Edgar Filing: FINDEX COM INC

FindEx.com, Inc. 10-QSB/A June 30, 2004

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

Amendment No. 1

(Mark One)

[X]

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

For the quarterly period ended June 30, 2004.

[_]

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

For the transition period from ________ to _________.

Commission File Number: 0-29963

FINDEX.COM, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	88-0379462
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

11204 Davenport Street, Suite 100, Omaha, Nebraska	68154
(Address of principal executive offices)	(Zip Code)

(402) 333-1900

(Issuer’s telephone number, including area code)

NA.

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [_] No [_]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 48,619,855 common shares as of September 29, 2005.

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

Explanatory Note

We are filing this Amendment Number 1 to our Quarterly Report on Form 10-QSB for the three and six months ended June 30, 2004 to restate our financial statements for the quarter then ended to reflect issues identified during a regulatory review of our financial statements associated with a certain registration statement filed with the SEC on November 22, 2004 on Form SB-2 and which is pending effectiveness as of the date of this filing of Amendment Number 1 to Form 10-QSB for the quarter ended June 30, 2004. There was no net effect on either cash provided by operating activities, cash used by investing activities or cash used by financing activities as a result of the corrections to the financial statements for the period covered by this report. Our management and our board of directors have concluded that these restatements are necessary to reflect the following changes.

Revisions affecting our condensed consolidated statements of operations:

In June 1999 we entered into a certain software license agreement with Parsons Technology, Inc. to manufacture, distribute and sell a variety of software titles, including QuickVerse^®and Membership Plus^®, by far our two largest selling titles. During the three months ended June 30, 2002, we offset the remaining unpaid installment ($1,051,785) against the carrying amount of the 1999 license in accordance with the terms of a tentative settlement agreement with The Learning Company (“TLC”), the licensor-assignee at the time. Although paragraph 6 of Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, which guides the recognition and measurement of intangible assets, provides that the measurement of an asset in which the consideration given is cash is measured by the amount of cash paid, our management has since concluded that too much time had passed between the date of the 1999 license and the date of the tentative settlement agreement for such an offset to be proper. Therefore, we have recognized the extinguishment of the liability owed to TLC as income in our 2002 statement of operations. We have restated our condensed consolidated balance sheets as of June 30, 2004 and 2003 and our condensed consolidated statements of operations and consolidated statements of cash flows for the three and six months then ended.

During the three months ended June 30, 2002, we extended the estimated life of the 1999 license from 10 years to 50 years in accordance with the terms of a tentative settlement agreement with TLC. Although the 1999 license, as amended, provides for our unlimited and exclusive use of trademarks related to the licensed products, and our management has assessed its useful life as indefinite based on the estimated future direct or indirect cash flows from the license, as determined in accordance with paragraphs 11 and 53 of SFAS No. 142, Goodwill and Other Intangible Assets, our management has since further concluded that a 10 year life is appropriate on the basis of, among other reasons, our going concern opinions for the years ended December 31, 2002 and 2003. We have restated our condensed consolidated balance sheets as of June 30, 2004 and 2003 and our condensed consolidated statements of operations and consolidated statements of cash flows for the three and six months then ended.

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

We had previously, and erroneously, included rebates, and adjustments to rebates, as part of our sales and marketing expenses. The more appropriate presentation should have been, and is now, an adjustment to revenue, in accordance with EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). During the three months ended June 30, 2004, we recorded an adjustment to our rebates reserve in the amount of $266,301 and an adjustment to our rebates payable in the amount of $12,599. These adjustments were the result of a change in our internal control over financial reporting. Previously, when making our assessment of the adequacy of our reserve for rebates, we did not take into consideration the amount and number of outstanding checks, issued checks that were returned as undeliverable, or our ability to meet our recorded financial obligation. We have since changed our internal control procedures to include review of each of these factors in our assessment of the adequacy of our reserve for rebates. There was no net effect on our net income (loss) for the three and six months ended June 30, 2004 and 2003 as a result of our correction of this error.

During the three months ended March 31, 2004 and 2003, we wrote-off two distinctly different categories of obsolete inventory with carried costs totaling $32,396 and $31,892, respectively. The 2004 obsolete inventory write-off contained Zondervan-owned content and was a direct result of our March 2004 final settlement agreement with The Zondervan Corporation (see Note 11). We originally recorded these events as non-recurring items in the “Other income (expense)” section of our condensed consolidated statement of operations. We have revised our condensed consolidated statement of operations for the three and six months ended June 30, 2004 and 2003 to reflect these inventory adjustments in the “Cost of Sales” section. There was no net effect on our net income (loss) for the three and six months ended June 30, 2004 and 2003 as a result of our correction of this error.

-i-

During the three months ended June 30, 2004, we reached a final settlement agreement in our dispute with Zondervan and TLC. As part of the settlement process, we conducted an internal audit (verified by an independent auditor provided by TLC) of the accrued royalties owed Zondervan. The audit revealed that accrued royalties had been overstated due to our 2001 bad debt recognition of TLC’s trade accounts receivable balance. The amount by which the accrued royalties had been overstated remained part of our dispute with Zondervan and as such remained in our liabilities until a final settlement agreement was reached. We originally reported the adjustment as a non-recurring item in the “Other income (expense)” section of our condensed consolidated statements of operations for the three and six months ended June 30, 2003. We have revised our condensed consolidated statements of operations for the three and six months ended June 30, 2003 to reflect the adjustment as “Other income”. There was no net effect on our net income (loss) for the three and six months ended June 30, 2003 as a result of our correction of this error.

Rebates payable to a third-party processor were overstated on our consolidated financial statements for the year ended December 31, 2000. We discovered this error during the preparation of our condensed consolidated financial statements for the three months ended March 31, 2004. We originally recorded this event as an adjustment to our beginning retained earnings for the year ended December 31, 2003 in our fiscal year 2004 quarterly and annual filings. We have since revised our consolidated statement of operations for the year ended December 31, 2000 to reflect an adjustment to revenue and reported the correction on our Form 10-KSB/A for the year then ended. There was no net effect on our net income (loss) for the three and six months ended June 30, 2004 and 2003 or retained earnings (deficit) at June 30, 2004 and 2003 as a result of our correction of this error.

We have also reclassified various expense items in our condensed consolidated statements of operations for the three and six months ended June 30, 2004 and 2003 to conform with the presentation in our statements of operations for the years ended December 31, 2004 and 2003. There was no net effect on our net income (loss) for the three and six months ended June 30, 2004 and 2003 as a result of our correction of these errors.

A discussion of the restatement for quarter ended June 30, 2004 is included in Note 12 of the condensed consolidated financial statements included in this Amendment Number 1 to Form 10-QSB for the quarter ended June 30, 2004. Changes have also been made to the following items as a result of the restatement:

Part I Item 1 Financial Statements.

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

This Amendment Number 1 to Form 10-QSB for the quarter ended June 30, 2004 does not otherwise change or update the disclosures set forth in the Form 10-QSB as originally filed and does not otherwise reflect events occurring after the filing of the form 10-QSB. For a description of our business and the risks related to our business, see our Annual Report on Form 10-KSB/A for the year ended December 31, 2004.

