FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003, OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _____.
Commission file number: (333-42640)
Endo Networks, Inc.
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(Exact name of registrant as specified in its charter)
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(Former name of registrant if changed since last report)
Nevada 75-2882833
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(State of Incorporation) (Tax ID No.)
2624 Dunwin Drive, Unite #3, Mississauga, Ontario, Canada L5L3T5
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(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code: 905 820 8800
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 Act of 1934 during the past
12 months and (2) has been subject to such filing requirement for the past 90
days.
X YES NO
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Aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 30, 2003
$ 911,773
Shares of common stock outstanding at September 30, 2003
12,568,866
PART I.
ITEM 1 DESCRIPTION OF BUSINESS
OVERVIEW
Endo Networks Inc. helps businesses acquire qualified new customers and
profitably build sales with existing customers.
We use interactive technology like touchscreen kiosks, handheld computers,
wireless and websites, digital TVs and background audio, combined with
promotional marketing tactics to filter large numbers of consumers, to find
highly qualified prospects, and even precondition them for the sales process.
Our services can be deployed within a businesses own retail environment, to
increase sales with their own customer base by increasing frequency of visit
and/or average spend with individual customers (onsite CRM), or they can be
deployed within the community, i.e. within a partner retailer or at a home or
trade show, to find and acquire qualified new customers.
Our services can also be deployed against employees or a business's sales
channel, to achieve increased sales and improved profitability through better
channel performance.
Our solutions are:
- Permission based
- Easily integrated with legacy systems
- Highly-scaleable, easily tested
- Focused on immediate results
- Very measurable
- Real-time or near real time
- Conducive to brand partnerships
Our role is not to replace incumbent agencies/suppliers, but to integrate and
unlock untapped value and potential from existing initiatives, thereby
delivering substantial incremental value.
Our areas of expertise include: web, CDROM, kiosk, handheld, wireless, CRM, ERM,
loyalty, promotional marketing, direct marketing, point of sale, market
research, survey, incentive, sampling, and field and event marketing.
Our client base includes specialty retail, general retail, food service,
automotive, alcohol, tobacco, financial, energy, consumer packaged goods,
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entertainment, government, manufacturing, amateur sports, professional sports,
and telecommunications in both the United States and Canada.
The corporate head office is located at 2624 Dunwin Drive, Unit 3, Mississauga,
Ontario, Canada, 20 minutes from Toronto and 60 minutes from Buffalo.
Endo Networks was incorporated in Ontario, Canada on January 30, 2001.
Conceptual and software development was ongoing prior to this date for
approximately two years by company founders. Endo Networks Inc. (Canada) was
acquired by Discount Mortgage Services Inc. (Texas) in September, 2001. Discount
Mortgage Services Inc. (Texas) underwent a name change to Endo Networks, Inc.
(US) in November, 2001. Endo Networks, Inc. (US) was redomiciled to Nevada in
December, 2002.
As of December 2003 Endo Networks had 18 total employees, 12 full-time.
PRODUCTS/SERVICES/MARKETS
Deployment Locations
Endo Networks deployments are located online and in high-traffic public areas
including:
- Events (i.e. consumer and trade shows)
- Retail stores
- Restaurants
- Government community centers
- Office towers
- Campus
- Malls
- Movie Theatres
Endo Networks deployments utilize any available form of connectivity for remote
management and content delivery.
APPLICATIONS
Endo Networks deployments are used to deliver a combination of third party and
proprietary applications in the following categories:
ENDOVIP - Customer database, survey, messaging, rewards tool.
ENDOPRO - Employee/sales channel database, survey, messaging, quiz, rewards
tool.
ENDOVIP/PRO PLUG-INS - engaging add-ons to EndoVIP or EndoPRO (can also be
standalone) including PlayerPoints, Trivia, Picture Postcard, Video Riff,
Casino, Spin and Win, Enter to Win, Green Screen/Chromakey, Vote, Jukebox,
Compare, Survey, Apply, ID Reader, Hotseat, Feature, Recommender, About Town,
POS Connector, and Surf.
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ENDOREGISTER - Sports or Event registration solution
ENDOPHOTOID - Photo ID generation solution
ENDONOS - Remote network management tool.
ENDOTV - In-house digital signage system using any type of TV or monitor.
ENDORADIO - In-house background audio system.
