SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2003
Commission file number: 333-42640
ENDO NETWORKS, INC.
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(exact name of registrant as specified in its charter)
Nevada 75-2882833
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(State of Incorporation) (IRS ID No.)
2624 Dunwin Drive, Unit #3, Mississauga, Ontario, Canada L5L 3T5
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 905-820-8800
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past twelve 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 [ ].
Shares of common stock outstanding at March 31, 2003:
12,568,866
TABLE OF CONTENTS
PART I _ FINANCIAL INFORMATION Page Number
Item 1. Financial Statements 1 - 4
Item 2. Managements's Discussion and Analysis
of Financial Condition and Results of Operations 5 - 7
PART II _ OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Exhibits and Reports on Form 8-K 8
Signatures 9
Certifications Pursuant to 18 U.S.C. Section 1350 10
ENDO NETWORKS, INC.
BALANCE SHEETS
March 31, 2003 and September 30, 2002
ASSETS
Unaudited
March 31, 2003 Sept 30, 2002
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CURRENT ASSETS:
Cash $8,698 $18,903
Accounts receivable 145,902 69,771
Inventory parts 15,383 12,700
Prepaid expenses 9,759 8,933
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Total current assets 179,742 110,307
PROPERTY AND EQUIPMENT, net of accumulated depreciation 386,005 422,670
OTHER ASSETS
Deposits 44,980 41,772
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TOTAL ASSETS $610,727 $574,749
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $109,697 $45,439
Accrued expenses 134,709 85,335
Capitalized leases - current 151,843 142,057
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Total current liabilities 396,249 272,831
Capitalized leases - non current 128,356 185,767
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TOTAL LIABILITIES 524,605 458,598
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STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 50,000,000 authorized,
12,568,866 shares issued and outstanding 12,569 12,569
Subscriptions receivable 0 (25,308)
Additional paid-in-capital 292,446 292,446
Accumulated deficit (218,893) (163,556)
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Total Stockholders' Equity 86,122 116,151
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $610,727 $574,749
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See accompanying notes to interim condensed financial statements F-1
ENDO NETWORKS, INC.
STATEMENT OF OPERATIONS
Three and Six Months Ended March 31, 2003 and 2002
(Unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
Mar 31, 2003 Mar 31, 2002 Mar 31, 2003 Mar 31, 2002
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Revenue $187,019 $53,973 $298,690 $112,423
Cost of Goods Sold 113,866 194,471
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Gross Profit 73,153 53,973 104,219 112,423
Operating Expense:
Depreciation and amortization 9,735 16,370 17,083 53,437
General and administrative 66,785 144,824 142,473 238,765
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Total Operating Expense 76,520 161,194 159,556 292,202
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NET LOSS ($3,367) ($107,221) ($55,337) ($179,779)
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Weighted average shares outstanding 12,568,866 12,070,966 12,868,866 12,150,466
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Loss per share - basic and diluted ($0.00) ($0.01) ($0.00) ($0.01)
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See accompanying notes to interim condensed financial statements F-2
ENDO NETWORKS, INC.
STATEMENT OF CASH FLOWS
Six Months Ended March 31, 2003 and 2002
(Unaudited)
Six Months Six Months
Ended Ended
Mar 31, 2003 Mar 31, 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($55,337) ($179,779)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Items not requiring cash - depreciation and amortization 17,083 53,437
(Increase) decrease in accounts receivable (76,131) (49,884)
(Increase) decrease in deposits (3,208) 8,166
(Increase) decrease in parts inventory (2,683)
(Increase) decrease in prepaid expenses (826) (1,297)
Increase (decrease) in accounts payable & accrued expenses 113,632 109,426
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NET CASH (USED) IN OPERATING ACTIVITIES: (7,470) (59,931)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) disposal of assets (83,471)
Proceeds from sale of assets 19,582
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Total cash flows from investing activities 19,582 (83,471)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 96,644
Subscriptions receivable 25,308
Proceeds from (payments on) lease financing (47,625) 55,679
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Total cash flows from financing activities (22,317) 152,323
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NET INCREASE IN CASH ($10,205) $8,921
CASH, BEGINNING OF PERIOD 18,903 352
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CASH, END OF PERIOD $8,698 $9,273
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See accompanying notes to interim condensed financial statements F-3
ENDO NETWORKS, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
March 31, 2003
Note A - Presentation
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The condensed balance sheet of the Company as of March 31, 2003, the related
condensed statements of operations for the three and six months ended March 31,
2003 and 2002, and the statement of cash flows for the six months ended March
31, 2003 and 2002 included in the condensed financial statements include all
adjustments (consisting of normal, recurring adjustments) necessary to summarize
fairly the Company's financial position and results of operations. The results
of operations for the three and six months ended March 31, 2003 are not
necessarily indicative of the results of operations for the full year or any
other interim period. The information included in this Form 10-QSB should be
read in conjunction with Management's Discussion and Analysis and Financial
Statements and notes thereto included in the Company's September 30, 2002 Form
10-KSB.