-ii-

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

		June 30, 2004			June 30, 2003
		(Restated)			(Restated)
Assets
Current assets:
Accounts receivable, trade	$	183,241		$	158,700
Inventory		161,903			320,100
Other current assets		97,326			66,804
Total current assets		442,470			545,604
Property and equipment, net		63,664			78,163
Software license, net		2,517,538			3,021,044
Software development, net		504,497			385,746
Restricted cash		100,354			50,000
Other assets		93,805			49,393
Total assets	$	3,722,328		$	4,129,950

Liabilities and stockholders’ equity
Current liabilities:
Cash overdraft	$	38,990		$	12,125
Notes payable		89,999			749,999
Accrued royalties		1,203,369			1,595,859
Accounts payable, trade		709,415			884,285
Current maturities of long-term notes payable		175,150			59,302
Other current liabilities		679,252			1,251,050
Total current liabilities		2,896,175			4,552,620
Long-term note payable		65,300			18,801
Non-current deferred taxes		777,774			830,381
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51
Common stock		23,492			19,811
Paid-in capital		7,227,564			7,029,079
Retained (deficit)		(7,268,028	)		(8,320,793	)
Total stockholders’ equity		(16,921	)		(1,271,852	)
Total liabilities and stockholders’ equity	$	3,722,328		$	4,129,950

See accompanying notes.

F-1

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

	Three Months Ended June 30						Six Months Ended June 30
		2004			2003			2004			2003
		(Restated)			(Restated)			(Restated)			(Restated)

Revenues, net of reserves and allowances	$	1,211,722		$	763,841		$	2,778,115		$	1,832,682
Cost of sales		271,410			262,322			740,069			561,143
Gross profit		940,312			501,519			2,038,046			1,271,539
Operating expenses:
Sales and marketing		267,902			155,915			510,501			334,600
General and administrative		615,895			344,269			1,171,574			814,074
Bad debt provision		---			---			2,500			---
Depreciation and amortization		139,187			136,902			274,639			274,002
Total operating expenses		1,022,984			637,086			1,959,214			1,422,676
Earnings (loss) from operations		(82,672	)		(135,567	)		78,832			(151,137	)
Other income		1,170			583,628			1,170			584,612
Other expenses, net		(17,358	)		(22,557	)		(31,688	)		(37,354	)
Income (loss) before income taxes		(98,860	)		425,504			48,314			396,121
Provision for income taxes		(31,011	)		56,616			(61,322	)		113,232
Net income (loss)	$	(129,871	)	$	482,120			(13,008	)		509,353
Retained (deficit) at beginning of year								(7,255,020	)		(8,830,146	)
Retained (deficit) at end of period							$	(7,268,028	)	$	(8,320,793	)


Net earnings (loss) per share:
Basic	$	(0.01	)	$	0.02		$	---		$	0.03
Diluted	$	(0.01	)	$	0.02		$	---		$	0.03

Weighted average shares outstanding:
Basic		23,276,312			19,811,438			22,143,875			19,811,438
Diluted		23,276,312			20,078,401			22,143,875			20,069,385

See accompanying notes.

F-2

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

Six Months Ended June 30		2004			2003
		(Restated)			(Restated)
Cash flows from operating activities:
Cash received from customers	$	2,639,964		$	2,045,624
Cash paid to suppliers and employees		(2,409,585	)		(1,861,189	)
Other operating activities, net		(28,166	)		21,611
Net cash provided by operating activities		202,213			206,046
Cash flows from investing activities:
Acquisition of property and equipment		(18,612	)		(6,643	)
Software development costs		(178,049	)		(145,666	)
Website development costs		(31,836	)		(21,056	)
Deposits made		(485	)		(50,500	)
Net cash (used) by investing activities		(228,982	)		(223,865	)
Cash flows from financing activities:
Proceeds from (payments on) line of credit, net		(2,999	)		(5,016	)
Payments made on long-term notes payable		(50,890	)		(27,941	)
Net cash (used) by financing activities		(53,889	)		(32,957	)
Net (decrease) in cash and cash equivalents		(80,658	)		(50,776	)
Cash and cash equivalents, beginning of year		41,668			38,651
Cash overdraft, end of period	$	(38,990	)	$	(12,125	)

Reconciliation of net income (loss) to cash flows from operating activities:
Net income (loss)	$	(13,008	)	$	509,353
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Software development costs amortized		258,258			40,422
Provision for bad debts		2,500			---
Stock and warrants issued for services		44,186			---
Depreciation and amortization		274,639			274,002
Change in assets and liabilities:
Decrease in accounts receivable		180,062			69,541
Decrease in inventories		110,697			96,600
Decrease in refundable income taxes		---			29,148
(Increase) in prepaid expenses		(75,406	)		(9,254	)
(Decrease) in accrued royalties		(204,937	)		(534,754	)
(Decrease) in accounts payable		(174,708	)		(187,278	)
Increase in income taxes payable		700			---
Increase (decrease) in deferred taxes		60,622			(113,232	)
(Decrease) increase in other liabilities		(261,392	)		31,498
Net cash provided by operating activities	$	202,213		$	206,046

See accompanying notes.

F-3

FindEx.com, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The accompanying financial statements should be read in conjunction with the audited consolidated financial statements of Findex.com, Inc. included in our Form 10-KSB/A for the fiscal year ended December 31, 2003.

Inventory

Inventory, including out on consignment, consists primarily of software media, manuals and related packaging materials and is recorded at the lower of cost or market value, determined on a first-in, first-out basis and adjusted on a per-item basis.

Software Development Costs

In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. Capitalized costs are amortized on a product-by-product basis using the greater of the straight-line method over the estimated product life or on the ratio of current revenues to total projected product revenues. The Company generally considers technological feasibility is established with the release of a beta version for testing. Total capitalized software development costs at June 30, 2004 were $1,177,400, less accumulated amortization of $672,903. Research and development costs incurred and charged to expense were $27,522 and $30,003 for the three months ended June 30, 2004 and 2003, respectively and $43,696 and $97,794 for the six months ended June 30, 2004 and 2003, respectively.

NOTE 2 - INVENTORIES (Restated)

At June 30, 2004 and 2003, inventories consisted of the following:

		2004		2003
Raw materials	$	67,000	$	103,000
Finished goods		94,903		217,100
	$	161,903	$	320,100

F-4

NOTE 3 - NOTES PAYABLE

At June 30, 2004 and 2003, notes payable consisted of the following:

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

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

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

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

See Note 11 - Subsequent Events.

NOTE 4 - LONG-TERM NOTES PAYABLE

At June 30, 2004 and 2003, long-term notes payable consisted of the following:

		2004		2003
Unsecured term note payable to a corporation due October 2004 in monthly installments of $5,285, including interest at 8%.	$	44,093	$	78,103

Term note payable to a corporation due December 2005 in monthly installments of $6,833, including interest at 8%. Secured by inventory.		116,994		---

Unsecured term note payable to a corporation due March 2006 in monthly installments of $4,384, including interest at 8%.		79,363		---
		240,450		78,103
Less current maturities		175,150		59,302
	$	65,300	$	18,801

Principal maturities at June 30, 2004 are as follows:

2005	$	175,150
2006		65,300
	$	240,450

See Note 11 - Subsequent Events

NOTE 5 - INCOME TAXES (Restated)

The provision for taxes on income consisted of the following:

	Three months ended June 30,					Six months ended June 30,
		2004			2003		2004			2003
Current:
Federal	$	---		$	---	$	---		$	---
State		(700	)		---		(700	)		---
		(700	)		---		(700	)		---
Deferred:
Federal		(25,001	)		46,304		(50,002	)		92,608
State		(5,310	)		10,312		(10,620	)		20,624
		(30,311	)		56,616		(60,622	)		113,232
Total tax (expense) benefit	$	(31,011	)	$	56,616	$	(61,322	)	$	113,232

F-5

NOTE 6 - EARNINGS PER COMMON SHARE (Restated)

Earnings per common share are computed by dividing net income by the weighted average number of common shares and common stock equivalents outstanding during the year. Common stock equivalents are the net additional number of shares that would be issuable upon the exercise of the outstanding common stock options and warrants, assuming that the Company reinvested the proceeds to purchase additional shares at market value. A total of 2,440,000 and 4,132,200 potentially dilutive securities for the three and six months ended June 30, 2004 and 2003, respectively, have been excluded from the computation of diluted earnings per share, as their inclusion would be anti-dilutive.

