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 April 30, 2016
 
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)
 
360-366-8858
 (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 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 April 30, 2016, 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
17
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
20
ITEM 4.
CONTROLS AND PROCEDURES
20
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
ITEM 1.
LEGAL PROCEEDINGS
21
ITEM 1A.
RISK FACTORS
21
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
21
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
21
ITEM 4.
[MINE SAFETY DISCLOSURES]
21
ITEM 5.
OTHER INFORMATION
21
ITEM 6.
EXHIBITS
22
 
 
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.

 
2

PART I - FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS



   
Page
Financial Statements:
   
   
4
Balance Sheets as of April 30, 2016 October 31, 2015 (Unaudited)
   
     
Statements of Operations
                 for the six months ended April 30, 2016 and 2015 (Unaudited)
 
5
     
Statements of Cash Flows
                for the six months ended April 30, 2016 and 2015 (Unaudited)
 
6
     
Notes to Financial Statements (Unaudited)
 
7 to 16




3

 
3DX INDUSTRIES, INC.
Balance Sheets
(Unaudited)
 
   
April 30,
   
October 31,
 
 
 
2016
   
2015
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
16,138
   
$
19,951
 
Accounts receivable
   
13,660
     
25,110
 
Total current assets
   
29,798
     
45,061
 
 
               
Property and equipment
               
Manufacturing equipment
   
1,392,981
     
1,392,981
 
Furniture and fixtures
   
638
     
638
 
Computer equipment
   
1,005
     
1,005
 
Less accumulated depreciation
   
(359,891
)
   
(260,179
)
Total property and equipment
   
1,034,733
     
1,134,445
 
 
               
Other assets
               
Website development (net of accumulated amortization of $3,326 and $2,889)
   
794
     
1,231
 
Security deposit
   
4,275
     
4,275
 
Total other assets
   
5,069
     
5,506
 
 
               
Total assets
 
$
1,069,600
   
$
1,185,012
 
Liabilities and stockholders' deficit
               
Current liabilities
               
Accounts payable and accrued expenses
 
$
889,351
   
$
732,186
 
Payables to related parties
   
367,415
     
301,870
 
Equipment purchase payable - current portion
   
661,630
     
645,006
 
Accrued compensation - convertible
   
174,000
     
174,000
 
Current portion of notes payable - unrelated party
   
611,478
     
571,095
 
Current portion of convertible notes payable - unrelated party
   
334,185
     
322,966
 
Total current liabilities
   
3,038,059
     
2,747,123
 
 
               
Long-term liabilities
               
Convertible notes payable - related party
   
500,000
     
500,000
 
Total long-term liabilities
   
500,000
     
500,000
 
 
               
Total liabilities
   
3,538,059
     
3,247,123
 
 
               
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 April 30, 2016 and at October 31, 2015
   
37,461
     
37,461
 
Additional paid-in capital
   
14,931,530
     
14,931,530
 
Accumulated deficit
   
(17,437,450
)
   
(17,031,102
)
Total stockholders' deficit
   
(2,468,459
)
   
(2,062,111
)
 
               
Total liabilities and stockholders' deficit
 
$
1,069,600
   
$
1,185,012
 



The accompanying notes are an integral part to these unaudited financial statements.  
4

3DX INDUSTRIES, INC.
Statements of Operations
 
 
 
For the Three Months Ended
   
For the Six Months Ended
 
 
 
April 30,
   
April 30,
 
 
 
2016
   
2015
   
2016
   
2015
 
 
                       
Revenue
 
$
98,697
   
$
59,130
   
$
186,759
   
$
168,633
 
Cost of goods sold
   
2,295
     
8,207
     
11,692
     
32,090
 
Gross profit
   
96,402
     
50,923
     
175,067
     
136,543
 
 
                               
