
|||||||||
Gross
profit
|
434,356
|
573,196
|
1,225,040
|
2,567,828
|
|||||||||
Operating
expenses:
|
|||||||||||||
Sales
and marketing
|
193,223
|
562,868
|
580,684
|
1,297,836
|
|||||||||
General
and administrative
|
385,658
|
212,261
|
1,310,340
|
1,419,057
|
|||||||||
Other
operating expenses
|
133,146
|
152,336
|
424,567
|
466,553
|
|||||||||
Total
operating expenses
|
712,027
|
927,465
|
2,315,591
|
3,183,446
|
|||||||||
Loss
from operations
|
(277,671
|
)
|
(354,269
|
)
|
(1,090,551
|
)
|
(615,618
|
)
|
|||||
Other
expenses, net
|
(47,898
|
)
|
(5,234
|
)
|
(57,929
|
)
|
(12,009
|
)
|
|||||
Registration
rights penalties
|
---
|
(158,792
|
)
|
(49,314
|
)
|
(277,792
|
)
|
||||||
Gain
(loss) on valuation adjustment of derivatives
|
237,009
|
(328,121
|
)
|
1,109,548
|
(874,992
|
)
|
|||||||
Loss
before income taxes
|
(88,560
|
)
|
(846,416
|
)
|
(88,246
|
)
|
(1,780,411
|
)
|
|||||
Income
tax (provision) benefit
|
114,909
|
(111,976
|
)
|
89,457
|
187,182
|
||||||||
Net
income (loss)
|
$
|
26,349
|
$
|
(958,392
|
)
|
1,211
|
(1,593,229
|
)
|
|||||
Retained
deficit at beginning of year
|
(7,752,097
|
)
|
(6,170,830
|
)
|
|||||||||
Retained
deficit at end of period
|
$
|
(7,750,886
|
)
|
$
|
(7,764,059
|
)
|
|||||||
Net
income (loss) per share:
|
|||||||||||||
Basic
|
$
|
0.00
|
$
|
(0.02
|
)
|
$
|
0.00
|
$
|
(0.03
|
)
|
|||
Diluted
|
$
|
0.00
|
$
|
(0.02
|
)
|
$
|
0.00
|
$
|
(0.03
|
)
|
|||
|
|||||||||||||
Weighted
average shares outstanding:
|
|||||||||||||
Basic
|
49,558,317
|
48,619,855
|
49,294,214
|
48,619,855
|
|||||||||
Diluted
|
51,167,410
|
48,619,855
|
51,660,240
|
48,619,855
|
|||||||||
|
|||||||||||||
See
accompanying notes.
|
Findex.com,
Inc.
|
|||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||
(Unaudited)
|
|||||||
|
|||||||
Nine
Months Ended September 30
|
2006
|
2005
|
|||||
Cash
flows from operating activities:
|
|||||||
Cash
received from customers
|
$
|
2,683,215
|
$
|
4,049,153
|
|||
Cash
paid to suppliers and employees
|
(2,375,960
|
)
|
(3,565,309
|
)
|
|||
Other
operating activities, net
|
(16,204
|
)
|
(3,910
|
)
|
|||
Net
cash provided by operating activities
|
291,051
|
479,934
|
|||||
Cash
flows from investing activities:
|
|||||||
Software
development costs
|
(412,108
|
)
|
(766,151
|
)
|
|||
Other
investing activities, net
|
(12,955
|
)
|
15,300
|
||||
Net
cash (used) by investing activities
|
(425,063
|
)
|
(750,851
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from note payable, net
|
75,000
|
---
|
|||||
Payments
made on long-term notes payable
|
(59,556
|
)
|
(30,604
|
)
|
|||
Net
cash provided (used) by financing activities
|
15,444
|
(30,604
|
)
|
||||
Net
(decrease) in cash and cash equivalents
|
(118,568
|
)
|
(301,521
|
)
|
|||
Cash
and cash equivalents, beginning of year
|
119,560
|
341,359
|
|||||
Cash
and cash equivalents, end of period
|
$
|
992
|
$
|
39,838
|
|||
|
|||||||
Reconciliation
of net income (loss) to cash flows from operating
activities:
|
|||||||
Net
income (loss)
|
$
|
1,211
|
$
|
(1,593,229
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash
|
|||||||
provided
by operating activities:
|
|||||||
Software
development costs amortized
|
600,959
|
524,989
|
|||||
(Gain)
loss on fair value adjustment of derivatives
|
(1,109,548
|
)
|
874,992
|
||||
Bad
debts (benefit) provision
|
(11,216
|
)
|
29,650
|
||||
Depreciation
& amortization
|
435,783
|
436,903
|
|||||
Noncash
operating expenses
|
69,997
|
---
|
|||||
Loss
on disposal of property and equipment
|
1,746
|
1,869
|
|||||
Change
in assets and liabilities:
|
|||||||
Decrease
in accounts receivable
|
146,387
|
71,786
|
|||||
Decrease
in inventories
|
63,591
|
22,231
|
|||||
Decrease
in refundable taxes
|
5,764
|
7,164
|
|||||
(Increase)
decrease in prepaid expenses
|
(7,603
|
)
|
55,509
|
||||
Increase
in accrued royalties
|
101,581
|
40,831
|
|||||
Increase
in accounts payable
|
164,327
|
65,858
|
|||||
Increase
in income taxes payable
|
---
|
180
|
|||||
(Decrease)
in deferred taxes
|
(89,457
|
)
|
(187,362
|
)
|
|||
(Decrease)
increase in other liabilities
|
(82,471
|
)
|
128,563
|
||||
Net
cash provided by operating activities
|
$
|
291,051
|
$
|
479,934
|
|||
|
|||||||
See
accompanying notes.
|
•
|
planning
the Website,
|
•
|
developing
the applications and infrastructure until technological feasibility
is
established,
|
|
•
|
developing
graphics such as borders, background and text colors, fonts,
frames, and
buttons, and
|
|
•
|
operating
the site such as training, administration and
maintenance.
|
•
|
obtain
and register an Internet domain
name,
|
•
|
develop
or acquire software tools necessary for the development
work,
|
|
•
|
develop
or acquire software necessary for general Website
operations,
|
•
|
develop
or acquire code for web
applications,
|
•
|
develop
or acquire (and customize) database software and software
to integrate
applications such as corporate databases and accounting
systems into web
applications,
|
|
•
|
develop
HTML web pages or templates,
|
|
•
|
install
developed applications on the web server,
|
|
•
|
create
initial hypertext links to other Websites or other locations
within the
Website, and
|
|
•
|
test
the Website applications.
