10-K 1 enip10k_oct312015.htm FORM 10-K enip10k_oct312015.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K


x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended October 31, 2015

or
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to ______________
 
Commissions file number 000-55094

ENDEAVOR IP, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
45-2563323
(State or other jurisdiction of
Incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
140 Broadway, 46th Floor
   
New York, NY
 
10005
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code (212) 585-7514

Securities registered under Section 12(b) of the Exchange Act: None.
 
 
Title of each class
 
Name of each exchange on
which registered

Securities registered under Section 12(g) of the Exchange Act:
 
Common Stock, $0.0001 par value
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act   Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o  No x
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x   No o

 
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this From 10-K. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes o  No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter

As of April 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of voting stock held by non-affiliates of the registrant, based on the closing sales price of common stock on the Over the Counter Bulletin Board on April 30, 2015 ($0.0005), was approximately $144,000.  As of January 28, 2016, the registrant had 2,303,191,008 shares of common stock outstanding.

 
 



 

TABLE OF CONTENTS
 
 
Page
   
1
   
1
5
13
13
 
     
14
   
14
16
16
23
24
25
25
25
     
26
   
26
28
31
32
32
     
33
   
33
 

ENDEAVOR IP, INC.
 
FORWARD LOOKING STATEMENTS
 
This Annual Report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

·
The uncertainty of profitability based upon our history of losses;

·
Risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; and

·
Other risks and uncertainties related to our business plan and business strategy.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares of our capital stock.

As used in this annual report, the terms “we”, “us”, “our”, and the “Company” mean Endeavor IP, Inc. and our subsidiaries, unless otherwise indicated.

ITEM 1. BUSINESS

Recent Updates
 
On January 23, 2015, we reached an agreement with our Chief Executive Officer, Ravinder Dhat resulting in his resignation as our Chief Executive Officer and Chairman of the Board on January 23, 2015, but Mr. Dhat remained as a member of our Board of Directors. We entered into a Separation Agreement and Release (the “Separation Agreement”) with Mr. Dhat that provided for, among other things, Mr. Dhat’s agreement to forfeit in full the following items as part of the Separation Agreement: (i) waiver in full of the 2014 bonus payment; (ii) non-payment of portions of various settlement proceeds that we entered into from ongoing litigation which payment was provided to Mr. Dhat by a board resolution offering such compensation; and (iii) agreement to terminate in full any and all obligations due and owing to Mr. Dhat under the amendment agreement we and Mr. Dhat entered into on November 7, 2014 (less vested equity grants). The Separation Agreement also terminated in full Mr. Dhat’s right to receive any further compensation resulting from any litigation settlements or license agreement that we enter into after January 23, 2015. In addition, the Separation Agreement also provided for the right to receive 20% of the proceeds that we may have received if we had sold or executed a letter of intent relating to the sale of our patent portfolio prior to June 23, 2015; payment of $8,653.85 for all earned, but unused vacation time as provided for in the Dhat Initial Employment Agreement; continuation of insurance coverage for Mr. Dhat and his family for a period of six (6) months from his resignation date; acknowledgement that the covenants with respect to our confidential information (as defined in the Dhat Initial Employment Agreement) will remain in place; waiver of any non-competition or non-solicitation provisions as well as any clawback rights described in Section 10 of the Dhat Initial Employment Agreement; and cooperation on the part of Mr. Dhat from time to time on matters that we may request and the right to retain 5,670,362 shares of restricted stock.  (See Item 11 – Compensation – Employment Contracts).

 
On January 23, 2015, our Board of Directors appointed Franciscus Diaba as our new Chief Executive Officer and Chairman of the Board of Directors. We also entered into an amendment to the Employment Agreement with Franciscus Diaba that appoints him as our new Chief Executive Officer and Chairman of the Board assuming the duties formerly held by Ravinder Dhat in addition to his current role as our President. (See Item 11 – Compensation – Employment Contracts). On July 15, 2015, our Board of Directors also appointed Franciscus Diaba as our General Counsel.

On February 5, 2015, the Company appointed David Waldman as a director of the Company.

On February 9, 2015, Ravinder Dhat resigned from the board of directors of the Company.

General

Endeavor IP, Inc., f/k/a Finishing Touches Home Goods Inc. (the “Company” or “we”), was formed as a corporation under the laws of the State of Nevada on December 8, 2009.  We are now solely in the business of the commercialization and development of intellectual property assets.  Our activities generally include the acquisition and development of patents, and the monetization of those patents which was initialized on May 13, 2013 when we purchased certain intellectual property rights from Mesh Comm, LLC (“Mesh”) and Solid Solar Energy, Inc., n/k/a Spiral Energy Tech, Inc. (“Solid Solar”)
 
We acquired from Mesh two U.S. patents and one pending patent application relating to wireless communication networks, as well as all right, title and interest in all related causes of actions and other enforcement rights under or on account of any of such acquired patents in consideration for (i) Eight Hundred Thousand Dollars ($800,000) and (ii) a royalty equal to 20% of the net revenues from any Enforcement Activities or Sales Transactions (as such terms are defined in the Mesh Purchase Agreement) related to the purchased patents pursuant to the terms of a Proceeds Interest Agreement.  Additionally, we assumed all obligations of Mesh under that certain license agreement between Mesh and a third party licensor.

We acquired from Solid Solar two patents relating to remote access energy monitoring systems and electric alternating current sensors for measuring alternating currents in circuit conductors, as well as all right, title and interest in all related causes of actions and other enforcement rights under or on account of any of such acquired patents in consideration for (i) One Hundred Thousand Dollars ($100,000), (ii) 666,666 shares of common stock and (ii) a royalty equal to 20% of the net revenues from any Enforcement Activities or Sales Transactions (as defined in the Solid Solar Purchase Agreement) related to the purchased patents pursuant to the terms of a Proceeds Interest Agreement.  Additionally, we granted Solid Solar a personal, royalty-free, irrevocable, non-exclusive and worldwide license (without the right to sublicense) to, among other things, develop, distribute and sell Solid Solar’s products and services covered by the patents sold to us.