Operating expenses
                               
Depreciation and amortization
   
50,075
     
44,735
     
100,149
     
90,492
 
Professional services
   
11,980
     
68,805
     
39,846
     
137,152
 
General and administrative expenses
   
170,275
     
184,344
     
387,570
     
376,716
 
Total operating expenses
   
232,330
     
297,884
     
527,565
     
604,360
 
 
                               
Other income (expense)
                               
Interest expense
   
(26,687
)
   
(6,457
)
   
(53,850
)
   
(22,122
)
Total other (expense)
   
(26,687
)
   
(6,457
)
   
(53,851
)
   
(22,122
)
 
                               
Net loss
 
$
(162,615
)
   
(253,418
)
 
$
(406,348
)
 
$
(489,939
)
 
                               
Net loss per common share -
                               
basic and diluted
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.01
)
 
                               
Weighted average number of common
                               
shares outstanding
   
37,461,409
     
37,461,409
     
37,461,409
     
37,461,409
 
 
 
The accompanying notes are an integral part to these unaudited financial statements.   
5

3DX INDUSTRIES, INC.
Statements of Cash Flows
(Unaudited)
 
 
 
For the Six Months Ended
 
 
 
April 30,
 
 
 
2016
   
2015
 
Cash flows from operating activities:
           
Net loss
 
$
(406,348
)
 
$
(489,939
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization expense
   
100,149
     
90,492
 
Changes in operating assets and liabilities
               
(Increase) decrease in accounts receivable
   
11,450
     
(12,514
)
(Increase) decrease in prepaid expenses
   
-
     
1,614
 
Increase (decrease) in accounts payable
   
152,940
     
184,132
 
Increase (decrease) in accounts payable - related party
   
65,545
     
71,810
 
Increase (decrease) in accrued interest
   
51,951
     
16,936
 
    Net cash used in operating activities
   
(24,313
)
   
(137,469
)
                 
Cash flows from investing activities:
               
Equipment purchases
   
-
     
-
 
Website development
   
-
     
-
 
    Net cash used in investing activities
   
-
     
-
 
                 
Cash flows from financing activities:
               
Proceeds from third party borrowing
   
20,500
     
193,000
 
Repayments on third party borrowing
   
-
     
(52,472
)
    Net cash provided by financing activities
   
20,500
     
140,528
 
 
               
Increase (decrease) in cash
   
(3,813
)
   
3,059
 
Cash - beginning of period
   
19,951
     
2,074
 
Cash - end  of period
 
$
16,138
   
$
5,133
 
Supplemental disclosures of cash flow information:
               
Interest paid
 
$
2,500
   
$
7,988
 
Income taxes paid
 
$
-
   
$
-
 
 
               
 
The accompanying notes are an integral part to these unaudited financial statements.
6

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
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.
  
Going Concern
 
The Company has incurred net losses since inception, and as of April 30, 2016 had an accumulated deficit of $ 17,437,450 and had negative working capital of $3,008,261. 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
 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments and other short-term investments with a maturity date of three months or less, when purchased, to be cash equivalents.

Property and Equipment
 
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
 
In June 2014, the Company commenced testing its equipment and began producing prototypes. Depreciation expense classified to operations for the six month periods ended April 30, 2016 and 2015 amounted $99,712 and $89,825, respectively.

Long-Lived Assets
 
The Company accounts for its long-lived assets in accordance with Accounting Standards Codification ("ASC") Topic 360-10-05, "Accounting for the Impairment or Disposal of Long-Lived Assets." ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.
7

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Fair Value of Financial Instruments
 
Pursuant to ASC No. 820,  " Fair Value Measurements and Disclosures, "  the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of April 30, 2016. The Company's financial instruments consist of accounts payables and notes and loans payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of the respective instrument.

Loss Per Share

The company follows the provisions of ASC Topic 260,  Earnings per Share .  Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.  Basic and diluted losses per share are the same as all potentially dilutive securities are anti-dilutive.