F-4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Plan of Operation & Managements Discussion and Analysis of Financial Condition
and Results of Operations
INTRODUCTION
The following discussion is the quarterly management's discussion and analysis
for the three month period ending March 31, 2003. Endo Networks, Inc.,
incorporated in Nevada and its wholly owned subsidiary, Endo Networks, Inc.,
incorporated in Ontario are collectively referred to as "Endo Networks" or the
"Corporation". In this discussion, all amounts are expressed in US funds. We
wish to caution readers that this report includes certain forward-looking
information and statements within the meaning of US federal securities laws.
These forward-looking statements contain information that is generally stated to
be anticipated, expected or projected by Endo Networks, and involves known and
unknown risks, uncertainties and other factors which may cause the actual
results and performance of Endo Networks to be materially different from any
future results and performance expressed or implied by such forward-looking
information.
OVERVIEW
Endo Networks effectively commenced operations as an aggregator of public
network applications September 30, 2001, making this the Sixth operating quarter
for the Corporation. In addition to continually fine-tuning its application
offering and strengthening its operational foundation, the company continues to
be engaged in aggressively securing new paid pilot projects the retail, event
and food service markets, primarily in Canada but with limited initiatives into
the United States, as well as expanding our existing deployments. The
positioning statement of the company has evolved into "Enabling Marketing's Last
Mile", which refers to Endo's competencies at enabling aggregated marketing,
human resources and technology solutions of both hardware and software at the
point of interaction between employee and customer, i.e. the retail store or the
restaurant.
RECENT EVENT
None.
DEPLOYMENTS
Generally, the winter is a slower season for new deployments, where we focus
more on managing our existing deployments and refining our applications and
solutions. This year is not unusual in this respect. Progress of note includes:
A: development of an expanded 802.11b (wi fi) capacity on our network
deployments, both portable and permanent
B: development of an integrated online, kiosk and handheld relationship
marketing/loyalty/training/incentive/reward/communications tool for use with
both customers and employees
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C: securing a new client and project in the recreational products business,
using our integrated relationship marketing product for salesperson incentive.
D: approval by our client Sheridan Nurseries of expanding their initial test to
a one-year pilot of a "total solution" in a high-volume location of their chain.
We continued to manage our existing retail deployments and field marketing
deployments with our current customers.
There have been no deployments in the Government category this quarter.
SPONSORSHIPS Presentations continue to secure sponsorships in preparation for
upcoming projects.
PARTNERSHIPS
No new partnerships in this period.
REVENUES
Revenues have historically been low for this period, as we prepare for the
spring increase in business. Revenues are a mix of hardware sale, hardware
rental and professional services. Professional services includes content
creation, interactive design (on-premise touchscreens and websites), marketing
consulting and hardware support service contracts. Hardware rental includes both
hardware rented to clients short-term for use in events and field marketing, and
long-term rental equipment permanently deployed in client retail locations.
Revenues for the three months ended March 31, 2003 were $187,019 compared with
$53,973 for the same three month period in 2002, with a gross profit of $73,153
compared with $53,973 a year earlier. The decrease in the percentage of gross
profit to revenue was due to more service being conducted in the same period
last year when there were more hardware deployments in the three months ended
March 31, 2003. The increase in deployments should increase our revenue stream
in future periods.
