UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2015

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to _______

 

Commission File Number 333-156594

 

3DX INDUSTRIES, INC.

 

(Exact name of registrant as specified in its charter)

 

Nevada		46-4485465
(State of incorporation)		(I.R.S. Employer Identification No.)

 

6920 Salashan Parkway, Suite D-101 Ferndale, WA 98248

(Address of principal executive offices)

 

(360) 244-4339

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐Yes ☑ No (Not required)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐                                          Accelerated Filer ☐

 

Non-Accelerated Filer ☐                                            Smaller Reporting Company ☑

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

 

As of September 18, 2015, there were 37,461,409 shares of the registrant’s $0.001 par value common stock issued and outstanding.

3DX INDUSTRIES, INC.

TABLE OF CONTENTS

 

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
ITEM 4.	CONTROLS AND PROCEDURES	16
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	17
ITEM 1A.	RISK FACTORS	17
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4.	[MINE SAFETY DISCLOSURES]	17
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS	18

 

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of 3DX Industries, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "DDDX" refers to 3DX Industries, Inc.

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

INDEX	F-1
Unaudited Balance Sheets as of July 31, 2015 and October 31, 2014	F-2
Unaudited Statements of Operations for the Three and Nine Months Ended July 31, 2015 and 2014	F-3
Unaudited Statements of Cash Flows for the Nine Months Ended July 31, 2015 and 2014.	F-4
Notes to Financial Statements Unaudited	F-5

 

 

 

3DX INDUSTRIES, INC.

Balance Sheets

(Unaudited)

 

		July 31,				October 31,
		2015				2014
Assets
Current assets
Cash and cash equivalents		$	7,314			$	2,074
Accounts receivable			63,305				—
Prepaid expenses			—				1,614
Total current assets			70,619				3,688
Property and equipment
Manufacturing equipment			1,392,981				1,254,571
Furniture and fixtures			638				638
Computer equipment			1,005				1,005
Less accumulated depreciation			(210,323	)			(75,585	)
Total property and equipment			1,184,301				1,180,629
Other assets
Website development (net of accumulated amortization of $2,681 and $1,691)			1,439				2,429
Security deposit			4,975				4,275
Total other assets			6,414				6,704
Total assets		$	1,261,334			$	1,191,021
Liabilities and stockholders' deficit
Current liabilities
Accounts payable and accrued expenses		$	663,980			$	331,595
Payables to related parties			258,195				149,135
Equipment purchase payable - current portion			634,990				196,378
Accrued compensation - convertible			174,000				174,000
Current portion of notes payable - unrelated party			417,674				236,495
Current portion of convertible notes payable - unrelated party			188,980				—
Total current liabilities			2,337,819				1,087,603
Long-term liabilities
Equipment purchase payable			—				479,362
Convertible notes payable - related party			500,000				500,000
Convertible notes payable - unrelated party			128,314				157,541
Note payable - unrelated parties			145,171				52,897
Total long-term liabilities			773,485				1,189,800
Total liabilities			3,111,304				2,277,403
Stockholders' equity
Preferred stock, $.001 par value, 10,000,000 shares authorized, none outstanding			—				—
Common stock, 175,000,000 shares authorized, $0.001 par value, 37,461,409 shares issued at July 31, 2015 and at October 31, 2014			37,461				37,461
Additional paid-in capital			14,931,530				14,931,530
Accumulated deficit			(16,818,961	)			(16,055,373	)
Total stockholders' deficit			(1,849,970	)			(1,086,382	)
Total liabilities and stockholders' deficit		$	1,261,334			$	1,191,021

 

The accompanying notes are an integral part to these unaudited financial statements. 

3DX INDUSTRIES, INC.