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock or conversion of notes into shares of the company's common stock that could increase the number of shares outstanding and lower the earnings per share of the company's common stock.  This calculation is not done for periods in a loss position as this would be antidilutive.  For the six months ended April 30, 2016 and 2015, respectively, the Company has recorded a net loss and therefore we have not presented diluted earnings per share.
 
Convertible Debt Instruments
 
If the conversion features of conventional debt instruments provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature ("BCF"). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 "Debt with Conversion and Other Options." In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to operations over the life of the debt using the effective interest method. The Company was not required to record any BCF's on any of the convertible debt it issued during the six month period ended April 30, 2016.

Issuances Involving Non-Cash Consideration
 
All issuances of the Company's stock for non-cash consideration have been assigned a dollar amount equaling the market value of the shares issued on the date the shares were issued for such services. The non-cash consideration received pertains to officer's compensation and consulting services.
8

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation
 
The Company accounts for stock-based compensation under Accounting Standard Codification Topic 505-50, "Equity-Based Payments to Non-Employees." This topic defines a fair-value-based method of accounting for stock-based compensation. In accordance with the Topic, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using Binomial or Black-Scholes option-pricing models, whereby compensation cost is the excess of the fair value of the award as determined by the pricing model at the grant date or other measurement date over the amount that must be paid to acquire the stock. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.

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.
 
Recent Accounting Pronouncements
 
The Company's management has evaluated all recent accounting pronouncements since the last financial report and 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.
 
9

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements

NOTE 3 - MINING CLAIMS
 
McNeil Claims, Canada
 
On March 24, 2011 the Company signed an agreement with Warrior Ventures, Inc. ("Warrior"), a private company, to acquire 100% of the McNeil Gold Property. The McNeil property is located within the Abitibi Greenstone belt, approximately 30 miles southeast of Timmins, Ontario, Canada and approximately 35 miles west of Kirkland Lake, Ontario, Canada.  On October 8, 2013, the Company entered into an agreement with Trio Gold Corp. ("Trio") to assign 100% of its claims in the McNeil property, subject to a 5% net smelter royalty, to Trio once Trio has incurred exploration and administrative costs totaling $5,000,000 (CDN) based upon the following schedule:
 
On or before December 31, 2015 $ 500,000
On or before December 31, 2017 $2,000,000
On or before December 31, 2019 $2,500,000

Trio failed to perform under the terms of our agreement and the assignment agreement was terminated.

During fiscal 2016 the Company was required to make a minimum lease payment on the McNeil Claims.  As a result of failure to meet minimum expenditure requirements on the property, the claims are currently in default.

Rodeo Creek Project, Nevada
 
On February 22, 2010, the Company entered into an agreement with Carlin Gold Resources, Inc., ("Carlin") in which Carlin assigned the Company all of its rights, title, and interest in an exploration agreement between it and Trio. The assigned exploration agreement was dated January 28, 2010.  Trio leased and had an option to purchase a 100% interest in 29 unpatented lode mining claims located in Nevada within the Carlin Gold Trend (the "Claims"). The Claims are subject to a 1.5% net smelter return ("NSR").
 
In December 2014, the Company notified Trio of its intent to terminate its agreement on the Rodeo Creek Property. The Company will have no further interest in this project. The Company has earned a 2% Net Smelter Royalty on the property, however such NSR has not been formally recorded as at the date of this report.

NOTE 4 - 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 October 31, 2015 totaled $519,752 (October 31, 2015 - $515,528) of which the accrued interest of $17,659 was classified as a short-term liability and the $500,000 was classified as a long-term liability. During the six months ended April 30, 2016, the accrued interest of $4,224 ($4,142 – April 30, 2015) was charged to operations. The Company has not paid any accrued interest.
10

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
 
NOTE 5 - 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 a 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.
 
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 fiscal year ended October 31, 2015, the Company paid $60,461, of which $52,472 was applied to the principal and $7,989 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 April 30, 2016 in the total remaining amount of $661,630 (October 31, 2015 - $645,006).
 