Revenues for the six months ended March 31, 2003 were $298,690 compared with
$112,423 for the same six month period in 2002, with a gross profit of $102,219
compared with $112,423 a year earlier. The decrease in the actual gross profit
and the percentage of gross profit to revenue was due to more service being
conducted in the same period last year when there were more hardware deployments
in the six months ended March 31, 2003. The increase in deployments should
increase our revenue stream in future periods.
OPERATING EXPENSE
For the three months ended March 31, 2003, operating expenses exclusive of
depreciation and amortization decreased $78,040 to $66,784 from $144,824 for the
same three months in 2002. Again, this was due to less salaries paid for service
work and more hardware deployments. Depreciation and amortization also decreased
from $16,370 to $9,736 for the same three month periods.
6
For the six months ended March 31, 2003, operating expenses exclusive of
depreciation and amortization decreased $96,292 to $142,473 from $238,765 for
the same three months in 2002. Again, this was due to less salaries paid for
service work and more hardware deployments. Depreciation and amortization also
decreased from $53,437 to $17,083 for the same six month periods.
Operating expenses include depreciation and amortization ("d&a") on both rental
equipment and fixed assets, and current operating expenses comprising chiefly
salary, facility rental, interest on leases and professional fees.
The d&a of rental equipment will increase in future quarters as deployments
increase, while the d&a on fixed equipment is expected to increase as the
requirement for additional network monitoring equipment increases.
Significant investments in growth continue to be made by the Corporation in the
following areas: business development, application development, business
partnership negotiation and network management. Operational expenses in this
category are expected to remain relatively static for the near future.
Net loss decreased from a loss of $107,221 in the three months ended March 31,
2002 to a loss of $3,367 for the same three months in 2003. Net loss decreased
from a loss of $179,779 in the six months ended March 31, 2002 to a loss of
$55,337 for the same six months ended March 31, 2003.
RESEARCH AND DEVELOPMENT
As in previous quarters, the Corporation continues to receive response from
existing clients with the potential to consume more of the Corporation's
products and services, and potential new clients in similar and new market
categories. In order to meet the demand for Endo Networks' offering, it
continues to be necessary to invest substantially in research and development.
Clients and potential clients have been involved in meetings and discourse to
determine software requirements, and identify areas for further development.
Skilled software developers are involved in utilizing the results of this
research to for the improvement of existing applications as well as the
development of select new applications. New application development is tied to a
set timeline based on expected development resources.
LIQUIDITY & CAPITAL RESOURCES
Based on cash on hand, contracts and accounts receivable, Endo Networks expects
current capital resources to be sufficient to fund existing operations going
forward.
OUTLOOK
Endo Networks expects the next quarter to show the results of the business
development of this and previous quarters, with strong revenue growth.
Operational expenses (net of product purchases for resale) are expected to
increase slightly and temporarily due to deployment costs, with future expansion
subsequent to revenue growth. However, there can be no assurance that unforeseen
revenue shortfalls or unanticipated expenses will not occur. Profitability will
be determined by management's decision on how much revenue to re-invest in
growth.
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PRT II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None
8
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Endo Networks, Inc.
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(Registrant)
BY: /s/ Peter B. Day
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Peter B. Day
Its: President
DATE: May 23, 2003
Mississauga, Ontario, Canada
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CERTIFICATIONS
I, Peter B. Day, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A 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 quarterly report; and
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 quarterly
report.
Date: May 23, 2003
By: /s/ Peter B. Day
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Name: Peter B. Day
Title: Chairman, Chief Executive Officer and
Chief Financial Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
The undersigned, Peter B. Day, the Chief Financial Officer of Endo Networks,
Inc., a Nevada Corporation, (the "Company), pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby
certifies that:
1. the Company's Quarterly Report on Form 10-QSB/A for the fiscal quarter
ended March 31, 2003 (the "Report") fully complies with the requirements of
Section 13(a) 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.
/s/ Peter B. Day
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Peter B. Day
Chief Financial Officer
Dated: May 23, 2003
This certification accompanies this Report on Form 10-Q pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required
by the Act, be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.
10