U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE EXCHANGE ACT OF
1934
From the transition period from ___________ to ____________.
Commission File Number 333-42640
ENDO NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 75-2882833
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2624 DUNWIN DRIVE, UNIT #3, MISSISSAUGA, ONTARIO, CANADA L5L 3T5
(Address of principal executive offices)
(905) 820-8800
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days:
YES: X NO:
As of July 31, 2006, there were 13,557,366 shares of common stock of the issuer
outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements 3
Item 2 Management's Discussion and Analysis Or
Plan of Operations 11
Item 3 Controls and Procedures 15
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Default upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ENDO NETWORKS, INC.
CONSOLIDATED BALANCE SHEET
June 30, 2006
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 331
Accounts receivable, net of allowance for doubtful accounts of $0 134,030
Prepaid expenses 63,019
-----------
Total current assets 197,379
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $1,107,727 333,961
-----------
TOTAL ASSETS $ 531,340
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
LIABILITIES
Current Liabilities:
Current maturities of capital leases payable $ 178,365
Accounts payable - related party 3,794
Accounts payable - other 210,884
Accrued expenses - related party 352,085
Accrued expenses - other 335,740
-----------
Total current liabilities 1,080,868
-----------
Total liabilities
1,080,868
COMMITMENTS
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, 50,000,000 authorized,
13,577,366 shares issued and outstanding 13,557
Additional paid-in-capital 429,263
Accumulated deficit (1,108,828)
Accumulated other comprehensive income 116,480
-----------
Total Stockholders' Deficit (549,528)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 531,340
===========
See accompanying summary of accounting policies and notes to financial
statements.
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ENDO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Revenue $ 213,634 $ 377,068 $ 746,736 $ 814,295
Cost of sales 121,940 165,724 314,975 260,831
------------ ------------ ------------ ------------
Gross profit 91,694 211,344 431,761 553,464
Operating expenses:
Depreciation 42,097 52,150 125,975 157,052
Other general and administrative 335,798 119,520 745,837 482,807
------------ ------------ ------------ ------------
Total operating expense 377,895 171,670 871,812 639,859
------------ ------------ ------------ ------------
Net income (loss) $ (286,201) $ 39,674 $ (440,051) $ (86,395)
============ ============ ============ ============
Net loss per share:
Basic and diluted $ (0.02) $ (0.00) $ (0.03) $ (0.01)
============ ============ ============ ============
Weighted average shares outstanding:
Basic 13,263,036 12,665,366 12,901,256 12,665,366
============ ============ ============ ============
Diluted 13,263,036 13,299,366 12,901,256 12,665,366
============ ============ ============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements
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ENDO NETWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Year Ended September 30, 2005, and
Nine Months Ended June 30, 2006
(unaudited)
Accumulated
Additional Other
Common Stock Paid In Accumulated Comprehensive
Shares Amount Capital Deficit Income Total
----------------------------------------------------------------------------------------
Balance,
September 30, 2004 12,665,366 $ 12,665 $ 299,105 $ (454,556) $ 44,115 $ (98,671)
Common stock issued
for services 55,000 55 5,445
Net loss (214,221) (214,221)
Foreign currency
translation
adjustment 92,883 92,883
-----------
Total comprehensive
loss (121,338)
---------------------------------------------------------------------------------------
Balance,
September 30,2005 12,720,366 12,720 304,550 (668,777) 136,998 (214,509)
Issuance of common
stock for services 837,000 837 124,713 125,550
Net loss (440,051) (440,051)
Foreign currency
translation adjustment (20,518) (20,518)
-----------
Total comprehensive loss (460,569)
---------------------------------------------------------------------------------------
Balance,
June 30, 2006 13,557,366 $ 13,557 $ 429,263 $(1,108,828) $ 116,480 $ (549,528)
=======================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
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ENDO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended June 30, 2006 and 2005
(Unaudited)
2006 2005
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(440,051) $ (86,395)
Adjustments to reconcile net loss to net cash
provided by operations:
Items not requiring cash:
Depreciation and amortization 125,975 157,052
Common stock issued for services 125,550 --
Changes in assets and liabilities:
Accounts receivable (50,821) (137,306)
Prepaid expenses (3,291) 8,556
Accounts payable and accrued expenses 302,047 155,113
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 59,409 97,020
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,759) (194,161)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (3,759) (194,161)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on (proceeds from) lease financing (33,942) 6,255
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (33,942) 6,255
--------- ---------
Effect of foreign exchange rate changes on cash (21,377) 93,036
--------- ---------
NET CHANGE IN CASH 331 2,150
Cash, beginning of period -- 11,612
--------- ---------
Cash, end of period $ 331 $ 13,762
========= =========
Supplemental information:
Income taxes paid $ -0- $ -0-
Interest paid $ 17,108 $ 22,278
See accompanying summary of accounting policies and notes to consolidated
financial statements.
