Summary of Significant Accounting Policies

3 Months Ended

Jan. 31, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”).

Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.  Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is our opinion, however, that the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended October 31, 2013 as filed with the SEC, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis, for the years ended October 31, 2013 and 2012. The financial information as of October 31, 2013 is derived from the audited financial statements presented in our Annual Report on Form 10-K for the year ended October 31, 2013.  The accompanying unaudited interim consolidated financial statements should also be read in conjunction with the Form 8-K and 8-K/A filed in May 2013 and July 2013, respectively, with respect to the acquisition of MeshTech. The interim results for the three months ended January 31, 2014 are not necessarily indicative of the results to be expected for the year ending October 31, 2014 or for any future interim periods.

Principles of Consolidation and Corporate Structure

The accompanying consolidated financial statements include the accounts of Endeavor IP, Inc. and its wholly-owned subsidiaries. All significant intracompany balances and transactions have been eliminated in consolidation.

The Company's consolidated subsidiaries and/or entities are as follows:

Name of Subsidiary or Consolidated Entity	Place of Formation/Incorporation (Jurisdiction)	Date of Incorporation (Date of Disposition, if Applicable)	Attributable Interest
FTHG Canada	Canada	May 10, 2010	100%
		(June 14, 2012)	0%
Endeavour UK	United Kingdom	January 13, 2012	100%
		(May 13, 2013)	*
Endeavor MeshTech, Inc	Delaware	May 6, 2013	100%
Endeavor Energy, Inc	Delaware	July 8, 2013	100%

*This entity is reflected as a discontinued operation as of May 13, 2013

Development Stage

The Company’s financial statements are presented as those of a development stage company. Activities during the development stage primarily include organizing the business, raising capital and acquiring additional intellectual property.

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company's operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Cash

The Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.  The Company had no cash equivalents at January 31, 2014 and October 31, 2013, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

The Company recognizes accounts receivable based on billing for the revenue earned from their patent enforcement activities.

The Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. At January 31, 2014 and October 31, 2013, there was no allowance for bad debt.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 605, “Revenue Recognition.” Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed, (iii) amounts are fixed or determinable and (iv) collectability is reasonably assured.

The Company generally receives a one-time, final lump sum payment, in exchange for granting a non exclusive license. At the time of payment there are no further obligations for the Company or any licensee.

Revenues from patent enforcement activities accounted for 100% of revenues since the Company’s inception and were all from a single claim.

Cost of Revenues

Cost of revenue mainly includes expenses incurred in connection with the Company’s patent enforcement activities, such as legal fees, consulting costs, patent maintenance, royalty fees for acquired patents and other related expenses.

Cost of revenue does not include expenses related to product development, integration or support, as these are included in general and administrative expenses.

The Company pays a contingency fee of approximately 25%-45% of gross recoveries from litigation settlements. These fees are based upon a graduated scale as negotiated between the Company and its legal counsel.

Income Taxes

A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

For income tax benefits arising from uncertain income tax positions, a tax benefit arising from an uncertain tax position can only be recognized for financial reporting purposes if, and to the extent that, the position is more likely than not to be sustained in an audit by the applicable taxing authority.

Penalties related to uncertain tax positions are recorded as a component of general and administrative expenses. Interest relating to uncertain tax positions is recorded as a component of interest expense. The Company has not recorded any uncertain tax positions at January 31, 2014 or October 31, 2013.

The Company had no material adjustments to its financial statements for unrecognized income tax benefits at January 31, 2014 or October 31, 2013.

The Company has not yet filed its corporation income tax return for the period ended October 31, 2013 and 2012.  The statute of limitations for the return will begin when the return is filed.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC No. 718, “Accounting for Stock-Based Compensation" (“ASC 718”), which established financial accounting and reporting standards for stock-based employee compensation. It defines a fair value based method of accounting for an employee stock option or similar equity instrument.

The Company accounts for compensation cost for stock option plans in accordance with ASC No. 718. The Company accounts for share based payments to non-employees in accordance with ASC No. 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.

Share based payments, excluding restricted stock, are valued using a Black-Scholes Pricing Model (“BSPM”). Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. Grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock based compensation expenses are included in selling, general and administrative expenses in the consolidated statement of operations.

When computing fair value of share based payments, the Company has considered the following variables:

• The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.

• The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

• The expected option term is computed using the “simplified” method as permitted under the provisions of Staff Accounting Bulletin (“SAB”) 110.

• The forfeiture rate is based on the historical forfeiture rate for the Company’s unvested stock options, which was 0%.

• Expected volatility was determined based on the Company’s historical trading activity in a public market.