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

Three months ended June 30		2004			2003
Net Income (loss)	$	(129,871	)	$	482,120
Preferred stock dividends		---			---
Net income (loss) available to common shareholders	$	(129,871	)	$	482,120

Basic weighted average shares outstanding		23,276,312			19,811,438
Dilutive effect of:
Stock options		---			---
Convertible preferred series A		---			114,000
Convertible preferred series B		---			40,000
Warrants		---			112,963
Diluted weighted average shares outstanding		23,276,312			20,078,401

Earnings (loss) per share:
Basic	$	(0.01	)	$	0.02
Diluted	$	(0.01	)	$	0.02

Six months ended June 30		2004			2003
Net Income (loss)	$	(13,008	)	$	509,353
Preferred stock dividends		---			---
Net income (loss) available to common shareholders	$	(13,008	)	$	509,353

Basic weighted average shares outstanding		22,143,875			19,811,438
Dilutive effect of:
Stock options		---			---
Convertible preferred series A		---			114,000
Convertible preferred series B		---			40,000
Warrants		---			103,947
Diluted weighted average shares outstanding		22,143,875			20,069,385

Earnings per share:
Basic	$	---		$	0.03
Diluted	$	---		$	0.03

F-6

NOTE 7 - STOCK-BASED COMPENSATION (Restated)

The Stock Incentive Plan (the “Plan”) authorizes the issuance of various forms of stock-based awards including incentive and nonqualified stock options, stock appreciation rights attached to stock options, and restricted stock awards to directors, officers and other key employees of the Company. Stock options are granted at an exercise price as determined by the Board at the time the Option is granted and shall not be less than the par value of such shares of Common Stock. Stock options vest quarterly over three years and have a term of ten years.

The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized for outstanding stock options. Had compensation cost for the Company’s outstanding stock options been determined based on the fair value at the grant date (calculated using the Black-Scholes Option-Pricing Model) for those options consistent with SFAS No. 123, the Company’s net income and primary and diluted earnings per share would have differed as reflected by the pro forma amounts indicated below:

	Three months ended June 30,						Six months ended June 30,
		2004			2003			2004			2003
Net income (loss), as reported	$	(129,871	)	$	482,120		$	(13,008	)	$	509,353
Pro Forma compensation charge under SFAS 123		(13,696	)		(15,722	)		(26,307	)		(31,444	)
Pro Forma net income (loss)	$	(143,567	)	$	466,398		$	(39,315	)	$	477,909

Earnings (loss) per share:
Basic - as reported	$	(0.01	)	$	0.02		$	---		$	0.03
Basic - pro forma	$	(0.01	)	$	0.02		$	---		$	0.02

Diluted - as reported	$	(0.01	)	$	0.02		$	---		$	0.03
Diluted - pro forma	$	(0.01	)	$	0.02		$	---		$	0.02

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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

In March 2004, the Company finalized the settlement with The Zondervan Corporation and TLC. The Settlement Agreement was effective October 20, 2003 and calls for FindEx to pay Zondervan a total of $500,000, plus 5% simple interest, in installments of $150,000, plus interest, due November 15, 2003 and January 30, 2004, and installments of $100,000, plus interest, due April 30, 2004 and July 30, 2004, all of which has been paid. This agreement was secured by all rights, title and interest in QuickVerse^® together will all proceeds produced by QuickVerse^®. In addition, according to the agreement, the term of the software license agreement with Parsons Technology, Inc., a subsidiary of TLC, has been extended indefinitely and provides the Company with the exclusive worldwide right to market, sell, and continue to develop those titles it covers.

The Company was in arrears with the Internal Revenue Service for back payroll taxes and had been paying the payroll taxes in monthly installments previously approved by the Internal Revenue Service. Subsequent to the financing received in July of 2004 (see Note 11 - Subsequent Events), the Company paid all back payroll taxes that were due to the Internal Revenue Service.

NOTE 9 - RISKS AND UNCERTAINTIES

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

F-7

NOTE 10 - GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has a negative current ratio and total liabilities in excess of total assets. Those factors create an uncertainty about the Company’s ability to continue as a going concern. Management of the Company has secured investment capital, reduced liabilities (see Note 11 - Subsequent Events), and is pursuing further development of the Company’s flagship software titles. The ability of the Company to continue as a going concern is dependent on the success of the Company’s flagship software titles and the successful development of new titles and platforms. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 11 - SUBSEQUENT EVENTS

On July 19, 2004, the Company cancelled 100,000 options with an exercise price of $0.11 per share, 190,200 options with an exercise price of $1.00 per share and 525,000 options with an exercise price of $1.03 per share. The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock options. Accordingly, no compensation cost had been recognized for the above stock options; and therefore, there was no effect on the financial statements.

On July 19, 2004, the Company converted 8,900 shares of Preferred Series A into 178,000 common shares, 1,500 shares of Preferred Series A into 15,000 common shares, 1,000 shares of Preferred Series A into 25,000 common shares, and 40,000 shares of Preferred Series B into 266,667 common shares. In addition, the Company converted $4,125 of unpaid accumulated Preferred Series A dividends into 56,356 common shares.

On July 19, 2004, the Company completed an equity financing in the amount of $1,750,000 through a private placement with a New York based private investment partnership. Under the terms of the agreement, the investor purchased 21,875,000 restricted common shares at a price of $0.08 per share. In addition, according to the terms of the agreement, the investor is entitled to receive two warrants to purchase common stock. The first warrant would entitle the investor to purchase up to 10,937,500 common shares at an initial price of $0.18 per share, and the second warrant would entitle the investor to purchase up to 10,937,500 additional common shares at an initial price of $0.60 per share. The exercise price associated with each of the warrants will be subject to downward adjustment based on the occurrence or non-occurrence of certain events, including the achievement of stated 2004 earnings and other performance goals.

On July 20, 2004, the Company submitted its request to terminate the Accounts Receivable Financing Agreement.

On July 26, 2004, the Company concluded a settlement agreement with an institutional private equity investor. As consideration of the settlement, the Company agreed to pay a one time termination fee of $125,000 and issue 295,692 non-restricted shares of common stock with an effective issuance date of September 26, 2002. An original warrant dated March 26, 2001 to purchase 510,000 common shares exercisable at $0.23 per share was cancelled.

In July 2004, the Company retired the three notes payable for a total of $89,999 (see Note 3 - Notes Payable).

In July 2004, the Company retired the term note due December 2005 for a payment of $70,000 (see Note 4 - Long-Term Notes Payable).

In July 2004, the Company paid all back payroll taxes that was due to the Internal Revenue Service (see Note 8 - Commitments and Contingencies).

F-8

In July 2004, the Company made the final payment to The Zondervan Corporation for $100,000 plus 5% simple interest. This payment completes all of the Company’s obligations that were previously outlined in the settlement with The Zondervan Corporation and TLC dated October 2003 (see Note 8 - Commitments and Contingencies). In addition, according to the settlement agreement, the term of the software license agreement with Parsons Technology, Inc., a subsidiary of TLC, has been extended indefinitely, and provides the Company with the exclusive worldwide right to market, sell, and continue to develop those titles it covers (see Note 8 - Commitments and Contingencies).

In August 2004, the Company received $50,000 out of a total of $100,000 from the cash held in reserve by our merchant banker.