DEPLOYMENT CATEGORIES
Network deployments fall into one of two additional categories: Paid or Placed.
Paid Deployments
In a Paid deployment, we receive full payment with margin for every product and
service we provide, either on a recurring monthly basis (i.e. lease or rent), or
one-time (i.e. purchase). We generally also receive a commission if we bring any
cost-recovery to the deployment, i.e. an outside brand that pays to utilize some
of the network capacity in synergy with the primary client. Retail, Event and
Government deployments are all generally Paid deployments. While Paid
deployments offer the stability of one payment partner, they may offer less
margin for Endo Networks long term, and may require potentially lengthy
approval, pilot and expansion stages.
Placed Deployments
In a Placed deployment, Endo Networks is responsible for the cost of the
deployment, and recovers that cost with margin from a "coalition" of
stakeholders sharing the network resource. Generally, the host location receives
the base deployment at no charge providing a certain level of deployment
performance. Revenue is generated through recurring charges such as advertising
or application sales commission, transactional charges such as lead generation,
instant gift certificate or jukebox, and one-time charges such as custom
development or software license.
Stakeholders include the host location, outside brands, and Endo Networks.
The host location receives a basic package of CRM and promotional services at no
charge, but may also subscribe to several step-up services in the same
categories.
Outside brands may be:
- Brand advertisers utilizing our deployment to generate sales leads or
brand awareness, or actually conduct "e-commerce"style transactions.
- 3rd party applications which we re-sell into the location to either
the location or the guests within the location.
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Endo Networks utilizes the deployment to promote our own services, to reach more
potential host locations and more outside brands, and to drive use of the
deployment for increased revenue.
NETWORK ACCESS
In the short and medium term, network access is accomplished through a network
of one or more interactive freestanding kiosks, wireless handheld computers, and
PC workstations. The actual configuration of devices varies with the type of
deployment.
In the long term, we will provide network access via wireless local area
networking technology to the user's own device.
COMPETITORS
Endo Networks is a true convergence business - our business opportunity has been
created by (and is driven by) the continued convergence of applications and
technology onto a PC platform, enabling us to provide value to an almost endless
number of applications through effective sharing of the network resource. This
also creates a substantial number of non-direct competitors, i.e. the
non-aggregated initiatives currently providing a limited service in any of our
target categories.
While Endo has not encountered a competitor with our unique approach to
aggregation and integration we must assume that there may be direct competitors
operating on a regional basis. The enormous market opportunity means there is
ample room for direct competition, which can assist in growing the market
segment.
It is our strategy to pursue opportunities for non-exclusive partnerships
wherever appropriate with initiatives which might currently be categorized as
competitors.
As direct competitors emerge, it will be the continual improvement of our
service offering and the continual strengthening of our network of relationships
that will entrench us with our existing clients, and make our service
increasingly more attractive to new potential clients. This will require our
employees to be "out of the box" thinkers, exceedingly synergy-minded. It will
also require a continual investment in research and development. We are pursuing
several forms of legal and contractual hardware, software, process, brand and
relationship protection to further strengthen our competitive position.
SUPPLIERS
Effective outsourcing is a key enabler of the rapid growth of Endo Networks.
We have selected hardware partners based on their ability to scale production
and delivery of physical network components to hundreds or even thousands of
units monthly. We have selected application partners with careful attention to
their infrastructure capabilities to ensure they are scalable. We are currently
evaluating regional, national and international service networks based on their
ability to provide a reliable service level, and integrate with our network
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management systems. And we have selected our network management systems and
software based on scalability and functionality.
FINANCING
Operations
Current operations are financed out of cash flow, and are ample to continue
operations at the current level of growth. Investment in operations to enable
enhanced growth will be commensurate with new revenues, although additional
sources of funding to accelerate growth will be explored.
Network Infrastructure
Endo Networks currently has access to all necessary financing for deployment of
network infrastructure. As projects move from pilot to roll-out, there will be
opportunities for new financing.