- 6 -
ENDO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: MANAGEMENT REPRESENTATION AND PRESENTATION
The consolidated balance sheet of ENDO Networks, Inc. ("ENDO" or the "Company")
as of June 30, 2006, the related consolidated statements of operations for the
three and nine months ended June 30, 2006 and 2005, consolidated statements of
stockholders' deficit for the year ended December 31, 2005 and six months ended
June 30, 2006 and consolidated statements of cash flows for the nine months
ended June 30, 2006 and 2005 included in the financial statements have been
prepared by ENDO without audit. In the opinion of management, the accompanying
financial statements include all adjustments (consisting of normal, recurring
adjustments) necessary to summarize fairly the ENDO'S financial position and
results of operations. The results of operations for the three and nine months
ended June 30, 2006 are not necessarily indicative of the results of operations
for the full year or any other interim period. Notes to the consolidated
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
ended September 30, 2005 to be reported in Form 10-KSB, have been omitted.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
ENDO is a company that uses technology and proven marketing tactics to engage
consumers and compel specific behaviors in high traffic public locations such as
events, retail and restaurant locations across North America, and online. ENDO
also develops application software and client controlled media.
Principles of Consolidation
The accompanying consolidated financial statements include our accounts and the
accounts of our wholly-owned subsidiary. All significant intercompany
transactions and balances have been eliminated in consolidation.
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.
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Revenue derived from professional services provided on a time and materials
basis is recognized as services are performed.
For time and material contracts, revenue is recognized and billed by multiplying
the number of hours expended by our professionals in the performance of the
contract by the established billing rates. For fixed fee projects, revenue is
generally recognized using the proportionate performance method. Provisions for
estimated losses on uncompleted contracts are made on a contract-by-contract
basis and are recognized in the period in which such losses are determined.
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.
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 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.
Intangible assets
Intangible assets are recorded at cost. Cost is amortized over the estimated
useful life of the asset unless that life is determined to be indefinite.
Intangible assets not subject to amortization are tested for impairment on at
least an annual basis. If the fair value of the intangible asset is determined
to be less than the carrying amount, an impairment loss is recognized in the
amount of that difference.
Intangible assets subject to amortization are reviewed for impairment in
accordance with the provisions applying to long-live assets.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property 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.
Impairment of long-lived assets
The Company monitors the recoverability of long-lived assets, including property
and equipment and intangible assets, based upon estimates using factors such as
expected future asset utilization, business climate, and undiscounted cash flows
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resulting from the use of the related assets or to be realized on sale. The
Company's policy is to write down assets to the estimated net recoverable
amount, in the period in which it is determined likely that the carrying amount
of the asset will not be recoverable.
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.
Income (Loss) per Share
The basic net income (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 income (loss) per common share is computed by dividing the net
income (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 three and nine months ended June 30,
2006 and the nine months ended June 30, 2005 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 634,000 of stock options at
June 30, 2006 and 2005.
Stock-Based Compensation
During the first quarter of 2006 ENDO adopted FASB issued Statement No. 123(R)
(revised 2004) ("FAS 123(R)"). FAS 123(R) revises FASB Statement No. 123,
Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25. FAS
123(R) and requires the Company to measure the cost of employee services
received in exchange for stock option awards based on the grant-date fair value
of such awards. That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award, which is
usually the vesting period. The Company will report such costs as part of our
general and administrative expenses.
Prior to the adoption of FAS 123(R), ENDO accounted for its stock-based
compensation plans under Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees.