|
Raw
materials
|
$
|
95,366
|
||
Finished
goods
|
55,647
|
|||
Inventories
|
$
|
151,013
|
Warrant
A
|
$
|
12,544
|
||
Warrant
B
|
488,717
|
|||
Warrant
C
|
451,653
|
|||
Derivatives
|
$
|
952,914
|
|
Warrant
A
|
Warrant
B
|
Warrant
C
|
|||||||||
Expected
term - years
|
.58
|
3.11
|
3.11
|
|||||||||
Stock
price at September 30, 2006
|
$
|
0.05
|
$
|
0.05
|
$
|
0.05
|
||||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
||||||
Expected
stock price volatility
|
235
|
%
|
212
|
%
|
212
|
%
|
||||||
Risk-free
interest rate
|
4.83
|
%
|
4.50
|
%
|
4.50
|
%
|
|
Three
months ended September 30
|
Nine
months ended September 30
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Current:
|
|||||||||||||
Federal
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
|||||
State
|
---
|
---
|
---
|
180
|
|||||||||
|
--- |
---
|
---
|
180
|
|||||||||
Deferred:
|
|||||||||||||
Federal
|
(112,543
|
)
|
116,472
|
(84,655
|
)
|
(165,714
|
)
|
||||||
State
|
(2,366
|
)
|
(4,496
|
)
|
(4,802
|
)
|
(21,648
|
)
|
|||||
(114,909
|
)
|
111,976
|
(89,457
|
)
|
(187,362
|
)
|
|||||||
Total
tax provision (benefit)
|
$ |
(114,909
|
)
|
$
|
111,976
|
$ |
(89,457
|
)
|
$ |
(187,182
|
)
|
For
the Three Months Ended September 30
|
2006
|
2005
|
|||||
Net
income (loss)
|
$
|
26,349
|
$ |
(958,392
|
)
|
||
Preferred
stock dividends
|
---
|
---
|
|||||
Net
income (loss) available to common shareholders
|
$
|
26,349
|
$ |
(958,392
|
)
|
||
Basic
weighted average shares outstanding
|
49,558,317
|
48,619,855
|
|||||
Dilutive
effect of:
|
|||||||
Convertible
debt
|
1,535,714
|
---
|
|||||
Stock
options
|
---
|
---
|
|||||
Warrants
|
73,379
|
---
|
|||||
Diluted
weighted average shares outstanding
|
51,167,410
|
48,619,855
|
For
the Nine Months Ended September 30
|
2006
|
2005
|
|||||
Net
loss
|
$
|
1,211
|
$ |
(1,593,229
|
)
|
||
Preferred
stock dividends
|
---
|
---
|
|||||
Net
loss available to common shareholders
|
$
|
1,211
|
$ |
(1,593,229
|
)
|
||
Basic
weighted average shares outstanding
|
49,294,214
|
48,619,855
|
|||||
Dilutive
effect of:
|
|||||||
Convertible
debt
|
1,535,714
|
---
|
|||||
Stock
options
|
676,043
|
---
|
|||||
Warrants
|
154,269
|
---
|
|||||
Diluted
weighted average shares outstanding
|
51,660,240
|
48,619,855
|
Findex.com,
Inc.
|
|||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||
December
31, 2005 and 2004
|
|||||||
|
|||||||
|
2005
|
2004
|
|||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
119,560
|
$
|
341,359
|
|||
Accounts
receivable, trade
|
405,380
|
566,819
|
|||||
Inventories
|
214,604
|
234,000
|
|||||
Deferred
income taxes, net
|
85,392
|
300,191
|
|||||
Other
current assets
|
42,814
|
109,078
|
|||||
Total
current assets
|
867,750
|
1,551,447
|
|||||
Property
and equipment, net
|
114,191
|
131,019
|
|||||
Software
license, net
|
1,762,276
|
2,265,783
|
|||||
Capitalized
software development costs, net
|
707,067
|
701,289
|
|||||
Deferred
income taxes, net
|
183,195
|
157,840
|
|||||
Restricted
cash
|
---
|
50,354
|
|||||
Other
assets
|
69,806
|
94,101
|
|||||
Total
assets
|
$
|
3,704,285
|
$
|
4,951,833
|
|||
|
|||||||
Liabilities
and stockholders’ equity
|
|||||||
Current
liabilities:
|
|||||||
Current
maturities of long-term debt
|
$
|
11,955
|
$
|
35,495
|
|||
Accrued
royalties
|
472,548
|
287,514
|
|||||
Accounts
payable, trade
|
556,042
|
621,804
|
|||||
Accrued
registration rights penalties
|
336,686
|
---
|
|||||
Accrued
payroll
|
206,988
|
209,984
|
|||||
Reserve
for sales returns
|
125,492
|
100,180
|
|||||
Derivatives
|
2,062,462
|
1,968,750
|
|||||
Other
current liabilities
|
121,274
|
128,166
|
|||||
Total
current liabilities
|
3,893,447
|
3,351,893
|
|||||
Long-term
debt
|
33,786
|
42,972
|
|||||
Deferred
income taxes, net
|
19,105
|
157,840
|
|||||
Commitments
and contingencies (Note 17)
|
|||||||
Stockholders’
equity:
|
|||||||
Common
stock, $.001 par value
|
|||||||
120,000,000
shares authorized,
|
|||||||
48,619,855
shares issued and outstanding
|
48,620
|
48,620
|
|||||
Paid-in
capital
|
7,461,424
|
7,521,339
|
|||||
Retained
(deficit)
|
(7,752,097
|
)
|
(6,170,831
|
)
|
|||
Total
stockholders’ equity
|
(242,053
|
)
|
1,399,128
|
||||
Total
liabilities and stockholders’ equity
|
$
|
3,704,285
|
$
|
4,951,833
|
|||
|
|||||||
See
accompanying
notes.
|
Findex.com,
Inc.
|
|||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|||||||
|
|||||||
Year
Ended December 31
|
2005
|
2004
|
|||||
Revenues,
net of reserves and allowances
|
$
|
5,337,342
|
$
|
5,322,842
|
|||
Cost
of sales
|
1,973,944
|
1,721,298
|
|||||
Gross
profit
|
3,363,398
|
3,601,544
|
|||||
Operating
expenses:
|
|||||||
Sales
and marketing
|
1,273,231
|
1,280,761
|
|||||
General
and administrative
|
2,432,667
|
2,309,838
|
|||||
Bad
debt expense
|
137,303
|
22,778
|
|||||
Amortization
expense
|
531,524
|
519,850
|
|||||
Depreciation
expense
|
50,704
|
44,478
|
|||||
Total
operating expenses
|
4,425,429
|
4,177,705
|
|||||
Loss
from operations
|
(1,062,031
|
)
|
(576,161
|
)
|
|||
Interest
income
|
1,059
|
1,378
|
|||||
Other
income
|
13,796
|
1,011,366
|
|||||
Other
adjustments
|
(436,686
|
)
|
(154,569
|
)
|
|||
Loss
on fair value adjustment of derivatives
|
(33,797
|
)
|
(291,672
|
)
|
|||
Loss
on disposition of assets
|
(1,869
|
)
|
(141
|
)
|
|||
Interest
expense
|
(11,029
|
)
|
(42,007
|
)
|
|||
Loss
before income taxes
|
(1,530,557
|
)
|
(51,806
|
)
|
|||
Provision
for income taxes
|
(50,709
|
)
|
1,015,859
|
||||
Net
income (loss)
|
$
|
(1,581,266
|
)
|
$
|
964,053
|
||
|
|||||||
Earnings
(loss) per share:
|
|||||||
Basic
|
$
|
(0.03
|
)
|
$
|
0.03
|
||
Diluted
|
$
|
(0.03
|
)
|
$
|
0.03
|
||
|
|||||||
Weighted
average shares outstanding:
|
|||||||
Basic
|
48,619,855
|
34,520,754
|
|||||
Diluted
|
48,619,855
|
35,195,840
|
|||||
|
|||||||
See
accompanying
notes.
|
Findex.com,
Inc.