CUSTOMERS
Our focus has been primarily on securing business in Retail, Food Service and
Event & Field Marketing, and secondarily on bringing additional brands into
these projects as sponsors. Projects are selected based on their ability to
expand post-pilot - therefore, focus has been on large chains and franchises, or
on particular categories where all the locations are similar (i.e. Pubs). Often,
a customer will participate with us at several different levels, i.e. as a host
location and as an outside brand partner on a deployment into another host
location with an attractive customer demographic or other synergies. The status
of each of these categories is discussed below:
Retail & Food Service
This year, our primary focus was on refining the functionality and
consumer-resonance of our offering in the retail channel. Of particular note is
the excellent performance of our new EndoVIP application, and the Casino
plug-in. Next year we expect to see expansion in this category based on these
results.
Event and Field Marketing
We have an increasing number of active projects in this category. Also, this
year we greatly expanded our software and hardware toolset to meet client needs
in this category. Further, we demonstrated the ROI of adding technology to an
event or field marketing execution to increase efficiency and deliver greatly
enhanced results.
Other Deployments
This year also saw Endo deployments on University campuses, in Malls and in
hockey arenas.
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Sponsors
Strong sponsorship development in the key categories of Automotive, Financial,
Energy, Alcohol and Tobacco should drive results in 2004.
RESEARCH AND DEVELOPMENT
We continue to invest substantially in research and development, a portion of
which we are able to invoice through to clients on various projects. We are
generally following an annual cycle of increased R&D investment in the first
quarter of the year, with more focus on client development the other three
quarters.
This year, we both developed a substantial amount of new applications to meet
demonstrable client requirements, and further refined existing applications, as
described above.
ACQUISITION STRATEGY
Not applicable.
ITEM 2 DESCRIPTION OF PROPERTY
HARDWARE RELATED TO DEPLOYMENTS
Endo Networks currently leases infrastructure equipment (including servers,
monitors, TVs, touchscreens, Internet appliances, sound systems, switches,
etc.).
SOURCE CODE
Endo Networks currently owns source code as follows:
Proprietary applications including interactive in-field, interactive online,
audio, video, wireless, content management, network management, sports
registration and various eCommerce applications, as well as software related to
integrating third party applications such as POS.
ITEM 3 LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
ITEM 4 SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS None.
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PART II.
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a. Market Information.
The Company's common stock is currently traded on the NASDAQ bulletin board. The
following were the high and low sales prices for each quarter for which the
Company's stock traded:
Period High Low
Calendar Year 2001 4th Quarter $1.25 $0.30
Calendar Year 2002 1st Quarter $1.01 $0.60
2nd Quarter $1.00 $0.30
3rd Quarter $0.75 $0.30
4th Quarter $0.51 $0.20
Calendar Year 2003 1st Quarter $0.51 $0.20
2nd Quarter $0.51 $0.20
3rd Quarter $0.51 $0.20
There are approximately one hundred (100) shareholders.
c. Dividends
Registrant has not paid a dividend to the holders of its common stock and does
not anticipate paying dividends in the near future.
e. Warrants/Options At
September 30, 2003, the Registrant had 220,000 options outstanding exercisable
at $0.50, expiring on September 30, 2004.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SUMMARY OF 2003
Revenues for the year ended September 30, 2003 were $909,518 compared with
$792,482 for the previous year and cost of sales for the same periods were
$463,718 and $379,328 respectively. Sales increased by 15% because we are
continuing to develop contacts and generate business. In the year ended
September 30, 2003, our revenues consisted of service and of product deployments
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which caused us to have cost of sales of $463,718 or 51% compared with $379,328
or 48% of sales the prior year. Although our sales increased our expenses
decreased to $466,820 from $572,941 the prior year giving us a small loss of
$(20,905) for the current fiscal year compared with a loss of $(159,787) the
prior fiscal year.
DEPLOYMENTS
Continued to prove the attractiveness of an aggregated model to host locations
Expanded our application suite
Generated substantial revenue from Paid deployments in Retail & Food Service,
Event & Field Marketing. Developed strong Sponsor relationships.
APPLICATIONS
Expanded our expert understanding of how to customize applications for touch and
public use. Developed a suite of online applications integrated with in-field
applications. Expanded our expert understanding of how to aggregate applications
for maximum effectiveness. Integrated PocketPC operating system and devices.
Expanded TabletPC operating system integration.
RESEARCH AND DEVELOPMENT
Developed and field-tested several different versions of in-field and online
applications, successfully determining the correct configuration for various
different retail & food service and event and field marketing deployments.
ACQUISITION
Not applicable
OPERATIONS
Funded operations out of revenue. Streamlined operations to reduce costs.