Statements of Operations

(Unaudited)

 

		For the Three Months Ended								For the Nine Months Ended
		July 31,								July 31,
		2015				2014				2015				2014
Revenue		$	105,806			$	—			$	274,439				—
Cost of goods sold			25,433				—				57,523				—
Gross profit			80,373				—				216,916				—
Operating expenses
Depreciation and amortization			45,236				29,768				135,728				30,539
Professional services			28,825				6,988				165,977				75,325
General and administrative expenses			253,188				116,211				629,904				9,733,298
Total operating expenses			327,249				152,967				931,609				9,839,162
Other income (expense)
Gain on settlement of indebtedness			—				—				—				(4,829,408	)
Interest expense			(26,773	)			(11,856	)			(48,895	)			(33,283	)
Total other (expense)			(26,773	)			(11,856	)			(48,895	)			(4,862,691	)
Net loss		$	(273,649	)			(164,823	)		$	(763,588	)		$	(14,701,853	)
Net loss per common share -
basic and diluted		$	(0.01	)		$	(0.00	)		$	(0.02	)		$	(0.45	)
Weighted average number of common
shares outstanding			37,461,409				36,841,844				37,461,409				32,627,416

 

The accompanying notes are an integral part to these unaudited financial statements.  

3DX INDUSTRIES, INC.

Statements of Cash Flows

(Unaudited)

 

		For the Nine Months Ended
		July 31,
		2015				2014
Cash flows from operating activities:
Net loss		$	(763,588	)		$	(14,701,853	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			135,728				30,539
Loss on settlement of debt			—				4,829,407
Stock-based compensation			—				9,450,000
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable			(63,305	)			—
(Increase) decrease in prepaid expenses			1,614				(3,228	)
(Increase) decrease in security deposit			(700	)			(4,275	)
Increase (decrease) in accounts payable			316,440				37,487
Increase (decrease) in accounts payable - related party			109,060				—
Increase in deferred rent			—				10,523
Increase (decrease) in accrued interest			43,952				33,283
Increase (decrease) in accrued compensation - related parties			—				108,191
Net cash used in operating activities			(220,799	)			(209,926	)
Cash flows from investing activities:
Equipment purchases							(93,386	)
Website development			—				(2,620	)
Net cash used in investing activities			—				(96,006	)
Cash flows from financing activities:
Proceeds from third party borrowing			286,500				331,000
Repayments on third party borrowing			(60,461	)			(12,510	)
Proceeds from related party borrowing			—				24,038
Repayments on related party borrowing			—				(24,038	)
Net cash provided by financing activities			226,039				318,490
Increase (decrease) in cash			5,240				12,558
Cash - beginning of period			2,074				2,460
Cash - end  of period		$	7,314			$	15,018
Supplemental disclosures of cash flow information:
Interest paid		$	7,988			$	4,729
Income taxes paid		$	—			$	—
Non-Cash Investing and Financing Transactions
Equipment purchased with debt		$	138,410			$	1,175,000
Common stock issued for debt			—				48,800
Accrued compensation converted to common stock			—				1,000

 

The accompanying notes are an integral part to these unaudited financial statements.

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

 

3DX Industries, Inc. (the “Company”) was incorporated in the state of Nevada on October 23, 2008. The Company’s principal activity presently is manufacturing and our head office is located near Bellingham WA, USA. The Company manufactures consumer and corporate products using an additive manufacturing method through 3D Metal printing technology and conventional precision manufacturing processes.

  

Financial Statements Presented

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the nine month period ended July 31, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2015. For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 31, 2014 as filed with the Securities and Exchange Commission on February 18, 2015.

 

Going Concern

 

The Company has incurred net losses since inception, and as of July 31, 2015 had a combined accumulated deficit of $16,818,961 and had negative working capital of $2,267,200. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management recognizes that the Company must generate additional funds to enable it to continue operating. Management intends to raise additional financing through debt and or equity financing and by other means that it deems necessary, with the goal of moving forward and sustaining a prolonged growth in its strategy phases. However, no assurance can be given that the Company will be successful in raising additional capital. Further, even if the company raises additional capital, there can be no assurance that the Company will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Company will not be able to meet its obligations and may have to cease operations.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Loss Per Share of Common Stock

 

The Company follows Accounting Standard Codification Topic No. 260, “Earnings Per Share” (“ASC No. 260”) that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The calculation of diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC No. 260, any anti-dilutive effects on net earnings (loss) per share are excluded. Potential common shares at July 31, 2015 and July 31, 2014 that have been excluded from the computation of diluted net loss per share include an option to convert approximately $4,117 in fees due to Santeo Financial Corporation at July 31, 2015 and 2014 into 4,117,060 common shares.  In addition, potential common shares at July 31, 2015 that have been excluded from the computation of diluted net loss per share include an option to convert approximately $3,470 (2014 - Nil) in fees due Santeo Financial Corporation at July 31, 2015 into 3,470,099 common shares. 