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 April 30, 2016 and October 31, 2015 totaled $1,392,981.
11

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 6 - NOTES PAYABLE – UNRELATED PARTY
 
 
(1)
Third party convertible promissory note
 
An unrelated third party 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 April 30, 2016 amounted to $26,877 (October 31, 2015 - $25,630). As per the terms of the agreement, the Company accrued interest of $1,247 during the six months ended April 30, 2016 and was charged to operation.

 
(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 fiscal year ended October 31, 2015, the Company paid $60,461, of which $52,472 was applied to the principal and $7,989 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.

 
(3)
Lender 1 
 
 
a.
5% various notes payable
 
Balance, October 31, 2014
 
$
223,478
 
Additional: Principal
   
46,500
 
Repayment: Principal
   
(5,000
)
Accrued interest:
   
13,375
 
Balance, October 31, 2015
   
278,353
 
Additional: Principal
   
20,500
 
Accrued interest:
   
6,804
 
Balance, April 30, 2016
 
$
305,657
 
During the six month period ended April 30, 2016, the Company received an additional $20,500 in loans from the aforementioned party which is assessed interest 5% per annum and mature at various dates through July 1, 2018. During the six months ended April 30, 2016 the Company accrued a further $6,804 in interest.


 
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 April 30, 2016 amounted to $168,781 (October 31, 2015 - $165,041). Accrued interest charged to operation for the six months ended April 30, 2016 and 2015 totaled $3,740 and $3,719, respectively.

12

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 6 - NOTES PAYABLE – UNRELATED PARTY (continued)
 
 
(4)
Lender 2 
 
Balance, October 31, 2014
 
$
67,855
 
Additional: Principal
   
 
Accrued interest
   
3,250
 
Balance, October 31, 2015
   
71,105
 
      Accrued interest
   
1,620
 
Balance, April 30, 2016
 
$
72,725
 
 
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 six months ended April 30, 2016 and 2015 amounted to $1,620.
 
 
(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.
 
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
   
1,459
     
5,836
 
Balance, October 31, 2015
   
26,459
     
105,836
 
      Accrued interest
   
1,246
     
4,986
 
Balance, April 30, 2016
 
$
27,705
   
$
110,822
 
13

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 6 - NOTES PAYABLE – UNRELATED PARTY (continued)

 
(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.

During the fiscal year ended October 31, 2015, the Company paid $11,472, of which $8,972 was applied to the principal and $2,500 applied to interest. The Company has met its payment obligations up to August 2015 and is in default of its current payment obligations.

The balance due on this obligation at April 30, 2016 is $233,069 (October 31, 2015 - $221,637).  
 
During the fiscal year ended October 31, 2015 in connection with the aforementioned equipment purchase, the Company capitalized the equipment (gross) at October 31, 2015 in an amount totaling $122,465. The EFA is personally guaranteed by the Company's President, Mr. Roger Janssen.
 
NOTE 7 - STOCKHOLDERS' EQUITY

For the six months ended April 30 2016 and for the year ended October 31, 2015

No Shares were issued during the period.
For the year ended October 31, 2014
 
In June 2014, a third party holding a convertible promissory note assigned $1,000 of accrued compensation due it to a third party, who converted the $1,000 into 1,000,000 shares of the Company's common stock at a conversion price of $0.001 per share. The Company did not recognize any gain or loss on the conversion.
 
On February 19, 2014, the Company issued 4,880,000 shares of its common stock in exchange for the cancelation of $48,880 of debt due an unrelated third party The Company recognized a loss from the extinguishment of the debt totaling $4,831,200, which was charged to operations.
 
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 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.
 
14

3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements
 
NOTE 8 - 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 April 30, 2016 amounted to $367,415 (October 31, 2015 - $301,870), which is included in the balance of other payables – related parties as reflected in the accompanying balance sheet. The $367,415 is net of $24,455 that was actually paid to Mr. Janssen during the six month period ended April 30, 2016.
  