|
||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||
|
||||||||||||||||||||||
|
Retained
|
|||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Earnings
|
||||||||||||||||||
|
Series
A
|
Series
B
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
|
Total
|
||||||||||||||
|
||||||||||||||||||||||
Balance,
December 31, 2003
|
$
|
11
|
$
|
40
|
21,011,438
|
$
|
21,011
|
$
|
7,080,629
|
$
|
(7,130,759
|
)
|
$
|
(29,068
|
)
|
|||||||
Common
stock issued for services
|
---
|
---
|
2,774,105
|
2,774
|
100,445
|
---
|
103,219
|
|||||||||||||||
Common
stock warrants issued for services
|
---
|
---
|
---
|
---
|
75,715
|
---
|
75,715
|
|||||||||||||||
Common
stock cancelled
|
---
|
---
|
(48,387
|
)
|
(48
|
)
|
48
|
---
|
---
|
|||||||||||||
Preferred
Series A common stock dividend
|
---
|
---
|
56,356
|
56
|
4,069
|
(4,125
|
)
|
---
|
||||||||||||||
Conversion
of preferred stock
|
(11
|
)
|
(40
|
)
|
484,677
|
485
|
(434
|
)
|
---
|
---
|
||||||||||||
Common
stock issued in connection with
|
||||||||||||||||||||||
private
placement, net of $51,047 of issuance costs
|
---
|
---
|
21,875,000
|
21,875
|
---
|
---
|
21,875
|
|||||||||||||||
Conversion
of notes payable
|
---
|
---
|
2,466,666
|
2,467
|
260,867
|
---
|
263,334
|
|||||||||||||||
Net
income, December 31, 2004
|
---
|
---
|
---
|
---
|
---
|
964,053
|
964,053
|
|||||||||||||||
Balance,
December 31, 2004
|
$
|
---
|
$
|
---
|
48,619,855
|
$
|
48,620
|
$
|
7,521,339
|
$
|
(6,170,831
|
)
|
$
|
1,399,128
|
||||||||
Common
stock warrant reclassified as derivative
|
---
|
---
|
---
|
---
|
(59,915
|
)
|
---
|
(59,915
|
)
|
|||||||||||||
Net
loss, December 31, 2005
|
---
|
---
|
---
|
---
|
---
|
(1,581,266
|
)
|
(1,581,266
|
)
|
|||||||||||||
Balance,
December 31, 2005
|
$
|
---
|
$
|
---
|
48,619,855
|
$
|
48,620
|
$
|
7,461,424
|
$
|
(7,752,097
|
)
|
$
|
(242,053
|
)
|
|||||||
|
||||||||||||||||||||||
See
accompanying notes.
|
Findex.com,
Inc.
|
|||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||
|
|||||||
Year
Ended December 31
|
2005
|
2004
|
|||||
Cash
flows from operating activities:
|
|||||||
Cash
received from customers
|
$
|
5,369,139
|
$
|
5,062,396
|
|||
Cash
paid to suppliers and employees
|
(4,761,153
|
)
|
(5,673,088
|
)
|
|||
Other
operating receipts
|
13,796
|
9,276
|
|||||
Interest
paid
|
(11,896
|
)
|
(37,928
|
)
|
|||
Interest
received
|
1,059
|
1,378
|
|||||
Income
taxes (paid) refunded
|
1,400
|
(5,702
|
)
|
||||
Net
cash provided (used) by operating activities
|
612,345
|
(643,668
|
)
|
||||
Cash
flows from investing activities:
|
|||||||
Acquisition
of property, plant and equipment
|
(35,746
|
)
|
(58,247
|
)
|
|||
Software
development costs
|
(812,309
|
)
|
(692,063
|
)
|
|||
Website
development costs
|
(16,163
|
)
|
(31,838
|
)
|
|||
Deposits
refunded (paid)
|
62,796
|
35,216
|
|||||
Net
cash (used) by investing activities
|
(801,422
|
)
|
(746,932
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from (payments on) line of credit, net
|
---
|
(20,935
|
)
|
||||
Payments
made on long-term notes payable
|
(32,722
|
)
|
(227,727
|
)
|
|||
Proceeds
from convertible notes payable
|
---
|
240,000
|
|||||
Proceeds
from issuance of stock
|
---
|
1,750,000
|
|||||
Stock
offering costs paid
|
---
|
(51,047
|
)
|
||||
Net
cash provided (used) by financing activities
|
(32,722
|
)
|
1,690,291
|
||||
Net
increase (decrease) in cash and cash equivalents
|
(221,799
|
)
|
299,691
|
||||
Cash
and cash equivalents, beginning of year
|
341,359
|
41,668
|
|||||
Cash
and cash equivalents, end of year
|
$
|
119,560
|
$
|
341,359
|
|||
|
|||||||
Reconciliation
of net income to cash flows from operating activities:
|
|||||||
Net
income (loss)
|
$
|
(1,581,266
|
)
|
$
|
964,053
|
||
Adjustments
to reconcile net income (loss) to net cash
|
|||||||
provided
(used) by operating activities:
|
|||||||
Software
development costs amortized
|
806,531
|
575,481
|
|||||
Stock
and warrants issued for services
|
---
|
178,929
|
|||||
Rebate
reserve adjustment
|
---
|
(142,039
|
)
|
||||
Provision
for bad debts
|
137,303
|
22,778
|
|||||
Depreciation
& amortization
|
582,228
|
564,328
|
|||||
Debt
forgiveness
|
---
|
(1,002,090
|
)
|
||||
Loss
on disposal of property and equipment
|
1,869
|
141
|
|||||
Loss
on fair value adjustment of derivatives
|
33,797
|
291,672
|
|||||
Change
in assets and liabilities:
|
|||||||
(Increase)
decrease in accounts receivable
|
24,136
|
(223,794
|
)
|
||||
Decrease
in inventories
|
19,396
|
38,600
|
|||||
(Increase)
decrease in refundable taxes
|
1,400
|
(2,948
|
)
|
||||
(Increase)
decrease in prepaid expenses
|
64,865
|
(84,211
|
)
|
||||
Increase
(decrease) in accrued royalties
|
185,034
|
(324,360
|
)
|
||||
(Decrease)
in accounts payable
|
(65,762
|
)
|
(271,198
|
)
|
|||
(Decrease)
in income taxes payable
|
---
|
(1,270
|
)
|
||||
Increase
(decrease) in deferred taxes
|
50,709
|
(1,017,343
|
)
|
||||
Increase
(decrease) in other liabilities
|
352,105
|
(210,397
|
)
|
||||
Net
cash provided (used) by operating activities
|
$
|
612,345
|
$
|
(643,668
|
)
|
||
|
|||||||
See
accompanying
notes.
|
•
|
planning
the Website,
|
•
|
developing
the applications and infrastructure until technological
feasibility is
established,
|
|
•
|
developing
graphics such as borders, background and text colors,
fonts, frames, and
buttons, and
|
|
•
|
operating
the site such as training, administration and
maintenance.
|
•
|
obtain
and register an Internet domain
name,
|
•
|
develop
or acquire software tools necessary for the development
work,
|
|
•
|
develop
or acquire software necessary for general Website
operations,
|
•
|
develop
or acquire code for web
applications,
|
•
|
develop
or acquire (and customize) database software and
software to integrate
applications such as corporate databases and accounting
systems into web
applications,
|
|
•
|
develop
HTML web pages or templates,
|
|
•
|
install
developed applications on the web server,
|
|
•
|
create
initial hypertext links to other Websites or other
locations within the
Website, and
|
|
•
|
test
the Website applications.
|
2005
|
2004
|
||||||
Trade
receivables
|
$
|
483,380
|
$
|
584,819
|
|||
Less:
Allowance for doubtful accounts
|
78,000
|
18,000
|
|||||
Accounts
receivable, trade
|
$
|
405,380
|
$
|
566,819
|
2005
|
2004
|
||||||
Raw
materials
|
$
|
118,158
|
$
|
111,300
|
|||
Finished
goods
|
96,446
|
122,700
|
|||||
Inventories
|
$
|
214,604
|
$
|
234,000
|
2005
|
2004
|
||||||
Computer
equipment
|
$
|
93,992
|
$
|
84,009
|
|||
Computer
software
|
65,442
|
62,861
|
|||||
Office
equipment
|
85,431
|
77,947
|
|||||
Office
furniture and fixtures
|
68,171
|
62,594
|
|||||
Warehouse
equipment
|
12,159
|
23,150
|
|||||
325,195
|
310,561
|
||||||
Less:
Accumulated depreciation
|
211,004
|
179,542
|
|||||
Property
and equipment, net
|
$
|
114,191
|
$
|
131,019
|
2005
|
2004
|
||||||
Software
license cost
|
$
|
5,135,574
|
$
|
5,135,574
|
|||
Less:
Accumulated amortization
|
3,373,298
|
2,869,791
|
|||||
Software
license, net
|
$
|
1,762,276
|
$
|
2,265,783
|
2005
|
2004
|
||||||
Warrant
A
|
$
|
47,389
|
$
|
---
|
|||
Warrant
B
|
1,030,348
|
984,375
|
|||||
Warrant
C
|
984,725
|
984,375
|
|||||
Derivatives
|
$
|
2,062,462
|
$
|
1,968,750
|
|
Warrant
A
|
Warrant
B
|
Warrant
C
|
|||||||
Expected
term - years
|
1.33
|
3.55
|
3.55
|
|||||||
Stock
price at December 31, 2005
|
$
|
0.10
|
$
|
0.10
|
$
|
0.10
|
||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
||||
Expected
stock price volatility
|
235
|
%
|
212
|
%
|
212
|
%
|
||||
Risk-free
interest rate
|
2.94
|
%
|
3.62
|
%
|
3.62
|
%
|
2005
|
2004
|
||||||
Unsecured
term note payable to a corporation due October 2004 in
monthly
installments of $5,285, including interest at 8%.