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DISCUSSION OF 2004
FIRST CALENDAR QUARTER 2004
Our primary focus for the first calendar quarter of 2004 will be on new
business. New business with existing customers including Energy, Alcohol, Duty
Free, Mall, Food Service and Automotive. New business with new customers
including Telecom, Financial, Tobacco, Office Towers, Media and Casino.
A secondary focus will be on the further integration of the various software
applications developed throughout 2003 into an rapid deployment toolkit, even
more easily customized to meet common client requirements. This will increase
speed and margin on deployments.
SECOND CALENDAR QUARTER 2004
The second calendar quarter of 2004 will see an emphasis on execution, as we
expect to have a number of new projects active during this time period. We will
also begin an marketing campaign to increase general awareness of who we are,
and what we do. Some of this campaign will be targeted towards US opportunities.
THIRD QUARTER 2004
The third quarter of 2004 will see a balance between execution, business
development and application development.
FOURTH QUARTER 2004
We expect the last quarter of 2004 to see an increased emphasis on execution, as
winter programs move to execution. Marketing activities will continue apace.
Anticipated number of employees by year end 2004 is approximately 25.
Endo Networks Inc. will provide an annual report including audited statements on
request. Endo Networks Inc. files quarterly reports with the SEC.
Public may read and copy any materials filed by Endo Networks with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Public may abtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This discussion may contain certain "forward-looking" statements as such term is
defined in the Private Securities Litigation Reform Act of 1995 and information
relating to the Company and its subsidiaries that are based on the beliefs of
the Company's management as well as assumptions made by and information
currently available to the Company's management. When used in this release, the
words "anticipate," "believe," "estimate," "expect" and "intend" and words or
10
phrases of similar import, as they relate to the Company or its subsidiaries or
Company management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitations, changes or anticipated changes
in regulatory environments, competitive factors, general economic conditions,
customer relations, relationships with vendors, the interest rate environment,
governmental regulation and supervision, seasonally, distribution networks,
product introductions and acceptance, technological change, changes in industry
practices, onetime events and other factors described herein and in other press
releases to the public or filings made by the company with the Securities and
Exchange Commission, the ability to secure partnership or joint-venture
relationships with other entities, the ability to raise additional capital to
finance expansion, and the risks inherent in new product and service
introductions and the entry into new geographic markets. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended. The Company does not intend to update these forward-
looking statements. For further information, which could cause actual results to
differ from the Company's expectations, as well as other factors, which could
affect the Company's financial statements, please refer to the Company's report
filed with the Securities and Exchange Commission.
Endo Networks Inc.
(905) 820 8800 www.endonetworks.com
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Certified Public Accountant is attached hereto.
ITEM 8 CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Board of Directors engaged Malone & Bailey, PLLC as auditor for the Company
whereas Charles E. Smith audited the financial statements the prior year. As
reflected in an 8-K filed for the change in accountants, there were no
disagreements with the prior auditor on accounting or financial disclosure
issues, and there have been no disagreements with the current auditor on
accounting or financial disclosure issues.
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PART III.
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following persons serve as directors and officers of Registrant:
Peter B. Day President, Secretary and Director
Served since November 2001 and
expires at the next annual meeting
Christopher R. Skillen Director
Served since December 2003 and
expires at the next annual meeting
CHRISTOPHER R. SKILLEN, DIRECTOR
Mr. Skillen received a BSc.major Computer Science from Sir George Williams
University. Mr. Skillen held an number of executive positions with Crowntek and
founded The Crowntek Business centers. Chris was the CEO at Telepanel Systems
Inc. ,a public company, from 1988 until 2000. NASDAQ and TSE listed company. He
is currently President of Skillen & Skillen a consultancy to technology
startups.
Mr. Skillen serves as a director on 4 Canadian companies.
PETER B. DAY - PRESIDENT, SECRETARY AND DIRECTOR Mr. Day attended the University
of Toronto from 1989 to 1992 studying English, History and Psychology and
attended Humber College in 2000 studying Telecommunications. Mr. Day's relevant
work experience follows: General Manager and Partner in Down Home Satellite
Programming, Inc. from 1996 to 1998. Marketing Director and General Manager for
Galaxy Satellite Programming, Inc. from 1998 to 2000. Vice President Streamline
Media, Inc., a computer software and web design company from 2000 to 2002. Vice
President and General Manager for Endo Networks, Inc. from 2000 to 2002,
President for Endo Networks, Inc. 2002 to present.