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable are reported at the invoiced amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions taking into account the history of write-offs and collections. A receivable is considered past due if payment has not been received within the period agreed upon in the invoice. Accounts receivable are written off after all collection efforts have been exhausted. Recoveries of trade receivables previously written off are recorded when received.

 

Revenue recognition

 

The Company recognizes revenue when it is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue is recognized upon transfer of title and risk of loss, which is generally upon the shipment of finished goods. Freight billed to customers is included in revenues, and all freight expenses paid by the Company are included in cost of revenue.

 

Reclassification

 

Certain reclassifications have been made to conform the 2014 amounts to 2015 classifications for comparative purposes.

 

Recent Accounting Pronouncements

 

The Company’s management has evaluated all recent accounting pronouncements since the last audit through the issuance date of these financial statements. In the Company’s opinion, none of the recent accounting pronouncements will have a material effect on the financial statements.

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

On December 18, 2013, the Company purchased various equipment relating to its 3D metal printing operation from Mr. Janssen for $500,000. The $500,000 is evidenced by a promissory note assessed interest at an annual rate of 1.64%. Accrued interest is payable quarterly with the Principal balance and any unpaid accrued interest fully due and payable on December 15, 2018. Mr. Janssen has the right to convert any outstanding principal and accrued interest into restricted shares of the of the Company’s common stock at a conversion price of $0.50 per share. The balance due Mr. Janssen at July 31, 2015 totaled $513,292 (October 31, 2014 - $507,022) of which the accrued interest of $13,292 was classified as a short-term liability and the $500,000 was classified as a long-term liability. The accrued interest of $13,292 was charged to operations. The Company has not paid any accrued interest.

 

NOTE 4 - EQUIPMENT

 

By way of agreement concurrent with Mr. Janssen’s appointment to the Board of Directors and entry into an Employment Agreement (see Note 6 – Commitments and Contingencies below) and executed on December 18, 2013, the Company purchased various equipment relating to the post production processes for its 3D metal printing operation from Mr. Janssen, our sole officer and director, for $500,000 which amount has been capitalized on our balance sheet.

 

On December 23, 2013, the Company purchased equipment from an unrelated third party for $750,000 of which $75,000 was paid on purchase. The remaining $675,000 is payable in two installments: $375,000 due June 1, 2014 and $300,000 due on September 1, 2014. The terms of the installment payments do not include a stated interest rate, therefore, the Company accounted for the purchase under ASC Topic 835-30-25 “Imputation of Interest” discounting the purchase price of the equipment by $18,795 for imputed interest using an interest rate of 5% per annum. The total gross capitalized value of this equipment was $731,025.

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 4 – EQUIPMENT (continued)

 

The Company failed to make the required installment payments when they became due and on October 23, 2014, the Company and the seller agreed to modify the terms of the obligation due. Under the modified terms, the balance of the note as of October 23, 2014 increased to $675,000, which is evidenced by a promissory note which is assessed interest at an annual rate of 5% per annum. Principal and accrued interest are paid in monthly installments of $20,230 commencing on December 1, 2014.

 

During the nine months ended July 31, 2015, the Company paid $60,461, of which $52,473 was applied to the principal and $7,988 applied to interest. The Company has met its payment obligations up to February 2015 and is in default of its current payment obligations. The Company has entered into negotiations with the third party to revise the payment schedule with respect to the purchase, however the loan is presently in default and is currently payable in full as at July 31, 2015 in the total remaining amount of $634,990 (October 31, 2014 - $675,740).

 

During the year ended October 31, 2014 in connection with the aforementioned equipment purchase, the Company capitalized an additional $23,366 in respect of installation costs.

 

In addition, the Company purchased additional equipment with a total value of $138,410 during the three months ended July 31, 2015 which has been capitalized on the Company’s balance sheets. Of this amount a total of $122,465 is subject to an equipment finance agreement as more fully descried in Note 5(6) below.