|
$
|
2,769
|
$
|
26,679
|
|||
Capital
lease obligation payable to a corporation due November
2009 in monthly
installments of $1,144, including interest at 11.7%. Secured
by telephone
equipment. See Notes 4 and 14.
|
42,972
|
51,788
|
|||||
45,741
|
78,467
|
||||||
Less:
Current maturities
|
11,955
|
35,495
|
|||||
Long-term
debt
|
$
|
33,786
|
$
|
42,972
|
2006
|
$
|
11,955
|
||
2007
|
10,318
|
|||
2008
|
11,591
|
|||
2009
|
11,877
|
|||
Total
|
$
|
45,741
|
2005
|
2004
|
||||||
Current:
|
|||||||
Federal
|
$
|
---
|
$
|
---
|
|||
State
|
---
|
1,484
|
|||||
|
---
|
1,484
|
|||||
Deferred:
|
|||||||
Federal
|
161,169
|
(1,009,939
|
)
|
||||
State
|
(110,460
|
)
|
(7,404
|
)
|
|||
50,709
|
(1,017,343
|
)
|
|||||
Total
tax provision (benefit)
|
$
|
50,709
|
$
|
(1,015,859
|
)
|
2005
|
2004
|
||||||
Expense
(benefit) at Federal statutory rate - 34%
|
$
|
(520,389
|
)
|
$ |
(12,952
|
)
|
|
State
tax effects, net of Federal taxes
|
(110,460
|
)
|
(4,069
|
)
|
|||
Nondeductible
expenses
|
14,814
|
236,009
|
|||||
Taxable
temporary differences
|
187,051
|
(73,533
|
)
|
||||
Deductible
temporary differences
|
(11,157
|
)
|
356,278
|
||||
Net
operating loss
|
505,575
|
---
|
|||||
Deferred
tax asset valuation allowance
|
(14,725
|
)
|
(1,517,592
|
)
|
|||
Income
tax expense (benefit)
|
$
|
50,709
|
$ |
(1,015,859
|
)
|
For
the year ended December 31, 2005
|
Federal
|
State
|
Total
|
|||||||
Current
Deferred Income Taxes
|
||||||||||
Reserve
for sales returns
|
$
|
42,667
|
$
|
1,054
|
$
|
43,721
|
||||
Reserve
for technical support costs
|
13,022
|
322
|
13,344
|
|||||||
Accrued
compensation costs
|
50,622
|
1,251
|
51,873
|
|||||||
Deferred
revenue
|
8,806
|
218
|
9,024
|
|||||||
Reserve
for bad debts
|
26,520
|
655
|
27,175
|
|||||||
Operating
loss carryforwards
|
85,091
|
531
|
85,622
|
|||||||
226,728
|
4,031
|
230,759
|
||||||||
Less:
Valuation allowance
|
141,705
|
3,662
|
145,367
|
|||||||
Deferred
income tax asset, net
|
$
|
85,023
|
$
|
369
|
$
|
85,392
|
||||
Non-current
Deferred Income Taxes
|
||||||||||
State
deferred tax liabilities
|
$
|
7,185
|
$
|
---
|
$
|
7,185
|
||||
Operating
loss carryforwards
|
2,794,956
|
25,101
|
2,820,057
|
|||||||
2,802,141
|
25,101
|
2,827,242
|
||||||||
Less:
Valuation allowance
|
1,751,338
|
22,804
|
1,774,142
|
|||||||
Deferred
income tax asset, net
|
1,050,803
|
2,297
|
$
|
1,053,100
|
||||||
Software
development costs
|
(240,403
|
)
|
(5,939
|
)
|
|
(246,342
|
)
|
|||
Website
costs
|
(18,990
|
)
|
(469
|
)
|
(19,459
|
)
|
||||
Inventory
|
(10,915
|
)
|
(270
|
)
|
(11,185
|
)
|
||||
Property
and equipment
|
(188
|
)
|
(5
|
)
|
(193
|
)
|
||||
Software
license fees
|
(595,774
|
)
|
(14,719
|
)
|
(610,493
|
)
|
||||
State
deferred tax assets
|
(1,338
|
)
|
---
|
(1,338
|
)
|
|||||
Deferred
income tax liability
|
(867,608
|
)
|
(21,402
|
)
|
$
|
(889,010
|
)
|
|||
Deferred
income tax asset, net
|
$
|
183,195
|
||||||||
Deferred
income tax liability, net
|
$
|
(19,105
|
)
|
For
the year ended December 31, 2004
|
Federal
|
State
|
Total
|
|||||||
Current
Deferred Income Taxes
|
||||||||||
Reserve
for sales returns
|
$
|
34,061
|
$
|
8,014
|
$
|
42,075
|
||||
Reserve
for technical support costs
|
13,362
|
3,144
|
16,506
|
|||||||
Accrued
compensation costs
|
50,734
|
11,937
|
62,671
|
|||||||
Deferred
revenue
|
14,807
|
3,484
|
18,291
|
|||||||
Reserve
for bad debts
|
6,120
|
1,440
|
7,560
|
|||||||
Operating
loss carryforwards
|
285,600
|
1,054
|
286,654
|
|||||||
404,684
|
29,073
|
433,757
|
||||||||
Less:
Valuation allowance
|
129,005
|
4,561
|
133,566
|
|||||||
Deferred
income tax asset, net
|
$
|
275,679
|
$
|
24,512
|
$
|
300,191
|
||||
Non-current
Deferred Income Taxes
|
||||||||||
Property
and equipment, net
|
$
|
2,312
|
$
|
544
|
$
|
2,856
|
||||
Reorganization
costs
|
1,700
|
400
|
2,100
|
|||||||
State
deferred tax liabilities
|
53,665
|
---
|
53,665
|
|||||||
Operating
loss carryforwards
|
2,555,351
|
3,957
|
2,559,308
|
|||||||
|
2,613,028
|
4,901
|
2,617,929
|
|||||||
Less:
Valuation allowance
|
1,774,631
|
4,901
|
1,779,532
|
|||||||
Deferred
income tax asset, net
|
|
838,397
|
|
---
|
|
838,397
|
||||
Software
development costs
|
(238,438
|
)
|
(56,103
|
)
|
|
(294,541
|
)
|
|||
Website
costs
|
(23,020
|
)
|
(5,416
|
)
|
(28,436
|
)
|
||||
Software
license fees
|
(409,360
|
)
|
(96,321
|
)
|
(505,681
|
)
|
||||
State
deferred tax assets
|
(9,739
|
)
|
---
|
(9,739
|
)
|
|||||
Deferred
income tax liability
|
|
(680,557
|
)
|
|
(157,840
|
)
|
$
|
(838,397
|
)
|
|
Deferred
income tax asset, net
|
$
|
157,840
|
||||||||
Deferred
income tax liability, net
|
$
|
(157,840
|
)
|
For
the Year Ended December 31
|
2005
|
2004
|
|||||
Net
Income (loss)
|
$ |
(1,581,266
|
)
|
$
|
964,053
|
||
Common
stock dividend on Preferred Series A
|
---
|
(4,125
|
)
|
||||
Net
income (loss) available to common shareholders
|
$ |
(1,581,266
|
)
|
$
|
959,928
|
||
Basic
weighted average shares outstanding
|
48,619,855
|
34,520,754
|
|||||
Dilutive
effect of:
|
|||||||
Stock
options
|
---
|
429,824
|
|||||
Warrants
|
---
|
245,262
|
|||||
Diluted
weighted average shares outstanding
|
48,619,855
|
35,195,840
|
|
Outstanding
Options
|
||||||
|
Number
of Shares
|
Weighted-Average
Exercise Price
|
|||||
Balance
at December 31, 2003
|
3,290,283
|
$
|
0.29
|
||||
Granted
|
---
|
---
|
|||||
Exercised
|
---
|
---
|
|||||
Expired
or forfeited
|
(140,083
|
)
|
$
|
0.12
|
|||
Canceled
|
(715,200
|
)
|
$
|
1.02
|
|||
Balance
at December 31, 2004
|
2,435,000
|
$
|
0.09
|
||||
Granted
|
---
|
---
|
|||||
Exercised
|
---
|
---
|
|||||
Expired
or forfeited
|
(55,000
|
)
|
$
|
0.11
|
|||
Canceled
|
---
|
---
|
|||||
Balance