WAYNE HOLM - DIRECTOR
Mr. Holm attended Simon Frazier University from 1965 to 1970 and played in the
Canadian Football League from 1969 to 1974. Mr. Holm's recent work experience
follows: In 1989 he co-founded Spectra Food Corporation in 1989 and became Vice
President. Vice President and Co-CEO for The Spectra Group of Great Restaurants,
Inc. from 1993 to 1997. Chairman of the Board for The Spectra Group of Great
Restaurants, Inc. from 1997 to 2001, and became President and Chief Operating
Officer in 2001. Mr. Holm also became the Senior Vice President for Branding and
Concept Development for Cara Operations Limited in 2000.
ITEM 10 EXECUTIVE COMPENSATION
The Company paid no compensation to its officers and directors in the fiscal
year ended September 30, 2003. The Company has no retirement or stock option or
bonus plan.
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ITEM 11 SECURITY OWNERSHIP OF MANAGEMENT AND BENEFICIAL OWNERS
Set forth below is the direct ownership of Registrant's common Stock by
management and any owner of 5% or more of Stock of Registrant.
Title of Name and address Amount of shares % of class
Securities of owner owned
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Common Peter B. Day 4,577,500 36.4%
2624 Dunwin Drive, Unit #3
Mississuaga, Ontario L5L 3T5
Common Dean T. Hiebert 2,432,500 19.3%
2624 Dunwin Drive, Unit #3
Mississuaga, Ontario L5L 3T5
Common Lynn Management, LLC 1,000,000 * 8.0%
709-B West Rusk #580
Rockwall, Texas 75087
Common All Officers, Directors & 8,010,000 63.7%
Beneficial Holders as a Group
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV.
ITEM 13 EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Included in Part II, Item 8 of this report:
Report of Independent Public Accountant
Balance Sheet as of September 30, 2003
Statement of Operations - Years Ended September 30, 2003 and 2002
Statement of Owners' Equity - Years Ended September 30, 2003 and 2002
Statement of Cash Flows - Years Ended September 30, 2003 and 2002
Notes to the Financial Statements
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(b) The following reports on Form 8-K were filed for the Company during the
year:
On an 8-K dated April 28, 2003 the resignation of William S. Best as a Director
of the Company. As reflected in the body of the 8-K filed for his resignation,
there were no disagreements with him on any matter relating to the Registrant's
operations, policies or practices.
(c) The Company is not filing any exhibits.
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Endo Networks, Inc.
Registrant
By: /s/ Peter B. Day
-------------------
Peter B. Day
Its: President
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
ENDO Networks, Inc.
Mississauga, Ontario, Canada
We have audited the accompanying balance sheet of ENDO Networks, Inc. as of
September 30, 2003 and the related statements of operations, stockholders'
equity, and cash flows and for each the years ended September 30, 2003 and 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ENDO Networks, Inc. as of
September 30, 2003 and the results of its operations and its cash flows for the
year then ended September 30, 2003 and 2002, in conformity with accounting
principles generally accepted in the United States of America.
Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com
January 7, 2004
ENDO NETWORKS, INC.
BALANCE SHEET
SEPTEMBER 30, 2003
ASSETS
Current assets
Cash $ 15,650
Accounts receivable, net of allowance of $26,684 158,224
Prepaid expenses 59,142
------------------
Total current assets 233,016
Property and equipment, net of accumulated depreciation of $217,744 526,237
------------------
TOTAL ASSETS $ 759,253
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 155,676
Accrued expenses 134,110
Capitalized leases - current 156,033
------------------
Total current liabilities 445,819
Capitalized leases - long term 192,880
------------------
Total liabilities 638,699
------------------
Commitments
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000 shares authorized,
12,568,866 shares issued and outstanding 12,569
Additional paid-in capital 292,446
Accumulated deficit (184,461)
------------------
Total Stockholders' Equity 120,554
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 759,253
==================
See accompanying summary of accounting policies
and notes to financial statements.