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 shall pay a security deposit of $700 and agreed to a monthly rental fee of $350 with the first month payable upon signing. The Company did not make any payments under this agreement in the period ended April 30, 2016 and October 31, 2015 and has accrued a total of $6,020 and $3,710, respectively, as due and payable.

On February 29, 2016, the Company extended a lease agreement originally entered into in January 2014 for a term of five years expiring February 28, 2021.  Minimum annual lease payments under the extended lease are as follows:

10 months ending October 31, 2016: $43,800
Year ending October 31, 2017: $52,560
Year ending October 31, 2018: $53,420
Year ending October 31, 2019: $54,452
Year ending October 31, 2020: $55,484
Year ending October 31, 2021: $9,276
 
NOTE 9 - SUBSEQUENT EVENTS

(a)
On November 23, 2016, the Company and ExOne entered into a title transfer, conditional release and equipment lease agreement where under the Company, notified of its default under the original terms of the agreement and amendments thereto (Note 5 above) effective January 11, 2016, agreed to transfer title of the equipment back to ExOne, agreed to a lump sum payment of $10,000 and agreed to enter into a 24 month lease for the equipment under the following terms:

a) Months 1-3: $5,000.00 per month
b) Months 4-6: $7,500.00 per month
c) Months 7-24: $10,000.00 per month

With each payment being due on the first date of the respective month and subject to a 5% late fee when unpaid within 10 (ten) days of the due date.  Further under the terms of the agreement ExOne has provided a conditional release of all amounts due under the original agreement and amendments thereto.


15

 
3DX INDUSTRIES, INC.
Notes to Unaudited Financial Statements


NOTE 9 - SUBSEQUENT EVENTS (continued)

(b)
On December 20, 2016, a lender of a convertible note with a principal balance of $150,000 (the "Original Note")  (refer to Note 6(3)(b)) entered into an amendment to the terms of that certain note and accrued interest whereby, among other considerations, the conversion price was reduced from $0.10 per share to $0.001 per share.  Subsequently, the lender assigned a total of $40,000 of its principal debt to an arm's length third party who converted a total of $6,000 in principal to 6,000,000 shares of common stock.  The assignee entered into a waiver and release agreement with the Company for the balance of the assigned convertible note payable in the amount of $34,000 on May 30, 2017.

The Company received conversion notices totaling $5,000 in respect of the balance still held under the aforementioned Original Note by the original lender and issued a total of 5,000,000 shares leaving a total balance payable, not including accrued interest, of $105,000 on this note.

(c)
On March 15, 2017, the Company and Santeo entered into a letter agreement to revise the terms of the original March 30, 2015 equipment lease (ref: Note 8 above). Under the terms of the letter agreement, the Company will purchase the manufacturing equipment for a total of $18,000 no later than December 31, 2017, which amount shall also include all accrued and unpaid rental payments, and any interest thereon up to December 31, 2017.  Should the Company be unable to make the required payment as at December 31, 2017, interest of 12% per annum shall apply to any balance outstanding.

(d)
On April 28, 2017, a third-party lender with various amounts outstanding agreed to release and waive a total of $367,170, inclusive of accrued interest thereon, with no further consideration payable.

(e)
On June 15, 2017, a total of 3,000,000 shares originally issued to settle part of convertible note in the amount of $3,000 as discussed in Note 9(b) above were returned to treasury and canceled.

(f)
During the month of June 2017, the Company and the original stakeholder of the McNeil Claims referenced in Note 3 above entered into an assignment agreement whereby the stakeholder acquired the defaulted claims.



16


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 April 30, 2016, we had $16,138 of cash on hand. We incurred operating expenses in the amount of $527,565 during the six months ended April 30, 2016. These operating expenses were comprised of general and administrative expenses, professional fees, management salaries, consulting fees, and other miscellaneous expenses.
 