Foreign Currency Translation
As nearly all operations are conducted in Canada, the Canadian dollar is the
functional currency. All balance sheet accounts have been translated at the
current exchange rate as of June 30, 2006. Statement of operations items have
been translated at average currency exchange rates during the periods ended June
30, 2006 and 2005. The resulting translation adjustment is recorded as a
separate component of comprehensive loss within stockholders' deficit.
- 9 -
NOTE 3 - GOING CONCERN
For the nine months ended June 30, 2006 and the year ended September 30, 2005,
ENDO incurred losses totaling $440,051 and $214,221, respectively, and at June
30, 2006 had a working capital deficit of $883,489.
There are no assurances that ENDO will be able to either (1) achieve a level of
revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through either private placement, public offerings
and/or bank financing necessary to support ENDO's working capital requirements.
To the extent that funds generated from any private placements, public offerings
and/or bank financing are insufficient, ENDO will have to raise additional
working capital. No assurance can be given that additional financing will be
available, or if available, will be on terms acceptable to ENDO. If adequate
working capital is not available ENDO may not continue its operations. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 4 - LEASE FINANCING OBLIGATIONS
In September 2005 the ENDO restructured its lease payable obligation. As of June
30, 2006, ENDO is in technical default on its current lease obligations since it
has missed payments totaling approximately $26,497. As a result the entire lease
payable has been classified as a current liability, and is included with current
maturities of capital leases payable in the accompanying financial statements.
NOTE 5 - PAYROLL TAXES
ENDO is required to remit employer payroll and employee payroll and income tax
withholding payments in the month following the payroll period. As of June 30,
2006 payroll tax and income tax withholding payments in the amount of $65,328
are in arrears. ENDO may be required to pay interest and penalties as a result
of its taxes not being paid on a timely basis.
NOTE 6 - RELATED PARTY TRANSACTIONS
On June 26, 2006, the Company signed an Asset Purchase Agreement with its
President, Peter B. Day, to sell all of our assets and 100% of the stock of Endo
Networks, Inc., a Canadian corporation ("Endo Canada"), a wholly owned
subsidiary of the Company. All of the Company's assets and virtually all of its
liabilities are held in Endo Canada. As consideration for the sale Mr. Day
agreed to assume substantially all of the Company's liabilities.
On August 1, 2006, the Company sent a proxy to its shareholders to approve the
transaction outlined above. The shareholder meeting is scheduled to be held on
September 5, 2006.
NOTE 7 - COMMON STOCK
In May 2006 the Company issued a total of 837,000 shares of common stock in
return for consulting services provided by two consultants. Based on the last
trading price prior to the issuance of the stock a non-cash consulting expense
of $125,550 was recorded for the issuance of these shares.
- 10 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Form 10-QSB
and in our Form 10-KSB. This report contains forward-looking statements
including, without limitation, statements regarding trends, cyclicality,
seasonality, volatility and growth in the markets we sell into, our strategic
direction, new product introductions, our liquidity position, our ability to
generate cash from continuing operations, our expected order and revenue growth,
the potential impact of our adopting new accounting pronouncements, our
financial results, the impact and timing of our enterprise resource planning and
customer relationship management systems implementation, our obligations under
our retirement and post-retirement benefit plans, timing of, costs related to,
and savings from our restructuring programs, the existence or length of an
economic recovery and our ability to take advantage of a recovery that involve
risks and uncertainties. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to various factors,
including those discussed below in "Factors That May Affect Future Results" and
elsewhere in this Form 10-QSB.
OVERVIEW
Endo Networks Inc. helps businesses acquire new customers and build sales and
loyalty with existing customers. We use interactive technology such as touch
screen kiosks, handheld computers, and websites, combined with promotional
marketing tactics to filter large numbers of consumers, to find qualified
prospects, and even precondition them for a sale. Our services can be deployed
within a business' own retail environment, to increase sales with their own
customer base by increasing frequency of visit and/or average spend with
individual customers , or they can be deployed within a partner location such as
an office tower or a consumer show, to find and acquire qualified new customers.
Our solutions are:
- Permission based
- Integratable with legacy systems
- Scaleable
- Measurable
- Conducive to brand partnerships
Our areas of expertise include: Web, Kiosk, Handheld, Wireless, Loyalty,
Promotional Marketing, Direct Marketing, Integration with Point of Sale, Survey,
Incentive, Sampling, and Field and Event Marketing.