ENDO NETWORKS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
2003 2002
------------------- ------------------
Revenues $ 909,518 $ 792,482
Cost of revenues 463,718 379,328
------------------- ------------------
Gross profit 445,800 413,154
------------------- ------------------
Operating expense:
Depreciation and amortization 65,885 135,042
General, administrative and selling 400,820 437,899
------------------- ------------------
Total operating expenses 466,705 572,941
=================== ==================
Net loss $ (20,905) $ (159,787)
=================== ==================
Net loss per share:
$ (0.00) $ (0.01)
Basic and diluted ===== ======
Weighted average shares outstanding:
Basic and diluted 12,568,866 12,404,352
=================== ==================
See accompanying summary of accounting policies
and notes to financial statements.
ENDO NETWORKS, INC.
STATEMENTS OF OWNERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
Accumulated
Common stock Additional Other
------------------------------- Paid-in Accumulated Comprehensive Total
Shares Amount Capital Deficit Loss
---------------- ------------- ------------- --------------- --------------- -------------
Balance,
September 30, 2001 12,070,966 $ 12,071 $ 94,222 $ (3,769) $ - $ 102,524
Comprehensive income:
Net loss - - - (159,787) - (159,787)
Foreign currency
translation - - - - - -
-
Comprehensive income: (159,787)
-------------
Common shares issued for
cash 497,900 498 172,916 - - 173,414
-------------- ------------ ------------- ------------- ------------- -------
Balance,
September 30, 2002 12,568,866 12,569 267,138 (163,556) - 116,151
Comprehensive income:
Net loss - - - (20,905) - (20,905)
Foreign currency
translation - - - - - -
-------------
Comprehensive income: (20,905)
-------------
Collection of subscription
receivables - - 25,308 - - 25,308
-------------- ------------ ------------- ------------- ------------- -------------
Balance,
September 30, 2003 12,568,866 $ 12,569 $ 292,446 $ (184,461) $ - $ 120,554
============== ============ ============= ============== ============= =============
See accompanying summary of accounting policies
and notes to financial statements.
ENDO NETWORKS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
2003 2002
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,905) $ (159,787)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 65,882 135,042
Changes in assets and liabilities:
Accounts receivable (88,453) (58,335)
Prepaid expenses (8,437) (10,218)
Parts inventory 12,700 (12,700)
Accounts payable 110,237 20,241
Accrued expenses 48,775 69,084
----------------- -----------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 119,799 (16,673)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of assets (169,449) (282,815)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 25,308 173,414
Proceeds from lease financing 82,367 262,962
Payments on lease financing (61,278) (118,337)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES 46,397 318,039
----------------- -----------------
NET CHANGE IN CASH (3,253) 18,551
Cash, beginning of period 18,903 352
----------------- -----------------
Cash, end of period $ 15,650 $ 18,903
================= =================
See accompanying summary of accounting policies
and notes to financial statements.
ENDO NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
ENDO Networks, Inc. (ENDO) is an interactive media, promotion, application, and
advertising aggregator deploying through wireless capable public access portals
to retail and restaurant locations across North America. ENDO also develops
application software and client controlled media including television and radio.
Cash Equivalents
ENDO considers all highly liquid investment instruments purchased with original
maturities of three months or less when acquired to be cash equivalents.
Revenue Recognition
ENDO recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and
collectibility is probable. ENDO recognizes revenue from the sale of advertising
related products and services like interactive advertising, studio promotion,
and event management as the services are performed. ENDO maintains allowances
for doubtful accounts on all its accounts receivable for estimated losses
resulting from the inability of its customers and others to make required
payments. If the financial condition of ENDO's customers and others were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Management 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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation of furniture and
equipment is calculated on straight-line method over the estimated useful lives
of the assets.
Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. No
impairment losses have been recorded since inception.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax basis of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized.
Loss per Share
The basic net loss per common share is computed by dividing the net loss
applicable to common stockholders by the weighted average number of common
shares outstanding.
Diluted net loss per common share is computed by dividing the net loss
applicable to common stockholders, adjusted on an "as if converted" basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the year ended September 30, 2003, potential dilutive securities
had an anti-dilutive effect and were not included in the calculation of diluted
net loss per common share. These securities consisted of 220,000 options at
September 30, 2003.
Recently Issued Accounting Pronouncements
ENDO does not expect the adoption of recently issued accounting pronouncements
to have a significant impact on ENDO's results of operations, financial position
or cash flow.
Stock-Based Compensation
ENDO accounts for stock-based compensation under the intrinsic value method.