NOTE 12 - RESTATEMENT AND RECLASSIFICATION

We have restated our financial statements for the three and six months ended June 30, 2004 and 2003 to reflect issues identified during a regulatory review of our financial statements associated with a registration statement filing on Form SB-2 that is pending effectiveness as of the date of this 10-QSB/A filing. Management and the board of directors concluded these restatements were necessary to reflect the changes described below. There was no net effect on cash provided by operating activities or cash used by investing and financing activities as a result of these errors.

Revisions affecting our condensed consolidated statements of operations:

During the three month period ended June 30, 2002, we offset the remaining unpaid installment ($1,051,785) against the carrying amount of the 1999 software license in accordance with the terms of the tentative settlement agreement with TLC. Although paragraph 6 of SFAS No. 141, Business Combinations, which guides the recognition and measurement of intangible assets, provides that the measurement of assets in which the consideration given is cash are measured by the amount of cash paid, our management has since concluded that too much time had passed between the date of the 1999 license (June 1999) and the date of the tentative settlement agreement (May 2002) for such an offset to be appropriate. Therefore, we recognized the extinguishment of the liability owed to TLC as income in the 2003 statement of operations. We have restated the condensed consolidated balance sheets as of June 30, 2004 and 2003 and the condensed consolidated statements of operations and consolidated statements of cash flows for the three and six months then ended.

Also during the three month period ended June 30, 2002, we extended the estimated life of the 1999 software license from 10 years to 50 years in accordance with the terms of the tentative settlement agreement with TLC. Although the software license provides for the unlimited and exclusive use of the trademarks related to the software programs, and management assessed the useful life of the software license as indefinite, but limited by the contractual provisions to 50 years, based on the estimated future direct or indirect cash flows from the license, as provided by paragraphs 11 and 53 of SFAS No. 142, Goodwill and Other Intangible Assets, our management has since concluded that a 10 year life is appropriate based on our going concern opinion. We have restated the condensed consolidated balance sheets as of June 30, 2004 and 2003 and the condensed consolidated statements of operations and consolidated statements of cash flows for the three and six months then ended.

Revisions affecting our condensed consolidated statements of operations:

We previously and erroneously included rebates, and adjustments to rebates, in sales and marketing expenses. The more appropriate presentation should have been, and is now, an adjustment to revenue, as provided by EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). During the three months ended June 30, 2004, we recorded an adjustment to the rebates reserve in the amount of $266,301 and an adjustment to rebates payable in the amount of $12,599. These adjustments resulted from a change in our internal control over financial reporting. Previously, when making our assessment of the adequacy of our reserve for rebates, we did not take into consideration the amount and number of outstanding checks, issued checks that were returned as undeliverable, or our ability to meet our recorded financial obligation. We changed our internal control procedures to include review of each of these factors in our assessment of the adequacy of the reserve for rebates. There was no net effect on net income (loss) from the correction of this error for the three and six months ended June 30, 2004 and 2003.

During the three months ended March 31, 2004 and 2003, we wrote-off two distinctly different categories of obsolete inventory with a carried cost totaling $32,396 and $31,892, respectively. The 2004 obsolete inventory was a direct result of the March 2004 settlement with The Zondervan Corporation (see Note 11). We originally recorded these as non-recurring items in the “Other income (expense)” section of the consolidated statement of operations. The revised condensed consolidated statement of operations for the three and six months ended June 30, 2004 and 2003 reflects this inventory adjustment in Cost of sales. There was no net effect on net income (loss) from this reclassification for the three and six months ended June 30, 2004 and 2003.

F-9

During the three months ended June 30, 2004, we reached a final settlement agreement in our dispute with Zondervan and TLC. As part of the settlement process, we conducted an internal audit (which was verified by an independent auditor provided by TLC) of the accrued royalties owed Zondervan. The audit provided that accrued royalties were overstated due to the 2001 bad debt recognition of the trade accounts receivable balance of TLC. The amount overstated had remained part of the dispute with Zondervan and remained in our liabilities until the final settlement was reached. We originally reported the adjustment as a non-recurring item in the “Other income (expense)” section of the condensed consolidated statements of operations for the three and six months ended June 30, 2003. The revised condensed consolidated statements of operations for the three and six months ended June 30, 2003 reflect the adjustment as “Other income”. There was no net effect on the net income (loss) from this reclassification for the three and six months ended June 30, 2003.

Rebates payable to a third-party processor were overstated on the consolidated financial statements for the year ended December 31, 2000. We discovered the error during the preparation of our condensed consolidated financial statements for the three months ended March 31, 2004. We originally recorded the error correction as an adjustment to the beginning retained earnings of the year ended December 31, 2003 on the 2004 quarterly and annual filings. We revised the consolidated statement of operations for the year ended December 31, 2000 to reflect an adjustment to revenue and reported the correction on Form 10-KSB/A for the year then ended. This revision had no net effect on the net income (loss) for the three and six months ended June 30, 2004 and 2003 or retained earnings (deficit) at June 30, 2004 and 2003.

We also reclassified various other expense items in the condensed consolidated statements of operations for the three and six months ended June 30, 2004 and 2003 to conform to the presentation in the statements of operations for the years ended December 31, 2004 and 2003. There was no net effect on net income (loss) from these reclassifications for the three and six months ended June 30, 2004 and 2003.

F-10

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

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2004
(Unaudited)

		As Originally Reported			As Restated			Change
Assets
Current assets:
Cash and cash equivalents	$	61,364		$	---		$	(61,364	)	(a)
Accounts receivable, trade		183,241			183,241			---
Inventory		161,903			161,903			---
Other current assets		97,326			97,326			---
Total current assets		503,834			442,470			(61,364	)
Property and equipment, net		63,664			63,664			---
Software license, net		2,513,158			2,517,538			4,380		(b)
Software development, net		504,497			504,497			---
Restricted cash		---			100,354			100,354		(a)
Other assets		93,805			93,805			---
Total assets	$	3,678,958		$	3,722,328		$	43,370

Liabilities and stockholders’ equity
Current liabilities:
Cash overdraft	$	---		$	38,990		$	38,990		(a)
Notes payable		89,999			89,999			---
Accrued royalties		1,203,369			1,203,369			---
Accounts payable, trade		709,415			709,415			---
Current maturities of long-term notes payable		175,150			175,150			---
Other current liabilities		679,252			679,252			---
Total current liabilities		2,857,185			2,896,175			38,990
Long-term note payable		65,300			65,300			---
Non-current deferred taxes		1,052,932			777,774			(275,158	)	(c)
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51			---
Common stock		23,492			23,492			---
Paid-in capital		7,227,564			7,227,564			---
Retained (deficit)		(7,547,566	)		(7,268,028	)		279,538
Total stockholders’ equity		(296,459	)		(16,921	)		279,538
Total liabilities and stockholders’ equity	$	3,678,958		$	3,722,328		$	43,370

(a) Reclassification of restricted cash with merchant banker as non-current asset.
(b) Net change from reclassification of forgiveness of final installment and additional amortization from returning the estimated economic useful life from indefinite to 10 years.
(c) Decrease from recalculation of deferred income taxes resulting from changes to the software license agreement.