 

Capitalized manufacturing equipment (gross) at July 31, 2015 and October 31, 2014 totaled $1,392,981.

 

NOTE 5 - NOTES PAYABLE – UNRELATED PARTY

 

(1)

Santeo Financial Corp (“Santeo”)

 

Santeo Financial Corp advanced $25,000 to the Company on February 14, 2015. The $25,000 is evidenced by an unsecured promissory note bearing interest at a rate of 10%. The interest shall be accrued beginning on August 1, 2015. Outstanding principal and accrued interest is fully due and payable on December 31, 2016. The holder has the right to convert any or all of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.10 per share. Upon conversion, the holder has certain registration rights. The Company is obligated to bear all costs associated with the registration of the shares. The outstanding balance at July 31, 2015 amounted to $25,000 (October 31, 2014 - $nil). As per the terms of the agreement, no accrued interest was charged during the nine month period ended July 31, 2015.

 

(2)

The ExOne Company

 

As further detailed above in Note 5 – Equipment, on October 23, 2014 the Company entered into a Secured Promissory Note, Loan and Security Agreement (the “Note”) in the principal amount of $675,000 with interest accruing at a rate of 5% per annum. Under the terms of the Note, principal and accrued interest are paid in monthly installments of $20,230 commencing on December 1, 2014. The note is secured by a lien on the purchased equipment. During the nine months ended July 31, 2015, the Company paid $60,461, of which $52,473 was applied to the principal and $7,988 applied to interest. The Company has met its payment obligations up to February 2015 and is in default of its current payment obligations. The Company has entered into negotiations with ExOne to revise the payment schedule with respect to the purchase.

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 5 - NOTES PAYABLE – UNRELATED PARTY (continued)

 

(3)

Lender 1

 

a.

5% various notes payable

 

Balance, October 31, 2014		$	223,478
Additional: Principal			46,500
Repayment: Principal			(5,000	)
Accrued interest:			10,116
Balance, July 31, 2015		$	275,094

 

During the nine months ended July 31, 2015, the Company received an additional $46,500 in loans from the aforementioned party which is assessed interest 5% per annum and mature at various dates through December 15, 2015.

 

b.

5% promissory note

 

In addition to the loans indicated above, the same lender advanced $150,000 to the Company on November 5, 2013. The $150,000 is evidenced by an unsecured promissory note bearing interest at a rate of 5%. Outstanding principal and accrued interest is fully due and payable on December 31, 2015. Effective January 1, 2015, the holder has the right to convert any or all of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.10 per share. Upon conversion, the holder has certain registration rights. The Company is obligated to bear all costs associated with the registration of the shares. The outstanding balance at July 31, 2015 amounted to $163,151 (October 31, 2014 - $157,541). Accrued interest charged to operation for the nine months period ended July 31, 2015 and 2014 totaled $5,610 and $5,651, respectively.

 

(4)

Lender 2

 

Balance, October 31, 2014		$	67,855
Additional: Principal			—
Accrued interest			2,431
Balance, July 31, 2015		$	70,286

 

On September 9, 2013, the Company borrowed $30,000 from a third party. The loan is evidenced by an unsecured promissory note. The loan is assessed interest at an annual rate of 5% per annum with principal and accrued interest fully due and payable on May 1, 2014. The outstanding balance was not paid on its due date.

 

On March 7, 2014, the Company borrowed an additional $35,000 from the same party noted above. The loan is evidenced by an unsecured promissory note. The loan is assessed interest at an annual rate of 5% per annum with principal and accrued interest fully due and payable on December 31, 2014.

 

Accrued interest charged to operations for the nine month periods ended July 31, 2015 and 2014 amounted to $2,431 and $1,949, respectively.

 

(5)

Lender 3

 

On November 18, 2014, the Company borrowed $25,000 from a third party (Note 1). The $25,000 is evidenced by an unsecured promissory note bearing interest at a rate of 10% beginning April 1, 2015. Outstanding principal and accrued interest is fully due and payable on December 01, 2015. The holder has the right to convert any or all of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.30 per share.