at December 31, 2005
|
2,380,000
|
$
|
0.08
|
Outstanding
Options
|
Exercisable
Options
|
|||||||||||||||
Range
of Exercise Prices
|
Outstanding
at December 31, 2005
|
Weighted-Average
Remaining Contractual Life (Years)
|
|
Weighted-Average
Exercise Price
|
Exercisable
at December 31, 2005
|
Weighted-Average
Exercise Price
|
||||||||||
$0.00
to $0.11
|
2,380,000
|
6.15
|
$
|
0.0848
|
2,380,000
|
$
|
0.0848
|
|
Outstanding
Warrants
|
||||||
|
Number
of Shares
|
Weighted-Average
Exercise Price
|
|||||
Balance
at December 31, 2003
|
525,000
|
$
|
0.09
|
||||
Granted
|
22,625,000
|
$
|
0.38
|
||||
Exercised
|
---
|
---
|
|||||
Expired
or forfeited
|
---
|
---
|
|||||
Canceled
|
---
|
---
|
|||||
Balance
at December 31, 2004
|
23,150,000
|
$
|
0.37
|
||||
Granted
|
---
|
---
|
|||||
Exercised
|
---
|
---
|
|||||
Expired
or forfeited
|
---
|
---
|
|||||
Canceled
|
---
|
---
|
|||||
Balance
at December 31, 2005
|
23,150,000
|
$
|
0.37
|
2006
|
$
|
81,331
|
||
2007
|
31,248
|
|||
Total
future minimum rental payments
|
$
|
112,579
|
Office
equipment
|
$
|
51,788
|
||
Less:
Accumulated depreciation
|
12,084
|
|||
Net
property and equipment under capital lease
|
$
|
39,704
|
2006
|
$
|
13,726
|
||
2007
|
13,726
|
|||
2008
|
13,726
|
|||
2009
|
12,582
|
|||
2010
|
---
|
|||
Total
minimum lease payments
|
53,760
|
|||
Less:
Amount representing interest
|
10,788
|
|||
Total
obligations under capital lease
|
42,972
|
|||
Less:
Current installments of obligations under capital lease
|
9,186
|
|||
Long-term
obligation under capital lease
|
$
|
33,786
|
2005
|
2004
|
||||||
Property
and equipment acquired under capital lease
|
$
|
---
|
$
|
51,788
|
|||
Conversion
of notes payable into common stock. See Note 6.
|
$
|
---
|
$
|
263,334
|
|||
Common
stock dividend on Preferred Series A
|
$
|
---
|
$
|
4,125
|
|||
Preferred
stock converted into common stock
|
$
|
---
|
$
|
470
|
|||
Common
stock and warrants issued for services
|
$
|
---
|
$
|
178,929
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
|
3
|
|
|
|
|
|
12
|
|
|
|
|
|
12
|
|
|
|
|
|
13
|
|
|
|
|
|
42
|
|
|
|
|
|
56
|
|
|
|
|
|
61
|
|
|
|
|
|
62
|
|
|
|
|
|
63
|
|
|
|
|
|
63
|
|
|
|
|
|
67
|
|
|
|
|
|
68
|
|
|
|
|
|
69
|
|
|
|
|
|
70
|
|
|
|
|
|
70
|
|
|
|
|
|
70
|
|
|
|
|
|
70
|
|
|
|
|
|
F-1
|
|
Registration
Fee - Securities and Exchange Commission
|
$
|
1,370
|
||
Printing
and Engraving
|
$
|
3,630
|
*
|
|
Legal
Fees and Expenses
|
$
|
150,000
|
*
|
|
Accounting
Fees
|
$
|
20,000
|
*
|
|
Blue
Sky Fees and Expenses
|
$
|
5,000
|
*
|
|
Penalty Fees under Registration Rights Agreement with Barron Partners, LP |
$
|
469,472 | ||
Total
|
$
|
649,472
|
*
|
Date
Securities Issued
|
Securities
Title
|
Issued
to
|
Number
of Securities Issued
|
Consideration
*
|
Footnotes
|
|||||||||||
Common
Stock Issuances
|
||||||||||||||||
Sold
for Cash
|
||||||||||||||||
7/19/2004
|
Common
Stock
|
Barron
Partners, LP
|
21,875,000
|
$
|
597,916
|
(A)(1)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Ahmad
Al Khiyami
|
75,000
|
$
|
21,429
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Betty
Wolfe
|
36,000
|
$
|
10,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Billy
W. Spain
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Bing
Bingham
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Bob
Heusinkveld
|
60,000
|
$
|
17,143
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Business
Investor Services, Inc.
|
360,000
|
$
|
102,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Charles
M. Jager
|
10,500
|
$
|
3,000
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Cory
J. Rueb
|
75,000
|
$
|
21,429
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
D.R.
Jack Sullivan
|
45,000
|
$
|
12,857
|
(A)(2)
|
|
3/7/2002
|
Common
Stock
|
Donald
Harrison
|
75,000
|
$
|
21,429
|
(A)(2)
|
|
3/7/2002
|
Common
Stock
|
Hugh
B. Jacks
|
45,000
|
$
|
12,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Jager
Companies, Inc.
|
9,000
|
$
|
2,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
James
O. Walker
|
60,000
|
$
|
17,143
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Jeff
Morgan
|
36,000
|
$
|
10,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Jernigan
Family Partnership II
|
75,000
|
$
|
21,429
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
John
B. Padgett
|
15,000
|
$
|
4,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
John
B. Richardson
|
15,000
|
$
|
4,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Kent
A. Upton
|
45,000
|
$
|
12,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Lifeway
Christian Resources
|
120,000
|
$
|
34,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Lifeway
Christian Resources
|
480,000
|
$
|
137,143
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Ollie
Sandlin
|
45,000
|
$
|
12,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Ralph
Ewing
|
36,000
|
$
|
10,286
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Robert
R. Crowe
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Ronald
Ardt
|
213,000
|
$
|
60,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Roy
W. Gilbert, Jr.
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Stan
Blair
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Steve
Jager
|
10,500
|
$
|
3,000
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Thomas
Ardt
|
24,000
|
$
|
6,857
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
Thomas
E. Bradford, Jr.
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
3/7/2002
|
Common
Stock
|
W.P.
Buck
|
30,000
|
$
|
8,571
|
(A)(2)
|
|
|||||||||
Footnotes:
|
||||||||||||||||
(1)
$1,750,000
($0.08 per share) total offering price, including warrants.