Loss per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period.  Diluted earnings (loss) per share is computed by dividing net income (loss), adjusted for changes in income or loss that resulted from the assumed conversion of convertible debt, exercise of stock options and warrants by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

The Company had the following potential common stock equivalents for the three months ended January 31, 2014 and 2013:

	Three months ended
	January 31, 2014		January 31, 2013
Stock options, exercise price ($0.75) – former related party		10,000		-
Stock options, exercise price ($0.75)		510,000		-
Stock options, exercise price ($0.69) – related party		2,144,881		-
		2,664,881		-

Since the Company reflected a net loss for the three months ended January 31, 2014, the inclusion of any common stock equivalents would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

• Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The Company's financial instruments consisted primarily of cash, accounts payable and debt. The carrying amount of the Company's financial instrument generally approximates its fair value as of January 31, 2014 and October 31, 2013, respectively, due to the short-term nature of these instruments.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances, such as service discontinuance or technological obsolescence, indicate that the carrying amount of the long-lived asset may not be recoverable. When such events occur, the Company compares the carrying amount of the asset to the undiscounted expected future cash flows related to the asset. If the comparison indicates that impairment is present, the amount of the impairment is calculated as the difference between the excess of the carrying amount over the fair value of the asset. If a readily determinable market price does not exist, fair value is estimated using discounted expected cash flows attributable to the asset. There have been no impairments recorded during the three months ended January 31, 2014 and 2013, respectively.

Intangible Assets

Intangible assets, consisting of patent portfolios, were acquired from May to July 2013.

Intangible assets that have finite useful lives are amortized on the straight-line method over their useful lives ranging from 7 to 16 years. Costs incurred to acquire these patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent.

Intangible assets that have in definite useful lives are not amortized but are tested at least annually for impairment.

Each reporting period, we evaluate the remaining useful lives of intangible assets not being amortized to determine whether facts and circumstances continue to support an indefinite useful life. Intangible assets are considered impaired if the fair value of the intangible asset is less than its net book value. If quoted market prices are not available, the fair values of the intangible assets are based on present values of expected future cash flows or royalties avoided using discount rates commensurate with the risks involved.

Goodwill

Goodwill represents the excess of the purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired. In accordance with current accounting guidance, goodwill is not amortized and is tested at least annually for impairment at the reporting unit level.

We perform our annual analysis during the fourth quarter of each fiscal year and in any other period in which indicators of impairment warrant additional analysis. Goodwill impairment reviews involve a two-step process. Goodwill is first evaluated for impairment by comparing management's estimate of the fair value of a reporting unit with its carrying value, including goodwill.

Management utilizes a discounted cash flow analysis, referred to as an income approach, to determine the estimated fair value of our reporting units. Significant judgments and assumptions including the discount rate, anticipated revenue growth rate and gross margins, estimated operating and interest expense, and capital expenditures are inherent in these fair value estimates, which are based on our operating and capital budgets and on our strategic plan. As a result, actual results may differ from the estimates utilized in our income approach. The use of alternate judgments and/or assumptions could result in a fair value that differs from our estimate and could result in the recognition of an impairment charge in the financial statements. As a result of these uncertainties, we utilize multiple scenarios and assign probabilities to each of the scenarios in the income approach.

We also consider indications obtained from market-based approaches. We compare market multiples derived from market prices of stock of companies that are engaged in a similar line of business to the corresponding measures of the Company. We also consider the combined carrying values of our reporting units to our market capitalization.

If the carrying value of our reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment. The amount of impairment is determined by comparing the implied fair value of the reporting unit's goodwill to the carrying value of the goodwill calculated in the same manner as if the reporting unit were being acquired in a business combination. If the implied fair value of goodwill is less than its carrying value, we would record an impairment charge for the difference.

Foreign Currency Transactions

The consolidated financial statements are presented in United States Dollars. The Company has bank accounts in foreign currency. The balance of these bank accounts were translated from its local currency (British Pounds) into the reporting currency, U.S. dollars, using period end exchange rates. The resulting translation adjustments were recorded as a separate component of accumulated other comprehensive loss. Revenues and expenses were translated using weighted average exchange rate for the period.

Transaction gains and losses resulting from foreign currency transactions were recorded as foreign exchange gains or losses in the consolidated statement of operations. The Company did not enter into any financial instruments to offset the impact of foreign currency fluctuations.

Transactions from some of the bank accounts were from the entity that is being reflected as discontinued.

Reclassifications

To conform prior period amounts to current year classifications, the Company has reclassified assets, liabilities, revenues and expenses associated with the disposal of Endeavour UK to discontinued operations. These reclassifications had no impact on the Company’s previously reported financial condition, results of operations or cash flows.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that have had a material impact on our unaudited consolidated financial statements.