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 5 - NOTES PAYABLE – UNRELATED PARTY (continued)

 

(5)

Lender 3 (continued)

 

On December 10, 2014, the Company further borrowed $100,000 from a third party (Note 2). The $100,000 is evidenced by an unsecured promissory note bearing interest at a rate of 10% beginning April 1, 2015. Outstanding principal and accrued interest is fully due and payable on December 31, 2016. The holder has the right to convert any or all of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.15 per share.

 

Pursuant to ASC Topic 470-20, “Debt with Conversion and Other Options,” there is no beneficial conversion feature associated with these promissory notes because the conversion rate is equal or greater than the fair market value on the issuance date.

 

			Note 1				Note 2
Balance, October 31, 2014		$	—			$	—
Additional: Principal			25,000				100,000
Accrued interest			829				3,315
Balance, July 31, 2015		$	25,829			$	103,315

 

(6)

Equipment Finance Agreement

 

On March 25, 2015, the Company entered into an Equipment Finance Agreement (“EFA”) with Global Finance Group, Inc. to borrow up to $275,000. Under the EFA the Company received cash proceeds of $90,000, $5,000 was paid directly to a third party to reduce certain outstanding loans and a further $122,465 was expended by Global to purchase equipment on behalf of the Company. The EFA is secured by the purchased equipment, and is assessed interest at a rate of 12% per annum. Principal and accrued interest are paid in monthly installments of $7,243 commencing on May 1, 2015. It was agreed between the parties that the first 4 months of payments will be reduced by $5,000 per payment, and thereafter, commencing September 1, 2015 payments of the full installment value will commence.

 

The balance due on this obligation at July 31, 2015 is $217,465 (October 31, 2014 - $nil).  

 

During the nine months ended July 31, 2015 in connection with the aforementioned equipment purchase, the Company capitalized the equipment (gross) at July 31, 2015 in an amount totaling $122,465. The EFA is personally guaranteed by the Company’s President, Mr. Roger Janssen.

 

3DX INDUSTRIES, INC.

Notes to Financial Statements

(Unaudited)

 

NOTE 6 - COMMITMENTS AND CONTINGENCIES

 

Effective November 23, 2013, the Company entered into an employment agreement with its President and Chief Executive Officer, Roger Janssen. Under the terms of the agreement, Mr. Janssen will receive a base salary of $15,000 a month over the three-year term of the agreement. At the sole discretion of the board of directors, Mr. Janssen may be granted performance bonuses and may also participate in any incentive plans that the Company may establish. In addition, Mr. Janssen received 30,000,000 shares of the Company’s restricted common stock as a signing bonus. The shares were valued at $4,800,000 based upon the trading price of the shares on the date of grant. Officer’s compensation for the year ended October 31, 2014 amounted to $4,887,449 including the indicated stock based compensation of $4,800,000. Accrued compensation due Mr. Janssen as of July 31, 2015 amounted to $258,195 (October 31, 2014 - $149,135), which is included in the balance of other payables – related parties as reflected in the accompanying balance sheet. The $258,195 is net of $26,539 that was actually paid to Mr. Janssen during the nine months ended July 31, 2015.

 

In January 2014, the Company entered into lease for warehouse and corporate office space located in Ferndale, Washington for 26 months. The Company was granted an option to extend the lease for another two years.

 

On March 30, 2015, the Company entered into an equipment rental agreement with Santeo Financial Corp. with respect to certain manufacturing equipment. The term of rental is 24 months, with an option to purchase the equipment at any time up to the end of the rental agreement. Under the terms of the agreement the Company paid a security deposit of $700 and agreed to a monthly rental fee of $350 with the first month payable upon signing.

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Qcontains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

RESULTS OF OPERATIONS

 

Plan of Operation

 

As of July 31, we had $7,314 of cash on hand. We incurred operating expenses in the amount of $931,609 during the nine months ended July 31, 2015. These operating expenses were comprised of general and administrative expenses, professional fees, management salaries, consulting fees, and other miscellaneous expenses.