F-11

Findex.com, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2003
(Unaudited)

		As Originally Reported			As Restated			Change
Assets
Current assets:
Cash and cash equivalents	$	37,876		$	---		$	(37,876	)	(a)
Accounts receivable, trade		158,700			158,700			---
Inventory		320,100			320,100			---
Other current assets		66,804			66,804			---
Total current assets		583,480			545,604			(37,876	)
Property and equipment, net		78,163			78,163			---
Software license, net		2,529,896			3,021,044			491,148		(b)
Software development, net		385,746			385,746			---
Restricted cash		---			50,000			50,000		(a)
Other assets		49,393			49,393			---
Total assets	$	3,626,678		$	4,129,950		$	503,272

Liabilities and stockholders’ equity
Current liabilities:
Cash overdraft	$	---		$	12,125		$	12,125		(a)
Notes payable		749,999			749,999			---
Accrued royalties		1,595,859			1,595,859			---
Accounts payable, trade		983,232			884,285			(98,947	)	(c)
Current maturities of long-term notes payable		59,302			59,302			---
Other current liabilities		1,251,050			1,251,050			---
Total current liabilities		4,639,442			4,552,620			(86,822	)
Long-term note payable		18,801			18,801			---
Non-current deferred taxes		1,067,494			830,381			(237,113	)	(d)
Commitments and contingencies
Stockholders’ equity:
Preferred stock		51			51			---
Common stock		19,811			19,811			---
Paid-in capital		7,029,079			7,029,079			---
Retained (deficit)		(9,148,000	)		(8,320,793	)		827,207
Total stockholders’ equity		(2,099,059	)		(1,271,852	)		827,207
Total liabilities and stockholders’ equity	$	3,626,678		$	4,129,950		$	503,272

(a) Reclassification of restricted cash with merchant banker as non-current asset.
(b) Net change from reclassification of forgiveness of final installment and additional amortization from returning the estimated economic useful life from indefinite to 10 years.
(c) Decrease from restatement of 2000 error correction discovered in 2004.
(d) Decrease from recalculation of deferred income taxes resulting from changes to the software license agreement.

F-12

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2004
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	2,499,215		$	2,778,115		$	278,900		(a)
Cost of sales		630,791			740,069			109,278		(b)
Gross profit		1,868,424			2,038,046			169,622
Operating expenses:
Sales and marketing		497,049			510,501			13,452		(c)
General and administrative		1,249,306			1,171,574			(77,732	)	(d)
Inventory write down		32,396			---			(32,396	)	(e)
Rebate reserve adjustment		(266,301	)		---			266,301		(f)
Bad deb provision		2,500			2,500			---
Depreciation and amortization		22,886			274,639			251,753		(g)
Total operating expenses		1,537,836			1,959,214			421,378
Earnings from operations		330,588			78,832			(251,756	)
Other income		---			1,170			1,170		(h)
Other expenses, net		(30,518	)		(31,688	)		(1,170	)	(h)
Income before income taxes		300,070			48,314			(251,756	)
Provision for income taxes		(2,305	)		(61,322	)		(59,017	)	(i)
Net income (loss)	$	297,765		$	(13,008	)		(310,773	)

Net earnings (loss) per share:
Basic	$	0.01		$	---		$	(0.01	)
Diluted	$	0.01		$	---		$	(0.01	)

Weighted average shares outstanding:
Basic		22,143,875			22,143,875			---
Diluted		23,821,007			22,143,875			(1,677,132	)	(j)

(a) Increase from reclassification of rebate reserve adjustment from Sales and marketing expenses.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, reclassification of fulfillment costs from Sales and marketing expenses, and reclassification of Inventory write down expense from operating expenses.
(c) Increase from reclassification of rebate reserve adjustment to Revenues and reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Decrease from reclassification to Cost of sales.
(f) Increase from reclassification as an adjustment to revenue.
(g) Increase from effects of additional amortization of the software license agreement.
(h) Reclassification of Other income.
(i) Income tax effects of additional software license amortization.
(j) Decrease due to change from net income to net loss.

F-13

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2004
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	961,951		$	1,211,722		$	249,771		(a)
Cost of sales		233,102			271,410			38,308		(b)
Gross profit		728,849			940,312			211,463
Operating expenses:
Sales and marketing		280,033			267,902			(12,131	)	(c)
General and administrative		658,603			615,895			(42,708	)	(d)
Rebate reserve adjustment		(266,301	)		---			266,301		(e)
Depreciation and amortization		13,311			139,187			125,876		(f)
Total operating expenses		685,646			1,022,984			337,338
Earnings (loss) from operations		43,203			(82,672	)		(125,875	)
Other income		---			1,170			1,170		(g)
Other expenses, net		(16,188	)		(17,358	)		(1,170	)	(g)
Income (loss) before income taxes		27,015			(98,860	)		(125,875	)
Provision for income taxes		(1,505	)		(31,011	)		(29,506	)	(h)
Net income (loss)	$	25,510		$	(129,871	)		(155,381	)

Net earnings (loss) per share:
Basic	$	---		$	(0.01	)	$	(0.01	)
Diluted	$	---		$	(0.01	)	$	(0.01	)

Weighted average shares outstanding:
Basic		23,276,312			23,276,312			---
Diluted		24,953,444			23,276,312			(1,677,132	)	(i)

(a) Reclassification of rebate reserve adjustment from Sales and marketing expenses.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, and reclassification of fulfillment costs from Sales and marketing expenses.
(c) Decrease from reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Increase from reclassification as an adjustment to revenue.
(f) Increase from effects of additional amortization of the software license agreement.
(g) Reclassification of Other income.
(h) Income tax effects of additional software license amortization.
(i) Decrease due to change from net income to net loss.

F-14

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2003
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	1,832,331		$	1,832,682		$	351		(a)
Cost of sales		486,639			561,143			74,504		(b)
Gross profit		1,345,692			1,271,539			(74,153	)
Operating expenses:
Sales and marketing		321,887			334,600			12,713		(c)
General and administrative		869,049			814,074			(54,975	)	(d)
Nonrecurring item		(551,736	)		---			551,736		(e)
Depreciation and amortization		49,747			274,002			224,255		(f)
Total operating expenses		688,947			1,422,676			733,729
Earnings (loss) from operations		656,745			(151,137	)		(807,882	)
Other income		---			584,612			584,612		(g)
Other expenses, net		(36,369	)		(37,354	)		(985	)	(h)
Income before income taxes		620,376			396,121			(224,255	)
Provision for income taxes		17,400			113,232			95,832		(i)
Net income	$	637,776		$	509,353			(128,423	)

Net earnings per share:
Basic	$	0.03		$	0.03		$	---
Diluted	$	0.03		$	0.03		$	---

Weighted average shares outstanding:
Basic		19,811,438			19,811,438			---
Diluted		19,965,438			20,069,385			103,947		(j)

(a) Increase from reclassification of rebate reserve adjustment from Sales and marketing expenses.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, reclassification of fulfillment costs from Sales and marketing expenses, and reclassification of Inventory write down expense from operating expenses.
(c) Increase from reclassification of rebate reserve adjustment to Revenues and reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Reclassification of Inventory write down to Cost of sales and royalty adjustment to Other income.
(f) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(g) Reclassification of royalty adjustment from nonrecurring item and miscellaneous income from Other expenses, net.
(h) Reclassification of miscellaneous income to Other income.
(i) Income tax effects of additional software license amortization.
(j) Increase from recalculation of potentially dilute common stock warrants.