The commenced revenue generating operations in fiscal 2015 from its primary business in the manufacturing sector. During the six month period we generated gross revenues of $186,759 as compared to $168,633 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 six month periods ended April 30, 2016 as compared to the same periods ended April 30, 2015.
 
Revenues
 
The Company generated $98,697 and $186,759 in gross revenues from operations in the three and six months ended April 30, 2016 and $59,130 and $168,633 in gross revenues in the three and six months ended April 30, 2015.  Associated costs of goods sold in the three and six months ended April 30, 2016 were $2,295 and $11,692 and $8,207 and 32,090 in the three and six months ended April 30, 2015, respectively. Revenues increased during the second fiscal quarter of 2016 as the Company was able to bring on the additional staff required to expand its customer list.   Gross profit for the three and six months ended April 30, 2016 was $96,402 and  $175,067, respectively, as compared to $50,923 and 136,543 in the three and six months ended April 30, 2015.
 
17

Expenses
 
For the three and six months ended April 30, 2016, total operating expenses were $232,330 and $527,565, respectively, as compared to $297,884 and $604,360 for the same periods ended April 30, 2015. The substantial decrease in expenditures for the six months ended April 30, 2016 as compared to the same six month period in 2015 relates to a reduction professional fees period over period. During the most recent three and six month periods the Company expensed $50,075 and $100,149 as depreciation and amortization expense as compared to $44,735 and $90,492 in the prior comparative three and six months ended April 30, 2015. General and administrative expenses over the three and six months ended April 30, 2016 were $170,275 and $387,570 as compared to $184,344 and $376,716 in the compartive three and six months of 2015.  Professional fees period over period experienced a substantive decline from $68,805 and $137,152 in the three and six months ended April 2015 to only $11,980 and $39,846 in the current three and six months ended April 30, 2016.  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 $162,615 and $406,348 for the three and six months ended April 30, 2016 as compared to $253,418 and $489,939 in the three and six month periods ended April 30, 2015.
 
Working Capital
 
 
 
April 30,
2016
   
October 31,
2015
   
Difference
 
Current Assets
 
$
27,798
   
$
45,061
   
$
(17,263
)
Current Liabilities
 
$
3,038,059
     
2,747,123
   
$
290,936
 
Working Capital
 
$
(3,010,261
)
 
$
(2,702,062
)
 
$
(308,199
)
   
Cash Flows
 
 
Six Months Ended
April 30, 2016
   
Six Months Ended
April 30, 2015
 
Net Cash (Used) in Operating Activities
 
$
(24,313
)
 
$
(137,469
)
Net Cash (Used) in Investing Activities
   
     
)
Net Cash Provided by Financing Activities
   
20,500
     
140,528
 
Net Effect of Foreign Currency Translation
   
     
 
Net Increase (Decrease) in Cash During the Period
 
$
(3,813
)
 
$
3,059
 
 
Interest Expense
 
Interest expense for the six months ended April 30, 2016 totaled $53,850 as compared to $22,122 at April 30, 2015. 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 April 30, 2016 is $16,138.
 
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.
 
18

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
 
The Company has incurred net losses since inception, and as of April 30, 2016 had an accumulated deficit of $ 17,437,450 and had negative working capital of $3,008,261. 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.
 
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 April 30, 2 016, 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.
 
19

Recently Issued Accounting Pronouncements
 
The Company's management has evaluated all recent accounting pronouncements since the last financial report and 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 April 30 , 2016 .
 
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.
20

 
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
 
 
 
 
31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14
 
Filed herewith.
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14
 
Filed herewith.
32.1
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
 
Filed herewith.
32.2
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
 
Filed herewith.
 
21

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:   January 17, 2018
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: January 17, 2018
By:
/s/  Roger Janssen
 
 
Name:
Roger Janssen
 
Title:
Director
 
 
 
Date:  January 17, 2018
By:
/s/  Earl W. Abbot
 
 
Name:
Earl W. Abbot
 
Title:
Director
  

22
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