 

The Company has recently commenced revenue generating operations from its primary business in the manufacturing sector. During the nine month period we generated gross revenues of $274,439 as compared to Nil in the prior comparative period. While we expect to see an increase in revenues as we secure additional customers, we are not presently generating enough revenue to meet our operational overhead. Management cannot guarantee that the Company will be successful in its existing business operations and the Company’s business is subject to risks inherent in the operation of a business enterprise with limited revenue generating operations, including limited capital resources and ongoing operational shortfalls

 

Our current cash holdings are not yet sufficient to satisfy our liquidity requirements and we will require additional financing to pursue our planned business activities. We are in the process of seeking equity and or debt financing to fund the shortfall in our operations over the next 12 months; however, management provides no assurance that future financing will be available to the Company on acceptable terms.  If financing is not available on satisfactory terms, the Company may be unable to continue operations, develop, or expand its existing operations.  Equity financing could result in additional dilution to the Company’s existing shareholders.

 

For the three and nine month periods ended July 31, 2015, as compared to the same periods ended July 31, 2014.

 

Revenues

 

The Company generated $105,806 and $274,439 in revenues from operations and $25,433 and $57,523 in cost of goods sold for the three and nine months ended July 31, 2015, respectively, with $nil in revenue from operations and cost of goods sold for the same periods ended July 31, 2014. Revenues increased over the second quarter as the Company was able to bring on additional staff in order to undertake additional customer orders.

 

Expenses

 

For the three and nine months ended July 31, 2015, total operating expenses were $327,249 and $931,609, respectively, as compared to $152,967 and $9,839,162 for the same periods ended July 31, 2014. The substantial decrease in expenditures for the nine months ended July 31, 2015 as compared to the same nine months period in 2014 relates to a reduction in stock based compensation incurred in 2014 totaling $9,450,000. During the respective comparative periods, save the one-time charge to stock based compensation as set out above, fees incurred for professional fees and general and administrative expenses increased period over period in both the three month and nine months comparative periods as the Company increased its level of operations. During the most recent three and nine month periods the Company expensed $45,236 and $135,728 as depreciation and amortization expense, with no similar comparative expense in the comparative periods ended July 31, 2014. In addition, during the prior three and nine month periods ended July 31, 2014, the Company recorded other expenses of $nil and $4,829,408 respectively as the result of a loss on the settlement of certain indebtedness, with no similar losses in the current three and six month periods ended July 31, 2015. Interest expenses increased period over period as the Company was required to take on additional loans from third parties to carry out operations. The Company recorded net losses of $273,649 and $763,588 for the three and nine months ended July 31, 2015 as compared to $164,823 and $14,701,853 in the three and nine month periods ended July 31, 2014.

 

Working Capital

 

		July 31, 2015				July 31, 2014				Difference
Current Assets		$	70,619			$	18,246			$	52,373
Current Liabilities		$	2,337,819				1,374,652			$	863,167
Working Capital		$	(2,267,200	)		$	(1,356,406	)		$	(810,794	)

  

Cash Flows

		Nine Months Ended July 31, 2015				Nine Months Ended July 31, 2014
Net Cash (Used) in Operating Activities		$	(220,799	)		$	(209,926	)
Net Cash (Used) in Investing Activities			—				(96,006	)
Net Cash Provided by Financing Activities			226,039				318,490
Net Increase (Decrease) in Cash During the Period		$	5,240			$	12,558

 

Interest Expense

 

Interest expense for the nine months ended July 31, 2015 totaled $48,895 as compared to $33,283 for the nine months ended July 31, 2014. Interest expense in both comparative periods consists primarily of accrued interest on certain outstanding accounts and notes payable.

 

Liquidity and Capital Resources

 

Growth of our operations will be based on our ability to internally finance from operating cash flows, and the ability to raise funds through equity and/or debt financing to increase sales and production. Our primary sources of liquidity are: (i) investor loans; and (ii) financing activities. Our cash balance as of July 31, 2015 is $7,314.

 

Our Company has funded some of its operations through debt financing with related and non-related party transactions.

 

The Company is not aware of any known trends, events or uncertainties which may affect its future liquidity.