- 11 -
Our client base includes specialty retail, general retail, food service,
automotive, alcohol, energy, consumer packaged goods, entertainment, amateur
sports, and telecommunications companies.
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 Texas as Discount Mortgage Services, Inc. on July
11, 2000 and in September 2001 purchased Endo Networks, a company incorporated
in Ontario, Canada on January 30, 2001, in which 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
and was re-domiciled to Nevada in December, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased by $52,767 during the nine months ended June 30, 2006
from $584,107 at December 31, 2005 to $531,340 at June 30, 2006 We do not expect
to incur material capital expenditures during the next 12 months for equipment
relating to new client deployments. We are continuing to generate operating
losses and there is no assurance we will be able to generate sufficient revenues
or obtain sufficient funds when needed, or whether such funds, if available,
will be obtained on terms satisfactory to us. We do not have any long term or
contingent obligations that must be satisfied.
CRITICAL ACCOUNTING POLICIES
Our unaudited Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis of making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We believe the following critical accounting policies, among others, affect our
more significant judgments and estimates used in the preparation of our
financial statements.
- 12 -
ALLOWANCE FOR DOUBTFUL ACCOUNTS
We maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. The allowance for
doubtful accounts is based on specific identification of customer accounts and
our best estimate of the likelihood of potential loss, taking into account such
factors as the financial condition and payment history of major customers. We
evaluate the collectability of our receivables at least quarterly. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. The differences could be material and could significantly impact cash
flows from operating activities.
VALUATION OF INTANGIBLES
From time to time, we acquire intangible assets that are beneficial to our
product development processes. We periodically evaluate the carrying value of
intangibles, including the related amortization periods. In evaluating acquired
intangible assets, we determine whether there has been impairment by comparing
the anticipated undiscounted cash flows from the operation and eventual
disposition of the product line with its carrying value. If the undiscounted
cash flows are less than the carrying value, the amount of the impairment, if
any, will be determined by comparing the carrying value of each intangible asset
with its fair value. Fair value is generally based on either a discounted cash
flows analysis or market analysis. Future operating income is based on various
assumptions, including regulatory approvals, patents being granted, and the type
and nature of competing products. If regulatory approvals or patents are not
obtained or are substantially delayed, or other competing technologies are
developed and obtain general market acceptance or market conditions otherwise
change, our intangibles may have a substantially reduced value, which could be
material.
DEFERRED TAXES
We record a valuation allowance to reduce the deferred tax assets to the amount
that is more likely than not to be realized. We have considered estimated future
taxable income and ongoing tax planning strategies in assessing the amount
needed for the valuation allowance. Based on these estimates, all of our
deferred tax assets have been reserved. If actual results differ favorably from
those estimates used, we may be able to realize all or part of our net deferred
tax assets. Such realization could positively impact our operating results and
cash flows from operating activities.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2006 TO THE
THREE AND NINE MONTHS ENDED JUNE 30, 2005
REVENUE. During the three months ended June 30, 2006, the company generated
revenues of $213,634 from sales compared to revenues from sales for the three
- 13 -
months ended June 30, 2005 of $377,068, which represents a decrease of $163,434
over the same period of the prior year. In the nine months ended June 30, 2006
the company had revenues of $746,736 compared with sales of $814,295 for the
same period the prior year. This decrease for the three months and increase for
the nine months is because the company had strong sales in the first three
months and softer sales in the six months ended June 30, 2006. In the last few
years the Company had sales of approximately $120,000 per quarter to a client
that had very low gross margins and in the quarter ended June 30, 2006, the
Company ceased that work.
COST OF SALES. Cost of goods sold increased from $165,724 or 44% of sales for
the three months ended June 30, 2005 to $121,940 or 57% of sales for the three
months ended June 30, 2006, an increase of 13%. For the nine months ended June
30, 2006 our cost of sales increased to $314,975 or 42% from $260,831 or 32% for
the nine months ended June 30, 2005, due to having higher ongoing contract labor
costs for the projects we are planning for the coming quarters.