F-15

Findex.com, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2003
(Unaudited)

		As Originally Reported			As Restated			Change

Revenues, net of reserves and allowances	$	769,965		$	763,841		$	(6,124	)	(a)
Cost of sales		238,984			262,322			23,338		(b)
Gross profit		530,981			501,519			(29,462	)
Operating expenses:
Sales and marketing		157,890			155,915			(1,975	)	(c)
General and administrative		371,755			344,269			(27,486	)	(d)
Nonrecurring items		(583,628	)		---			583,628		(e)
Depreciation and amortization		24,775			136,902			112,127		(f)
Total operating expenses		(29,208	)		637,086			666,294
Earnings (loss) from operations		560,189			(135,567	)		(695,756	)
Other income		---			583,628			583,628		(e)
Other expenses, net		(22,557	)		(22,557	)		---
Income before income taxes		537,632			425,504			(112,128	)
Provision for income taxes		8,700			56,616			47,916		(g)
Net income	$	546,332		$	482,120			(64,212	)

Net earnings per share:
Basic	$	0.03		$	0.02		$	(0.01	)
Diluted	$	0.03		$	0.02		$	(0.01	)

Weighted average shares outstanding:
Basic		19,811,438			19,811,438			---
Diluted		19,965,438			20,078,401			112,963		(h)

(a) Reclassification of rebate reserve adjustment from Sales and marketing expenses.
(b) Increase from reclassification of non-capitalized technical support wages from General and administrative expenses, and reclassification of fulfillment costs from Sales and marketing expenses.
(c) Decrease from reclassification of rebate reserve adjustment to Revenues and reclassification of fulfillment costs to Cost of sales.
(d) Decrease from reclassification of non-capitalized technical support wages to Cost of sales.
(e) Reclassification of royalty adjustment from nonrecurring item to Other income.
(f) Increase from additional amortization of software license agreement from returning the economic useful life to 10 years.
(g) Income tax effects of additional software license amortization.
(h) Increase from recalculation of potentially dilute common stock warrants.

F-16

Findex.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2004
(Unaudited)

		As Originally Reported			As Restated			Change
Cash flows from operating activities:
Cash received from customers	$	2,687,874		$	2,639,964		$	(47,910	)	(a)
Cash paid to suppliers and employees		(2,691,400	)		(2,409,585	)		281,815		(b)
Other operating activities, net		205,739			(28,166	)		(233,905	)	(c)
Net cash provided by operating activities		202,213			202,213			---
Cash flows from investing activities:
Acquisition of property and equipment		(18,612	)		(18,612	)		---
Software development costs		(178,049	)		(178,049	)		---
Website development costs		(31,836	)		(31,836	)		---
Deposits made		(485	)		(485	)		---
Net cash (used) by investing activities		(228,982	)		(228,982	)		---
Cash flows from financing activities:
Proceeds from (payments on) line of credit, net		(2,999	)		(2,999	)		---
Payments made on long-term notes payable		(50,890	)		(50,890	)		---
Net cash (used) by financing activities		(53,889	)		(53,889	)		---
Net (decrease) in cash and cash equivalents		(80,658	)		(80,658	)		---
Cash and cash equivalents, beginning of year		142,022			41,668			(100,354	)	(d)
Cash and cash equivalents (overdraft), end of period	$	61,364		$	(38,990	)	$	(100,354	)

Reconciliation of net income (loss) to cash flows from operating activities:
Net income (loss)	$	297,765		$	(13,008	)	$	(310,773	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Software development costs amortized		258,258			258,258			---
Provision for bad debts		2,500			2,500			---
Stock and warrants issued for services		44,186			44,186			---
Rebate reserve adjustment		(266,301	)		---			266,301		(e)
Depreciation and amortization		22,886			274,639			251,753		(f)
Change in assets and liabilities:
Decrease in accounts receivable		180,062			180,062			---
Decrease in inventories		110,697			110,697			---
(Increase) in prepaid expenses		(75,406	)		(75,406	)		---
(Decrease) in accrued royalties		(204,937	)		(204,937	)		---
(Decrease) in accounts payable		(174,711	)		(174,708	)		3		(g)
Increase in income taxes payable		700			700			---
Increase in deferred taxes		1,605			60,622			59,017		(h)
Increase (decrease) in other liabilities		4,909			(261,392	)		(266,301	)	(e)
Net cash provided by operating activities	$	202,213		$	202,213		$	---

(a) Decrease from reclassification of estimated cost of sales returns against cash paid.
(b) Increase from reclassification of reserve for rebate adjustment from other operating activities, reclassification of inventory write-down from other operating activities, and estimated cost of sales returns from cash received.
(c) Decrease from reclassification of reserve for rebate adjustment and inventory write-down to cash paid.
(d) Decrease from reclassification of restricted cash as other asset.
(e) Reclassification of Rebate reserve adjustment as decrease in other liabilities.
(f) Additional software license amortization.
(g) Rounding difference.
(h) Net income tax effects of additional software amortization.

F-17

Findex.com, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2003
(Unaudited)

		As Originally Reported			As Restated			Change
Cash flows from operating activities:
Cash received from customers	$	2,045,624		$	2,045,624		$	---
Cash paid to suppliers and employees		(1,861,189	)		(1,861,189	)		---
Other operating activities, net		21,611			21,611			---
Net cash provided by operating activities		206,046			206,046			---
Cash flows from investing activities:
Acquisition of property and equipment		(6,643	)		(6,643	)		---
Software development costs		(145,666	)		(145,666	)		---
Website development costs		(21,055	)		(21,056	)		(1	)	(a)
Deposits made		(500	)		(50,500	)		(50,000	)	(b)
Net cash (used) by investing activities		(173,864	)		(223,865	)		(50,001	)
Cash flows from financing activities:
Proceeds from (payments on) line of credit, net		(5,016	)		(5,016	)		---
Payments made on long-term notes payable		(27,941	)		(27,941	)		---
Net cash (used) by financing activities		(32,957	)		(32,957	)		---
Net (decrease) in cash and cash equivalents		(775	)		(50,776	)		(50,001	)
Cash and cash equivalents, beginning of year		38,651			38,651			---
Cash and cash equivalents (overdraft), end of period	$	37,876		$	(12,125	)	$	(50,001	)

Reconciliation of net income to cash flows from operating activities:
Net income	$	637,776		$	509,353		$	(128,423	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Software development costs amortized		40,422			40,422			---
Depreciation and amortization		49,747			274,002			224,255		(c)
Change in assets and liabilities:
Decrease in accounts receivable		69,541			69,541			---
Decrease in inventories		96,600			96,600			---
Decrease in refundable income taxes payable		29,148			29,148			---
(Increase) in prepaid expenses		(9,254	)		(9,254	)		---
(Decrease) in accrued royalties		(534,754	)		(534,754	)		---
(Decrease) in accounts payable		(187,278	)		(187,278	)		---
(Decrease) in deferred taxes		(17,400	)		(113,232	)		(95,832	)	(d)
Increase in other liabilities		31,498			31,498			---
Net cash provided by operating activities	$	206,046		$	206,046		$	---

(a) Rounding difference.
(b) Reclassification of restricted cash held by merchant banker.
(c) Increase from additional software license amortization.
(d) Income tax effects from additional software license amortization.

F-18

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

This Form 10-QSB, press releases and certain information provided periodically in writing or orally by our officers or our agents contain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934; and the Private Securities Litigation Reform Act of 1995. The words “may”, “would”, “could”, “will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”, and similar expressions and variations thereof are intended to specifically identify forward-looking statements. These statements appear in a number of places in this Form 10-QSB and include all statements that are not statements of historical fact regarding the intent, belief or current expectations of us, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) our ability to attract customers to generate revenues; (iv) market and other trends affecting our future financial condition or results of operations; (v) our growth strategy and operating strategy; and (vi) the declaration and/or payment of dividends.

Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, those set forth in Part I, Item 2 of this quarterly report on Form 10-QSB, entitled Management’s Discussion and Analysis or Plan of Operation, including without limitation the risk factors contained in the Company’s annual report on Form 10-KSB/A for period ending December 31, 2003. Except as required by law, we undertake no obligation to update any of the forward-looking statements in this Form 10-QSB/A after the date of this report.

GENERAL

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

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

·	Bible Study

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

·	Print & Graphic Products

·	Pastoral Products

·	Children’s Products

·	Language Tutorial Products.

RESULTS OF OPERATIONS

Our software products have a significant seasonality to their revenues. More than 50% of our annual sales are expected to occur in the five months of September through January; the five months of April through August are generally expected to be the weakest, historically generating only about 33% of our annual sales.