 

Critical Accounting Estimates 

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare for financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Going Concern

 

As at July 31, 2015, our Company has a net loss of $763,588 and a combined accumulated deficit of $16,818,961. We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Future Financing

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position.  The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

Off-Balance Sheet Arrangements

 

As of July 31, 2015, we had no off-balance sheet transactions that have had, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Recently Issued Accounting Pronouncements

 

The Company’s management has evaluated all recent accounting pronouncements since the last audit through the issuance date of these financial statements. In the Company’s opinion, none of the recent accounting pronouncements will have a material effect on the financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act").

 

Based on this evaluation, our Principal Executive and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective as of July 31, 2015.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

1.

Quarterly Issuances:

 

None.

 

2.

Subsequent Issuances:

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DICSLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

(a) The following Exhibits, as required by Item 601 of Regulation S-K, are attached or incorporated by reference, as stated below.

Number	Description		Filing
3.01	Articles of Incorporation		Filed with the SEC on January 6, 2009 as part of our Registration Statement on Form S-1.
3.02	Bylaws		Filed with the SEC on January 6, 2009 as part of our Registration Statement on Form S-1.
3.03	Amended Articles of Incorporation		Filed with the SEC on March 22, 2010 as part of our Quarterly Report on Form 10-Q.
4.04	Amended Articles of Incorporation, effective November 18, 2013		File with the SEC on December 31, 2013 as part of our Current Report on Form 8-K.
10.01	Assignment of Exploration Agreement between the Company and Carlin Gold Resources, Inc., dated February 22, 2010		Filed with the SEC on March 4, 2010 as part of our Current Report on Form 8-K.
10.02	Exploration Agreement by and between Carlin Gold Resources, Inc. and Trio Gold Corp dated January 28, 2010		Filed with the SEC on March 4, 2010 as part of our Current Report on Form 8-K.
10.03	Agreement between the Company and St. Elias Mines Ltd. dated April 16, 2010		Filed with the SEC on June 21, 2010 as part of our Quarterly Report on Form 10-Q.
10.04	Revision to Exploration Agreement by and between Carlin Gold Resources, Inc. and Trio Gold Corp dated February 24, 2010		Filed with the SEC on February 15, 2011 as part of our Annual Report on Form 10-K.
10.05	Purchase and Sale Agreement between the Company and Warrior Ventures, Inc. dated March 24, 2011		Filed with the SEC on June 8, 2011 as part of our Current Report on Form 8-K.
10.06	Executive Employment Agreement, dated December 18, 2013 by and between 3DX Industries, Inc. and Roger Janssen		File with the SEC on December 31, 2013 as part of our Current Report on Form 8-K.
10.07	Equipment Purchase Agreement, dated December 18, 2013 by and between 3DX Industries, Inc. and Roger Janssen		File with the SEC on December 31, 2013 as part of our Current Report on Form 8-K.
10.08	Acquisition and Option Agreement, dated October 8, 2013 by and between the Company and Trio Gold Corp.		Filed with the SEC on October 23, 2013 as part of our Current Report on Form 8-K.
10.09	Agreement between the Company and Dragon Resource Holdings Inc. dated November 9, 2012		Filed with the SEC on November 19, 2012 as part of our Current Report on Form 8-K.
16.01	Letter from Robison, Hill and Co. dated December 11, 2014		Filed with SEC on February 18, 2015, as part of our Annual Report on Form 10-K.
31.01	Certification of Principal Executive Officer Pursuant to Rule 13a-14		Filed herewith.
31.02	Certification of Principal Financial Officer Pursuant to Rule 13a-14		Filed herewith.
32.01	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act		Filed herewith.
32.02	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act		Filed herewith.
101.INS*	XBRL Instance Document		Filed herewith.
101.SCH*	XBRL Taxonomy Extension Schema Document		Filed herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document		Filed herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith.

 

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	3DX INDUSTRIES, INC.
Date:  September 21, 2015	By:	/s/  Roger Janssen
	Name:	Roger Janssen
	Title:	Principal Executive Officer Principal Accounting Officer President, and CEO

 

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

 

Date:  September 21, 2015	By:	/s/  Roger Janssen
	Name:	Roger Janssen
	Title:	Director

 

 

Date:  September 21, 2015	By:	/s/  Earl W. Abbott
	Name:	Earl W. Abbot
	Title:	Director