Amount listed
represents amount allocated to shares of common stock.
|
||||||||||||||||
(2)
$750,000
($0.29 per share) total offering price. Amount listed represents
amount
allocated to 2nd tranche.
|
||||||||||||||||
There
were no underwriter discounts or commissions associated with
these sales
of common stock for cash.
|
||||||||||||||||
Issued
for compensation to employees, executive officers and board
of
directors
|
||||||||||||||||
10/26/2006 |
Common
Stock
|
Independent
Board of Director
|
480,000 |
$
|
12,000 |
(A)
|
||||||||||
3/31/2006 |
Common
Stock
|
Independent
Board of Directors
|
438,462 |
$
|
57,000 |
(A)
|
||||||||||
6/4/2004
|
Common
Stock
|
Independent
Board of Directors
|
324,074
|
$
|
26,250
|
(A)
|
|
|||||||||
4/28/2004
|
Common
Stock
|
Non-Executive
Employees
|
635,000
|
$
|
13,970
|
(C)
|
|
|||||||||
4/7/2004
|
Common
Stock
|
Executive
Officers
|
1,519,349
|
$
|
33,426
|
(A)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
Executive
Officer
|
250,000
|
$
|
10,000
|
(A)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
Independent
Board of Directors
|
600,000
|
$
|
27,000
|
(A)
|
|
|||||||||
4/1/2002
|
Common
Stock
|
Executive
Officers
|
2,460,000
|
$
|
61,500
|
(A)
|
|
|||||||||
4/1/2002
|
Common
Stock
|
Independent
Board of Directors
|
2,000,000
|
$
|
50,000
|
(A)
|
|
|||||||||
4/1/2002
|
Common
Stock
|
Non-Executive
Employees
|
1,367,280
|
$
|
34,182
|
(C)
|
|
|||||||||
Issued
for compensation to independent
contractors
|
||||||||||||||||
4/3/2006 |
Common
Stock
|
Alliance
Advisors, LLC
|
250,000 |
$
|
32,500 |
(A)(5)(a)
|
||||||||||
7/16/2004
|
Common
Stock
|
Swartz
Private Equity, LLC
|
295,692
|
$
|
29,569
|
(A)(1)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
Edward
Gerskovich
|
75,000
|
$
|
3,375
|
(A)(2)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
Frank
Quinby
|
200,000
|
$
|
9,000
|
(A)(3)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
Rick
Cosaro
|
25,000
|
$
|
1,125
|
(A)(2)
|
|
|||||||||
7/25/2003
|
Common
Stock
|
StandAlone,
Inc.
|
50,000
|
$
|
2,250
|
(A)(2)
|
|
|||||||||
11/15/2002
|
Common
Stock
|
Ardt
Investment Management, Inc.
|
296,308
|
$
|
8,889
|
(A)(4)
|
|
7/23/2002
|
Common
Stock
|
Charles
Moskowitz
|
205,000
|
$
|
10,250
|
(A)(5)
|
|
|||||||||
12/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
430
|
(A)(5)
|
|
|||||||||
11/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
645
|
(A)(5)
|
|
|||||||||
10/25/2001
|
Common
Stock
|
World
Trade Partners, Inc.
|
500,000
|
$
|
65,000
|
(A)(6)
|
|
|||||||||
10/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
1,398
|
(A)(5)
|
|
|||||||||
9/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
1,828
|
(A)(5)
|
|
8/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
957
|
(A)(5)
|
|
|||||||||
7/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
1,398
|
(A)(5)
|
|
|||||||||
6/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
2,473
|
(A)(5)
|
|
|||||||||
5/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
2,903
|
(A)(5)
|
|
|||||||||
4/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
3,225
|
(A)(5)
|
|
|||||||||
3/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
10,750
|
$
|
7,310
|
(A)(5)
|
|
|||||||||
2/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
12,500
|
$
|
5,250
|
(A)(5)
|
|
|||||||||
1/15/2001
|
Common
Stock
|
Charles
Moskowitz
|
12,500
|
$
|
5,625
|
(A)(5)
|
|
|||||||||
Footnotes:
|
||||||||||||||||
(1)
Issued
as compensation for a withdrawn public offering.
|
||||||||||||||||
(2)
Issued
as compensation for software development services.
|
||||||||||||||||
(3)
Issued
as compensation for preparation of written corporate
materials.
|
||||||||||||||||
(4)
Issued
as compensation for consulting and valuation services.
|
||||||||||||||||
(5)
Issued
as compensation for investor relations services.
|
||||||||||||||||
(6)
Issued
as compensation for consulting, planning, development and
enhancement of
sales opportunities.
|
||||||||||||||||
(a) Original issuance was a total of 500,000 restricted shares of common stock; however, subsequent to September 30, 2006, the issuance was reduced to a total of 250,000 restricted shares of common stock. | ||||||||||||||||
Issued
upon conversion of promissory note
|
||||||||||||||||
12/31/2004
|
Common
Stock
|
Business
Investor Services, Inc.
|
466,666
|
NA
|
(B)
|
|
||||||||||
11/16/2004
|
Common
Stock
|
2030
Investors, LLC
|
1,000,000
|
NA
|
(B)
|
|
||||||||||
11/16/2004
|
Common
Stock
|
C.
James Jensen
|
1,000,000
|
NA
|
(B)
|
|
||||||||||
|
||||||||||||||||
These
represent the number of shares of common stock issued upon
conversion of
previously issued convertible
promissory notes. No additional consideration was received
for these
conversions.
|
||||||||||||||||
Issued
upon conversion of preferred stock and/or preferred stock
dividends
|
||||||||||||||||
7/16/2004
|
Common
Stock
|
Robert
Wohlfeld
|
71,356
|
$
|
4,125
|
(B)(1)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Abraham
Garfinkel
|
20,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Carlos
E. Vazquez
|
10,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Ed
Toon
|
20,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
First
Atlantic Capital Management, Inc.
|
66,667
|
$
|
---
|
(B)(3)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Ian
G. Landies
|
16,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Ionian
International Limited
|
200,000
|
$
|
---
|
(B)(4)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Ira
N. Kalfus
|
25,000
|
$
|
---
|
(B)(5)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Irwin
B. Finch Pension Trust
|
30,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Irwin
B. Finch Profit Sharing
|
20,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Jasmina
K. Skubic
|
30,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Kenneth
C. Jameson
|
16,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/16/2004
|
Common
Stock
|
Randall
G. Darling
|
16,000
|
$
|
---
|
(B)(2)
|
|
|||||||||
7/15/2001
|
Common
Stock
|
Gordon
Landies
|
41,103
|
$
|
4,200
|
(B)(1)
|
|
|||||||||
Footnotes:
|
||||||||||||||||
(1)
Converted
at 10 shares of common stock for 1 share of preferred stock,
plus
accumulated preferred dividends.
|
||||||||||||||||
(2)
Converted
at 20 shares of common stock for 1 share of preferred
stock.
|
||||||||||||||||
(3)
Converted
at $3.00 per share of original investment.
|
||||||||||||||||
(4)
Converted
at 10 shares of common stock for 1 share of preferred
stock.
|
||||||||||||||||
(5)
Converted
at 25 shares of common stock for 1 share of preferred
stock.
|
||||||||||||||||
Common
Stock Warrant Issuances
|
||||||||||||||||
Sold
for Cash
|
||||||||||||||||
11/10/2004
|
Common
Stock
|
Barron
Partners, LP
|
10,937,500
|
$
|
838,539
|
(A)
|
|
|||||||||
11/10/2004
|
Common
Stock
|
Barron
Partners, LP
|
10,937,500
|
$
|
838,539
|
(A)
|
|
|||||||||
These
warrants were issued in connection with the sale of common
stock. The
total proceeds received were allocated
between the common stock and the warrants.