GROSS PROFIT. Gross profit decreased to $91,694 for the three months ended June
30, 2006 from $211,344 for the three months ended June 30, 2005. For the nine
months ended June 30, 2006, our gross profit was $431,761 compared to $553,464
for the nine months ended June 30, 2005. Gross profit decreased from 68% for the
nine months ended June 30, 2005 to 58% for the nine months ended June 30, 2006
due to a higher number of contract laborers and higher labor rates.
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES. General, administrative and
selling expenses were $335,798 for the three months ended June 30, 2006,
compared to $119,520 for the three months ended June 30, 2005, representing an
increase of $216,278. General, administrative and selling expenses were $745,837
for the nine months ended June 30, 2006, compared to $482,807 for the nine
months ended June 30, 2005. The decrease is due to our decreased sales activity
and one time consulting costs of approximately $125,000 charged to expense in
June 2006.
Amortization and depreciation expense are not included in our general and
administrative expenses. These expenses were $42,097 and $52,150 for the three
months ended June 30, 2006 and 2005 respectively. Also, depreciation and
amortization expense was $125,975 and $157,052 for the nine months ended June
30, 2006 and 2005 respectively.
NET INCOME (LOSS) AND INCOME (LOSS) PER SHARE.
As a result of the above, in the three months ended June 30, 2006, our net loss
was $286,201 or $0.02 per share, compared to a net income of $39,674 or $0.00
per share for the three months ended June 30, 2005. Similarly, in the nine
months ended June 30, 2006, our net loss was $440,051 or $0.03 per share,
compared to a net loss of $86,395 or $0.01 per share for the nine months ended
June 30, 2005.
FORWARD LOOKING STATEMENTS. This Form 10-QSB contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements made by Endo Networks involve known and unknown
- 14 -
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from the forward looking statements include, but are not limited to,
risks associated with lack of significant operating history, demand for the Endo
Networks' products, international business operations, dependence on licensees,
governmental regulations, technological changes, intense competition and
dependence on management. Given these uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements. The Company's
management disclaims any obligation to forward-looking statements contained
herein to reflect any change in the Endo Networks' expectation with regard
thereto or any change in events, conditions, circumstances or assumptions
underlying such statements.
ITEM 3. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the participation
of the Endo Networks' management, including our Chief Executive Officer and
Chief Financial Officer, regarding the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of
1934) as of March 31, 2006. As a result of their evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that the Endo Networks'
disclosure controls and procedures are effective to ensure that information
required to be disclosed by Endo Networks in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms. There were no changes in Endo Networks' internal
control over financial reporting that occurred during the quarter ended March
31, 2006, that has materially affected and is reasonably likely to materially
affect, the Endo Networks' internal control over financial reporting.
- 15 -
PART III
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. EMPLOYMENT AGREEMENTS
None
ITEM 3. RECENT SALES OF UNREGISTERED SECURITIES
None
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Document
31.1 Certification of Chief Executive Officer required by Rule
13a-14a/15d-14(a) under the Exchange Act.
31.2 Certification of Chief Financial Officer required by Rule
13a-14a/15d-14(a) under the Exchange Act.
32.1 Certification of Chief Executive Officer pursuant to Section 8
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports of Form 8-K
None
- 16 -
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.
/s/ Peter B. Day
-----------------------
Peter B. Day
Chief Executive Officer
August 3, 2006
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Peter B. Day, certify that:
1. I have reviewed this annual report on Form 10-QSB of ENDO NETWORKS, INC.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14 for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b. Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: August 3, 2006
/s/ Peter B. Day
-----------------------
Peter B. Day
Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Peter B. Day, certify that:
1. I have reviewed this annual report on Form 10-QSB of Endo Networks, Inc.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14 for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b. Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: August 3, 2006
/s/ Peter B. Day
----------------
Peter B. Day,
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Endo Networks, Inc. (the "Company") on
Form 10-QSB for the period ending June 30, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report'), I, Peter B. Day,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company at
the dates and for the periods indicated.
/s/ Peter B. Day
----------------
Peter B. Day,
Chief Executive Officer
August 3, 2006
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of Endo Networks, Inc. (the "Company") on Form
10-QSB for the period ending June 30, 2006, as filed with the Securities and
Exchange Commission on the date hereof (the "Report'), I, Peter B. Day, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company at the dates and for the periods indicated.
/s/ Peter B. Day
----------------
Peter B. Day,
Chief Financial Officer
August 3, 2006