Under this method, ENDO recognizes no compensation expense for stock options
granted when the number of underlying shares is known and exercise price of the
option is greater than or equal to the fair market value of the stock on the
date of grant.
Foreign Currency
ENDO has the U.S. dollar designated as its functional currency. Financial
statements are remeasured to U.S. dollars for reporting purposes using current
rates of exchange for monetary assets and liabilities and historical rates of
exchange for nonmonetary assets and related elements of expense. Revenue and
other expense elements are remeasured at rates that approximate the rates in
effect on the transaction dates. Remeasured gains and losses are included in
general and administrative expense.
Software Capitalization
ENDO adopted Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". In accordance with
this standard, certain direct development costs associated with internal-use
software are capitalized, including external direct costs of material and
services, and payroll costs for employees devoting time to the software
projects. These costs are amortized over a period not to exceed five years
beginning when the asset is substantially ready for use. Costs incurred during
the preliminary project stage, as well as maintenance and training, are expensed
as incurred.
NOTE 2 - FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following as of September 30, 2003:
Estimated
Useful
Lives
Automobiles 3 $ 2,452
Kiosk equipment 3 45,850
Furniture and equipment 5-7 456,998
Computer equipment and software 3-5 23,841
Intellectual property 2 26,523
Application development (software) 3 188,317
----------------
743,981
Less: accumulated depreciation and
Amortization (217,744)
----------------
$ 526,237
Depreciation and amortization expense was $65,885 and $135,042 for the periods
ending September 30, 2003 and 2002, respectively.
NOTE 3 - LEASES
Capital Leases
ENDO leases equipment under long-term lease agreements. The leases covering
certain equipment, which expire over the next three years, are classified as
capital leases. Property and equipment includes equipment under capital leases
of $438,821.
The future minimum lease payments for capital leases and for operating leases
(with initial or remaining noncancellable terms in excess of one year) as of
September 30, 2003 follow:
Years ending Amount
-------------------------------------------- ----------------
2004 $ 156,033
2005 89,839
2006 103,041
---------------
348,913
Less: current maturities 156,033
---------------
Capitalized leases - long-term $ 192,880
===============
Operating Lease
ENDO leases its office space for $2,000 per month on a month to month basis.
ENDO had no other operating leases for the years ended September 30, 2003 and
2002.
NOTE 4 - INCOME TAXES
For the years ended September 30, 2003 and 2002, ENDO has incurred net losses
and, therefore, has no tax liability. The net deferred tax asset generated by
the loss carry-forward has been fully reserved. The cumulative net operating
loss carry-forward is approximately $18,000 at September 30, 2003, and will
expire in the years 2021 through 2023.
Deferred income taxes consist of the following at September 30, 2003:
Long-term:
Deferred tax assets $ 61,000
Valuation allowance (61,000)
--------------
$ -
==============
NOTE 5 - STOCKHOLDERS' EQUITY
Common Stock:
ENDO is authorized to issue 50,000,000 common shares of stock at a par value of
$0.001 per share. These shares have full voting rights. At September 30, 2003,
there were 12,568,866 shares outstanding. ENDO has not paid a dividend to its
shareholders.
Stock Options:
No compensation cost has been recognized for grants under the stock option plans
since all grants pursuant to these plans have been made at the current estimated
fair values of ENDO's common stock at the grant date. There were no options
issued for the year ended September 30, 2003.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in fiscal 2002: zero dividend yield, expected
volatility of 100%, risk-free interest rate of 4.0% and expected lives of 2
years.
The options granted have an exercise price of $.50 per share and vest at the
date of issuance. The maximum term of the options is two years.
The following table summarizes stock option activity:
Outstanding, October 1, 2002 220,000
Granted -
Canceled -
Exercised -
-----------------
Outstanding, September 30, 2003 220,000
=================
Exercisable at September 30, 2002 220,000
=================
Weighted-average grant-date fair
value of options, granted during
the year $ -
=================
Weighted-average remaining, years
of contractual life -
=================
NOTE 6 - CONCENTRATIONS OF CREDIT RISK
As of September 30, 2003, amounts due from four customers amounted to 88% of
total trade accounts receivable.
Three customers accounted for 20%, 13%, and 12% and one customer accounted for
29% of total revenues for the year ended September 30, 2003 and 2002,
respectively.