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During the quarter ended June 30, 2003, the Company recorded approximately $584,000 as Other Income as a result of accrued royalties being overstated in connection with the 2001 bad debt recognition from the trade accounts receivable balance with TLC. Furthermore, during the quarter ended June 30, 2004, the Company recorded an adjustment to revenue of approximately $266,000 due to an error in overstating rebates payable to a third-party processor. Net income decreased approximately $612,000 for the three months ended June 30 from a net income of approximately $482,000 for 2003 to a net loss of approximately $130,000 for 2004 and decreased approximately $522,000 for the six months ended June 30 from a net income of approximately $509,000 for 2003 to a net loss of approximately $13,000 for 2004. By excluding our interest, taxes, depreciation, and amortization from net income, our EBITDA decreased approximately $527,000 for the three months ended June 30 from EBITDA earnings of approximately $585,000 for 2003 to EBITDA earnings of approximately $58,000 for 2004 and decreased approximately $352,000 for the six months ended June 30 from EBITDA earnings of approximately $707,000 for 2003 to EBITDA earnings of approximately $355,000 for 2004. These net income and EBITDA results include the adjustments noted above.

Overall, interest expense for the three and six months ended June 30, 2004 decreased by approximately $5,300 and $15,000 respectively compared to 2003. This is due to the Company reducing its trade payables and meeting the scheduled terms. Furthermore, the note liabilities interest was reduced due to the reclassification of the note payable in the fourth quarter of 2003. Amortization expense related to the software license remained steady for the three and six months ended June 30, 2004 compared to 2003. Amortization expense related to software development costs increased approximately $39,000 and $150,000 for the three and six months ended June 30, 2004 compared to 2003. This is a direct result from QuickVerse^® 8.0 shipping in late December 2003 and Membership Plus^® 8.0 shipping in January 2004.

Revenues

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

Product return reserves are based upon a percentage of total retail and direct sales for the period and may increase or decrease as actual returns are processed. Product returns or price protection concessions that exceed our reserves could materially adversely affect our business and operating results and could increase the magnitude of quarterly fluctuations in our operating and financial results. Product returns from distributors and Christian bookstores are allowed primarily in exchange for new products or for credit towards purchases as part of a stock-balancing program. These returns are subject to certain limitations that may exist in the contract that we have with them. Under certain circumstances, such as termination or when a product is defective, distributors and bookstores could receive a cash refund if returns exceed amounts owed. Returns from sales made directly to the consumer are accepted within 45 days of purchase and are issued a cash refund.

Software products are sold separately, without future performance such as upgrades or maintenance, and are sold with post contract customer support (PCS) services, customer service and technical support assistance. In connection with the sale of certain products, we provide a limited amount of free technical support assistance to our customers. We do not defer the recognition of revenue associated with sales of these products, since the cost of providing this free technical support is insignificant. We accrue the estimated associated costs of providing this free support upon product shipment. We also offer several plans under which customers are charged for technical support assistance. For plans where we collect fees in advance, we recognize revenue over the period of service, which is generally one year.

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

Gross revenues increased approximately $217,000 for the three months ended June 30 from approximately $840,000 for 2003 to approximately $1,057,000 for 2004 and increased approximately $757,000 for the six months ended June 30 from approximately $2,016,000 for 2003 to approximately $2,773,000 for 2004. Such increase is due to the Company’s release of an enhanced version of our flagship product, QuickVerse^®, in late fourth quarter of 2003 and the release of an enhanced version of our top financial and data management product, Membership Plus^®, during the first quarter of 2004. Although there was a new product release during the first quarter of 2003, the retail value of the product was significantly lower than the QuickVerse^® and Membership Plus^® titles and ranged from $19.95 to $29.95.

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Sales returns and allowances increased approximately $29,000 for the three months ended June 30 from approximately $83,000 for 2003 to approximately $112,000 for 2004 and increased approximately $106,000 for the six months ended June 30 from approximately $216,000 for 2003 to approximately $322,000 for 2004 and slightly increased as a percentage of gross sales from approximately 9.8% and 10.7% for the three and six months ended June 30, 2003 to approximately 10.6% and 11.6% for the three and six months ended June 30, 2004, respectively. The increase in sales returns and allowances as a percentage is attributable to extending our return policy on direct sales from 30 days to 45 days during the fourth quarter of 2003.

COST OF SALES

Cost of sales consists primarily of royalties to third party providers of intellectual property and the direct costs and manufacturing overhead required to reproduce, package, fulfill and ship the software products. Direct costs and manufacturing overhead also include the amortized software development and the non-capitalized technical support wages. The direct costs and manufacturing overhead increased from approximately 19.2% and 20.3% of gross revenues for the three and six months ended June 30, 2003 to approximately 22.4% and 22.6% of gross revenues for the three and six months ended June 30, 2004, respectively. The six months ended June 30, 2003 and 2004 include the write down of two distinct categories of obsolete inventory of approximately $32,000, respectively, and the 2004 inventory write down was a direct result of settlement negotiations with Zondervan. The increase resulted directly from an increase in fulfillment costs and amortization of software development costs. Fulfillment costs from a third-party warehouse increased approximately $27,000 during the six months ended June 30 as we had an increased amount of retail sales during the first quarter of 2004 due to the enhanced releases of QuickVerse^® and Membership Plus^®. The amortization recognized during the three and six months ended June 30, 2003 resulted from several new software releases in 2003 and the continued amortization of those products released in 2002. Furthermore, the amortization increase for the three and six months ended June 30, 2004 corresponds with the December 2003 release of QuickVerse^® 8.0 and the January 2004 release of Membership Plus^® 8.0. The direct costs and manufacturing overhead percentage is expected to continue at the 2004 levels as working capital remains more consistent and as more development projects are implemented.

Royalties to third party providers of intellectual property decreased approximately $66,000 and $37,000 for the three and six months ended June 30 from approximately $101,000 and $152,000 for 2003 to approximately $35,000 and $115,000 for 2004, respectively. The royalty rate as a percentage of gross revenues decreased from approximately 12% and 8% of gross revenues for the three and six months ended June 30, 2003 to approximately 3% and 4% of gross revenues in 2004. The decrease of royalties reflects an increase in upgrade sales of the QuickVerse^® 8.0 and Membership Plus^® 8.0. Membership Plus^® upgrades are not subject to royalties and QuickVerse^® upgrades are subject to reduced royalties on only the content differences between versions or editions.

Software development costs are expensed as incurred until technological feasibility has been established, at which time development costs are capitalized until the software title is available for general release to customers. Capitalized costs are amortized on a product-by-product basis using the greater of straight-line amortization over the estimated life of the product or on the ratio of current revenues from the product to the total projected revenue over the life of the product. Generally, we consider technological feasibility to have been established with the release of a beta version for testing. Software development costs are summarized in the table below. The decrease in capitalization from 2003 to 2004 reflects that QuickVerse^® 8.0, and other projects, were in development during 2003 with fewer projects and no QuickVerse^® upgrade in development during 2003. The increase in amortization from 2003 to 2004 reflects the release of QuickVerse^® 8.0 and Membership Plus^® 8.0 during the 4th quarter of 2003 and the 1st quarter of 2004.