|
||||||||||||||||
Issued
for compensation to independent
contractors
|
||||||||||||||||
3/31/2006 |
Common
Stock
|
Michael
Membrado
|
300,000 |
$
|
7,958 |
(A)(2)
|
||||||||||
5/21/2004
|
Common
Stock
|
Joseph
Abrams
|
600,000
|
$
|
59,915
|
(A)(1)
|
|
|||||||||
4/7/2004
|
Common
Stock
|
Michael
Membrado
|
150,000
|
$
|
3,300
|
(A)(2)
|
|
|||||||||
6/3/2002
|
Common
Stock
|
Ronald
Ardt
|
250,000
|
$
|
12,500
|
(A)(3)
|
|
|||||||||
5/11/2001
|
Common
Stock
|
Membrado
& Montell, LLP
|
50,000
|
$
|
13,464
|
(A)(2)
|
|
|||||||||
3/7/2001
|
Common
Stock
|
Membrado
& Montell, LLP
|
100,000
|
$
|
13,464
|
(A)(2)
|
|
|||||||||
2/19/2001
|
Common
Stock
|
Kevin
Reagan
|
62,500
|
$
|
19,750
|
(A)(4)
|
|
|||||||||
2/19/2001
|
Common
Stock
|
Robert
Chamberlain
|
62,500
|
$
|
19,750
|
(A)(4)
|
|
|||||||||
Footnotes:
|
||||||||||||||||
(1)
Issued
as compensation for corporate business planning, financing
and merger and
acquisition assistance.
|
||||||||||||||||
(2)
Issued
as compensation for legal services.
|
||||||||||||||||
(3)
Issued
as compensation for business development services.
|
||||||||||||||||
(4)
Issued
as compensation for consulting.
|
||||||||||||||||
Issued
in connection with Equity Line Agreement
|
||||||||||||||||
3/26/2001
|
Common
Stock
|
Swartz
Private Equity
|
510,000
|
$
|
181,392
|
(A)
|
|
|||||||||
The
above warrant was issued as consideration for entering
into an equity line
agreement.
|
||||||||||||||||
Issued
in connection with Convertible Secured Note Payable
Agreement
|
||||||||||||||||
7/26/2006 |
Common
Stock
|
W.
Sam Chandoha
|
100,000 |
$
|
4,997 |
(A)
|
||||||||||
The
above warrant was issued as consideration for entering
into a loan
agreement evidenced by a convertible secured promissory
note.
|
||||||||||||||||
Common
Stock Option Issuances
|
||||||||||||||||
10/26/2006 |
Common
Stock
|
Non-Executive
Employees
|
850,000 |
$
|
21,250 |
(A)
|
||||||||||
7/7/2003
|
Common
Stock
|
Executive
Officer
|
500,000
|
$
|
---
|
(A)
|
|
|||||||||
6/7/2002
|
Common
Stock
|
Executive
Officer
|
500,000
|
$
|
---
|
(A)
|
|
|||||||||
8/21/2001
|
Common
Stock
|
Independent
Board of Directors
|
525,000
|
$
|
---
|
(A)
|
|
|||||||||
7/18/2001
|
Common
Stock
|
Executive
Officers
|
500,000
|
$
|
---
|
(A)
|
|
|||||||||
7/18/2001
|
Common
Stock
|
Non-Executive
Employees
|
950,000
|
$
|
---
|
(C)
|
|
|||||||||
6/12/2001
|
Common
Stock
|
Non-Executive
Employee
|
2,000
|
$
|
---
|
(C)
|
|
|||||||||
5/3/2001
|
Common
Stock
|
Non-Executive
Employee
|
2,000
|
$
|
---
|
(C)
|
|
|||||||||
3/5/2001
|
Common
Stock
|
Executive
Officer
|
25,000
|
$
|
---
|
(A)
|
|
|||||||||
3/5/2001
|
Common
Stock
|
Non-Executive
Employees
|
31,000
|
$
|
---
|
(C)
|
|
|||||||||
The
above non-qualified common stock options were issued
for employment
incentives to our executive officers and
non-executive employees and issued as consideration for
service rendered
as an independent board member.
For
options issued prior to January 1, 2006, we did not recognize
consideration upon the issuance of the options, but would
rather recognize
the consideration when the options are exercised, as
approved by APB
Opinion No. 25 and allowed under SFAS No. 123. For
options issued after January 1, 2006, and according to
SFAS No. 123 (R),
we do recognize consideration upon the issuance of the
options.
|
||||||||||||||||
Promissory
Notes Convertible into Common Stock
|
||||||||||||||||
9/30/2004
|
Common
Stock
|
2030
Investors, LLC
|
1,000,000
|
$
|
120,000
|
(A)
|
|
|||||||||
9/30/2004
|
Common
Stock
|
C.
James Jensen
|
1,000,000
|
$
|
120,000
|
(A)
|
|
|||||||||
5/31/2002
|
Common
Stock
|
AIM
Financial Advisors, Inc.
|
666,666
|
$
|
33,333
|
(A)
|
|
|||||||||
5/31/2002
|
Common
Stock
|
AIM
Securities, Inc.
|
666,666
|
$
|
33,333
|
(A)
|
|
|||||||||
5/31/2002
|
Common
Stock
|
Business
Investor Services, Inc.
|
666,666
|
$
|
33,333
|
(A)
|
|
|||||||||
Promissory
Notes
|
||||||||||||||||
7/23/2006 |
Note
Payable
|
W.
Sam Chandoha
|
NA |
$
|
150,000 |
(A)(1)
|
||||||||||
4/7/2006 |
Note
Payable
|
Barron
Partners, LP
|
NA |
$
|
336,000 |
(A)(2)
|
||||||||||
3/15/2004
|
Note
Payable
|
American
Bible Society
|
NA
|
$
|
90,700
|
(A)(3)
|
|
|||||||||
9/25/2003
|
Note
Payable
|
Ivy
Hill/Warner Media
|
NA
|
$
|
164,000
|
(A)(3)
|
|
|||||||||
(1)
Issued to fund an existing working capital deficit.
(2)
Issued in settlement of penalty fees incurred in connection
with a certain
Registration Rights Agreement entered into with Barron
on July 19,
2004.
(3)
Issued in settlement of outstanding trade account
payables.
|
||||||||||||||||
General
Footnotes:
|
(A)
We relied in each case for these unregistered sales on the private
offering exemption of Section 4(2) of the Securities Act and/or the
private offering safe harbor provision of Rule 506 of Regulation
D
promulgated thereunder based on the following factors: (i) the number
of
offerees or purchasers, as applicable, (ii) the absence of general
solicitation, (iii) representations obtained from the acquirors relative
to their accreditation and/or sophistication (or from offeree or
purchaser
representatives, as applicable), (iv) the provision of appropriate
disclosure, and (v) the placement of restrictive legends on the
certificates reflecting the securities coupled with investment
representations obtained from the acquirors.
|
|||||
(B)
We relied on Section 3(a)(9) of the Securities Act as the basis for
our
exemption from registration of these offerings.
|
|||||
(C)
We relied in each case for these unregistered sales on the private
offering exemption of Section 4(2) of the Securities Act based on
the
following factors: (i) the number of offerees, (ii) the absence of
general
solicitation, (iii) representations obtained from the acquirors relative
to their sophistication (or from offeree representatives, as applicable),
(iv) the provision of appropriate disclosure, and (v) the placement
of
restrictive legends on the certificates reflecting the securities
coupled
with investment representations obtained from the
acquirors.
|
|||||
As
of the date of this registration statement, none of the common stock
option issuances or the common stock warrant issuances have been
exercised.
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(1)
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To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement:
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(i)
|
to
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933;
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(ii)
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to
reflect in the prospectus any facts or events arising after the effective
date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information in this registration statement;
and
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(iii)
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to
include any material information with respect to the plan of distribution
not previously disclosed in this registration statement, or any material
change to such information in the registration statement.
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(2)
|
That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall be deemed to be a
new
registration statement relating to the securities offered therein,
and the
offering of such securities at that time shall be deemed to be the
initial
bona fide offering thereof.