	Three Months Ended June 30,				Six Months Ended June 30,
		2003		2004		2003		2004
Beginning balance	$	306,155	$	506,121	$	280,502	$	584,706
Capitalized		147,028		104,421		213,103		178,049
Amortized (cost of sales)		67,437		106,045		107,859		258,258
Ending balance	$	385,746	$	504,497	$	385,746	$	504,497

Research and development expense (General and administrative)	$	30,003	$	27,522	$	97,794	$	43,696

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SALES, GENERAL AND ADMINISTRATIVE

Sales expenses increased approximately $112,000 and $176,000 for the three and six months ended June 30 from approximately $156,000 and $335,000 for 2003 to approximately $268,000 and $511,000 for 2004. Included in Sales expenses, commissions to a third-party telemarketing firm increased approximately $113,000 during the six months ended June 30 as our sales focus to the direct consumer increased along with the number of new and enhanced product releases during late 2003 and early 2004; Advertising costs also increased approximately $57,000 during the six months ended June 30 with the new and enhanced product releases and the Christian Booksellers Association International conference being held in June rather than in July for 2004; Marketing and Customer Service costs increased approximately $6,000 as we continue to expand our sales efforts and focus more towards the consumer instead of the retail store.

Research and development costs include salaries and benefits of personnel and third parties conducting research and development of software products. Software development costs expensed as research and development are listed in the table above. The decrease in 2004 reflects the early stages of new development projects for the year of 2004. Research and development expenses are expected to increase in future periods as we continue to add new products and versions to our product mix.

Personnel costs increased approximately $126,000 from approximately $667,000 for the six months ended June 30, 2003 to approximately $793,000 for the six months ended June 30, 2004. This increase is primarily from the addition of staff members and the associated health care costs. The Company also recognized approximately $14,000 of expense related to 637,500 restricted common shares issued to employees and approximately $8,000 in expense for upper management year-end bonus accrual. Furthermore, the capitalization of direct and indirect labor and related overhead charges as software development costs (see ‘Cost of Sales’ above) decreased by approximately $84,000 from approximately $130,000 for the six months ended June 30, 2003 to approximately $46,000 for the six months ended June 30, 2004. This decrease is due to the early stages of new development projects for the year 2004. It is anticipated that personnel costs will increase in future periods as operating capital is available to fund full staffing of our product development team and expansion of the technical support and direct marketing staff. In addition, interest and penalty fees related to back payroll taxes increased approximately $48,000 for the six months ended June 30, 2004.

Legal costs increased approximately $34,000 as the disputes with TLC and Zondervan were finalized in March 2004. Rent expense increased approximately $9,000 as we opened a new product development facility located in Naperville, IL. Fees for outside board of directors increased approximately $17,000 as we have accounted for their services for the first two quarters of 2004, which is related to the issuance of 324,074 restricted common shares. Travel costs increased approximately $16,000 as we increased our sales staff and our sales efforts to our retail customers as new product lines and enhancements were introduced during late 2003 and early 2004. Telecommunication costs increased approximately $42,000 from an increase in technical support and customer service calls due to the two new major product releases in late December 2003 and early 2004. Corporate service fees increased approximately $28,000 for the six months ended June 30, 2004. These fees are related to the recent hire of an outside consultant and the expense for a previous issuance of a warrant to purchase 250,000 common shares. Bad debt expense increased $2,500 during 2004 due to the increased amount of outstanding accounts receivable.

Amortization

Amortization expense increased approximately $2,000 from approximately $252,000 for the six months ended June 30, 2003 to approximately $254,000 for the six months ended June 30, 2004. The software license acquired from TLC in July of 1999 is amortized over a 10 year useful life. Amortization expense reflects the continual amortization of the software license. Furthermore, amortization expense for 2004 reflects the launch of our new website during the second quarter.

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INCOME TAX BENEFITS

Our effective tax rate differs from the statutory federal rate due to differences between income and expense recognition prescribed by the Internal Revenue Code and Generally Accepted Accounting Principles. We utilize different methods and useful lives for depreciating property and equipment. Amortization of the software license agreement is on a straight-line basis over the estimated useful life for financial reporting while deductible when paid for income tax purposes. Changes in estimates (reserves) are recognized as expense for financial reporting but are not deductible for income tax purposes.

We have recognized a net deferred tax asset whose realization depends on generating future taxable income. Because of this uncertainty, we have recorded a valuation allowance to offset the net deferred tax asset. The resulting deferred tax liability reflects income taxes payable in future periods on the net deductible differences related to the software license agreement. We currently have net operating loss carryforwards, for income tax purposes, of approximately $8,400,000. The carryforwards are the result of income tax losses generated in 2000 ($2,973,000 expiring in 2020), 2001 ($5,191,000 expiring in 2021) and 2002 ($236,000 expiring in 2022). During fiscal year 2004, we will need to achieve a minimum annual taxable income, before deduction of operating loss carryforwards, of approximately $442,000 to fully utilize the current loss carryforwards. We believe this is achievable through continued careful expense management and introduction of new products and enhanced versions of our existing products.

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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2004, Findex had approximately $442,000 in current assets, $2,896,000 in current liabilities and a retained deficit of approximately $7,268,000. This continues to create an uncertainty about our ability to continue as a going concern. We had net loss before income taxes of approximately $99,000 and a net income before income taxes of approximately $48,000 for the three and six months ended June 30, 2004, respectively.

Net cash provided by operating activities was approximately $206,000 and $202,000 for the six months ended June 30, 2003 and 2004, respectively. Cash provided by operating activities is not currently adequate to meet our current software development and debt service needs.

Net cash used in investing activities was approximately $224,000 and $229,000 for the six months ended June 30, 2003 and 2004, respectively. The increase in cash used for investing activities results from capitalizing costs associated with software development and upgrading our website to expand our e-commerce capability. Software development activities will continue on an ongoing basis while costs associated with upgrading our website ceased during May 2004 with the launching of our new site.

Net cash used by financing activities was approximately $33,000 and $54,000 for the six months ended June 30, 2003 and 2004, respectively. Cash used by financing activities reflects proceeds from our accounts receivable line of credit and payments made on debt obligations.

On March 19, 2001, we entered into an Accounts Receivable Financing Agreement with Alliance Financial Capital, Inc. (“AFC”). Pursuant to this agreement, AFC agrees to purchase selected accounts receivable on a discounted basis, including, without limitation, full power to collect, compromise, sue for, assign, or in any manner enforce collection thereof. The agreement provides for advances of 60% toward the purchase of the invoices with a credit line of $250,000. The terms call for 40% to be held in a reserve account from the collection of each invoice. Invoices not paid by the customer within 90 days of shipment are required to be repurchased by us out of the reserve account. The agreement carries a 12-month term with a minimum monthly fee equal to one half of one percent (.5%). The term renews automatically in 12-month increments unless a written request for termination is received by AFC at least 30 days before the renewal date. During the six months ended June 30, 2004, we transferred accounts receivable totaling $286,677 to a lender for cash advances of $170,603. As accounts are paid, the collected funds (less the amount advanced and appropriate fees) are disbursed to the Company. The transfer agreement includes a repurchase requirement and, accordingly, the proceeds were accounted for as a secured borrowing. At June 30, 2004, the balance of receivables transferred and included in trade receivables was $29,895. The remaining secured borrowing balance of $17,937 is included in accrued expenses. On July 20, 2004, we submitted our request to terminate the Accounts Receivable Financing Agreement.

-5-

On July 19, 2004, we completed an equity financing in the amount of $1,750,000 through a private placement with Barron Partners, LP (“Barron”). Under the terms of the agreement, Barron purchased 21,875,000 restricted common shares at a price of $.08 per share. In addition, according to the terms of the agreement, Barron is entitled to receive two warrants to purchase common stock. The first warrant would entitle Barron to purchase up to 10,937,500 common shares at an initial price of $.18 per share and the second warrant would entitle Barron to purchase up to 10,937,500 additional common shares at an initial price of $.60 per share. The exercise price associated with each of the warrants will be subject to downward adjustment based on the occurrence or non-occurrence of certain events, including the achievement of stated 2004 earnings and other performance goals.

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

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Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		FINDEX.COM, INC.

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


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

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