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(3)
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To
remove from registration by means of a post-effective amendment to
this
registration statement any of the securities being registered which
remain
unsold at the termination of this offering.
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FINDEX.COM,
INC.
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By:
/s/
Steven Malone
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Steven
Malone, President
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&
Chief Executive Officer
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Signature
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Title
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Date
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||||||
/s/
Steven Malone
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Chairman
of the Board, President
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January 31,
2007
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Steven
Malone
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and
Chief Executive Officer (principal
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||||
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executive
officer)
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|||||
/s/
Kirk R. Rowland
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Chief
Financial Officer
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January 31,
2007
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Kirk
R. Rowland
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(principal
financial and accounting
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officer)
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/s/
John Kuehne
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Director
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January 31,
2007
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John
A. Kuehne
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Exhibit
No.
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Description
|
2.1
|
Share
Exchange Agreement between FindEx.com, Inc. and the stockholders
of Reagan
Holdings, Inc. dated March 7, 2000, incorporated by reference
to Exhibit
2.1 on Form 8-K filed March 15, 2000.
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3(i)(1)
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Articles
of Incorporation of Findex.com, Inc., incorporated by reference
to Exhibit
3.1 on Form 8-K filed March 15, 2000.
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3(i)(2)
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Amendment
to Articles of Incorporation of Findex.com, Inc. dated November
12, 2004
incorporated by reference to Exhibit 3.1(ii) on Form 10-QSB filed
November 12, 2004.
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3(ii)
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By-Laws
of Findex.com, Inc., incorporated by reference to Exhibit 3.3 on
Form 8-K
filed March 15, 2000.
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5.1
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Legal
opinion of M.M. Membrado, PLLC dated January 31, 2007. FILED
HEREWITH.
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10.1
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Stock
Incentive Plan of Findex.com, Inc. dated May 7, 1999, incorporated
by
reference to Exhibit 10.1 on Form 10-KSB/A filed May 13, 2004.
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10.2
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Share
Exchange Agreement between Findex.com, Inc. and the stockholders
of Reagan
Holdings Inc., dated March 7, 2000, incorporated by reference to
Exhibit
2.1 on Form 8-K filed March 15, 2000.
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10.3
|
License
Agreement between Findex.com, Inc. and Parsons Technology, Inc.
dated June
30, 1999, incorporated by reference to Exhibit 10.3 on Form 10-KSB/A
filed
May 13, 2004.
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10.4
|
Employment
Agreement between Findex.com, Inc. and Steven Malone dated July
25, 2003,
incorporated by reference to Exhibit 10.4 on Form 10-KSB/A filed
May 13,
2004.
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10.5
|
Employment
Agreement between Findex.com, Inc. and Kirk Rowland dated July
25, 2003,
incorporated by reference to Exhibit 10.5 on Form 10-KSB/A filed
May 13,
2004.
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10.6
|
Employment
Agreement between Findex.com, Inc. and William Terrill dated June
7, 2002,
incorporated by reference to Exhibit 10.6 on Form 10-KSB/A filed
May 13,
2004.
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10.7
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and John
A. Kuehne
dated July 25, 2003, incorporated by reference to Exhibit 10.7
on Form
10-KSB/A filed May 13, 2004.
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10.8
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and Henry
M.
Washington dated July 25, 2003, incorporated by reference to Exhibit
10.8
on Form 10-KSB/A filed May 13, 2004.
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10.9
|
Restricted
Stock Compensation Agreement between Findex.com, Inc. and William
Terrill
dated July 25, 2003, incorporated by reference to Exhibit 10.9
on Form
10-KSB/A filed May 13, 2004.
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10.10
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Stock
Purchase Agreement, including the form of warrant agreement, between
Findex.com, Inc. and Barron Partners, LP dated July 19, 2004, incorporated
by reference to Exhibit 10.1 on Form 8-K filed July 28, 2004.
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10.11
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Amendment
No. 1 To Barron Partners, LP Stock Purchase Agreement dated September
30,
2004, incorporated by reference to Exhibit 10.3 on Form 8-K filed
October
6, 2004.
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10.12
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Registration
Rights Agreement between Findex.com, Inc. and Barron Partners,
LP dated
July 26, 2004, incorporated by reference to Exhibit 10.2 on Form
8-K filed
on July 28, 2004.
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10.13
|
Waiver
certificate between Findex.com, Inc. and Barron Partners, LP
dated
September 16, 2004, incorporated by reference to Exhibit 10.4
on Form 8-K
filed October 6, 2004.
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10.14
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Settlement
Agreement between Findex.com, Inc., The Zondervan Corporation,
Mattel,
Inc., TLC Multimedia, Inc., and Riverdeep, Inc. dated October
20, 2003,
incorporated by reference to Exhibit 10.14
on
Form 10-KSB/A filed on June 7, 2005.
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10.15
|
Employment
Agreement Extension between FindEx.com, Inc. and Steven Malone
dated March
31, 2006, incorporated by reference to Exhibit 10.1 on Form
8-K filed
April 6, 2006.
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10.16
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Employment
Agreement Extension between FindEx.com, Inc. and William
Terrill dated
March 31, 2006 incorporated by reference to Exhibit 10.2
on Form 8-K filed
April 6, 2006.
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10.17
|
Employment
Agreement Extension between FindEx.com, Inc. and Kirk R.
Rowland dated
March 31, 2006 incorporated by reference to Exhibit 10.3
on Form 8-K filed
April 6, 2006.
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10.18
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Promissory
Note to Barron Partners, LP dated April 7, 2006, incorporated
by reference
to Exhibit 10.1 on Form 8-K filed April 13,
2006.
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10.19
|
Share
Exchange Agreement between FindEx.com, Inc. and the stockholders
of Reagan
Holdings Inc., dated March 7, 2000, incorporated by reference
to Exhibit
2.1 on Form 8-K filed March 15,
2000.
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10.20
|
Convertible
Secured Promissory Note between FindEx.com, Inc. and W.
Sam Chandoha,
dated July 20, 2006, incorporated by reference to Exhibit
10.1 on Form 8-K
filed July 26,
2006.
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10.21
|
Security
Agreement between FindEx.com, Inc. and W. Sam Chandoha,
dated July 20,
2006 incorporated by reference to Exhibit 10.2 on Form
8-K filed July 26,
2006.
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10.22
|
Common
Stock Purchase Warrant between FindEx.com, Inc. and W.
Sam Chandoha, dated
July 20, 2006 incorporated by reference to Exhibit 10.3
on Form 8-K filed
July 26, 2006.
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10.23
|
Modification
and Extension Agreement Between FindEx.com, Inc. and W.
Sam Chandoha,
dated September 20, 2006, incorporated by reference to
Exhibit 10.1 on
Form 8-K filed September
25,2006.
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16.1
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Letter
from Chisholm, Bierwolf, & Nilson, P.C., dated January 3, 2006
regarding change in certifying accountant, incorporated by
reference to
Exhibit 16.1 on Form 8-K/A filed January 4,
2006.
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21.1
|
Share
Exchange Agreement between FindEx.com, Inc. and the stockholders
of Reagan
Holdings Inc., dated March 7, 2000, incorporated by reference to
Exhibit
2.1 on Form 8-K filed March 15, 2000.
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21.2
|
Subsidiaries
of FindEx.com, Inc. as of December 31, 2005, incorporated
by reference to
Exhibit 21.1 on Form 10-KSB filed April 17,
2006.
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23.1
|
Consent
of Chisholm, Bierwolf & Nilson, LLC, Independent Certified Public
Accountants dated January 30, 2007. FILED HEREWITH.
|
23.2
|
Consent
of M.M. Membrado, PLLC (contained in Exhibit 5.1 to this registration
statement).
|
23.3
|
Consent
of Brimmer, Burek & Keelan LLP, Independent Certified Public
Accountants dated January 27, 2007. FILED
HEREWITH.
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24.1
|
Powers
of Attorney (included on the signature page to this registration
statement).
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