Business Strategy
 
We are the owner or assignee of certain patents, licenses and applications, as further described herein. We are engaged in the commercialization and development of intellectual property assets that are not related to our historical business of workplace ergonomic consultancy.  Our activities will generally include the acquisition and development of patents. In addition, we will seek to acquire existing rights to intellectual property through the acquisition of already issued patents and pending patent applications, both in the United States and abroad.  We may alone, or in conjunction with others, develop products and processes associated with our intellectual property and license our intellectual property to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes.
 
We will likely need to raise additional capital to pursue our business strategy. There is no assurance that we will succeed in our strategy or commercialize or realize value from intellectual property we have already acquired or any additional intellectual property we may acquire.

 
Key Elements of our Business Strategy
 
Our intellectual property acquisition, development and licensing business strategy will include the following key elements:
 
Identify Emerging Growth Areas where Patented Technologies will Play a Vital Role

Certain technologies become core technologies in the way products and services are manufactured, sold and delivered by companies across a wide array of industries. In conjunction with our partners, patent attorneys, and other patent sourcing professionals, we will identify core, patented technologies that have been or are anticipated to be widely adopted by third parties in connection with the manufacture or sale of products and services.

Contact and Form Alliances with Owners of Core, Patented Technologies
 
Often individual inventors and small companies have limited resources and/or expertise and are unable to effectively address the unauthorized use of their patented technologies.  We will seek to enter into business agreements with owners of intellectual property that:

·
do not have experience or expertise in the areas of intellectual property licensing and enforcement;
·
do not possess the in-house resources to devote to intellectual property licensing and enforcement activities; and/or
·
for any number of strategic business reasons, desire to more effectively and efficiently outsource their intellectual property licensing and enforcement activities.

Effectively and Efficiently Evaluate Patented Technologies for Acquisition, Licensing and Enforcement
 
Subtleties in the language of a patent, recorded interactions with the patent office, and the evaluation of prior art can make a significant difference in the potential licensing and enforcement revenue derived from a patent or patent portfolio. It is important to identify potential problem areas, if any, and determine whether potential problem areas can be overcome, prior to acquiring a patent portfolio or launching an effective licensing program.

Purchase or Acquire the Rights to Patented Technologies

After evaluation, we may elect to purchase the patented technology, or acquire the exclusive right to license the patented technology in all or in specific fields of use.  The original owner of the patent or patent rights will typically receive an upfront acquisition payment and/or retain the right to a portion of the gross revenues generated from a patent portfolio’s licensing and enforcement program, or a combination of the two. We may also issue shares of our common stock or other securities to the original owner of the patent or patent rights.

Successfully License and Enforce Patents with Significant Royalty Potential

As part of the patent evaluation process, significant consideration is also given to the identification of potential infringers, industries within which the potential infringers exist, longevity of the patented technology, and a variety of other factors that directly impact the magnitude and potential success of a licensing and enforcement program.

We evaluate potentially infringing technologies and present the claims of our patents and demonstrate how they apply to companies we believe are using our technologies in their products or services. These presentations can take place in a non-adversarial business setting, but can also occur through the litigation process, if necessary.

Ultimately, we execute patent licensing arrangements with users of our patented technologies through licensing negotiations, without the filing of patent infringement litigation, or through the negotiation of license and settlement arrangements in connection with the filing of patent infringement litigation.


 
Intellectual Property and Patent Rights
 
Our intellectual property is primarily comprised of issued patents and pending patents.
 
We own a portfolio comprised of six United States granted patents. We have included a list of our U.S. patents below.  Each patent below is publicly accessible on the Internet website of the U.S. Patent and Trademark Office at www.uspto.gov.
 
Number
Title
Issue  Date
Filing Date
Earliest Priority Date
7,379,981
Wireless Communication Enabled Meter and Network
May 27, 2008
Jan. 2, 2002
Jan. 2, 2002
8,019,836
Wireless Communication Enabled Meter and Network
Sep. 13, 2011
Feb. 13, 2008
Jan. 2, 2002
8,700,749
Wireless Communication Enabled Meter and Network
Apr. 15, 2014
Sep. 8, 2011
Jul. 21, 2000
8,855,019
Wireless Communication Enabled Meter and Network
Oct. 7, 2014
Jan. 31, 2014
Jul. 21, 2000
7,990,133
Non-Intrusive Electric Alternating Current Sensor
Aug. 2, 2011
Apr. 6, 2009
Apr. 6, 2009
7,336,201
Remote Access Energy System and Method
Feb. 26, 2008
  Jul. 8, 2005
Jul. 9, 2004

Competition
 
We expect to encounter significant competition in our new line of business from others seeking to commercialize and develop their intellectual property assets. Most of our competitors have much longer operating histories, and significantly greater financial and human resources than we do.

Entities such as Document Security Systems, Inc. (NYSE MKT: DSS), ITUS Corporation (OTCBB: ITUS), Marathon Patent Group, Inc. (NASDAQ MKT: MARA), Opti Inc. (OTCBB: OPTI), Vringo, Inc. (NYSE MKT:VRNG), Spherix Incorporated (NASDAQ MKT:SPEX), VirnetX Holding Corp (NYSE MKT:VHC), Worlds Inc. (OTCBB: WDDD) and others presently market themselves as being in the business of creating, acquiring, licensing or leveraging the value of intellectual property assets.

Others may enter the market as the true value of intellectual property is increasingly recognized and validated. In addition, competitors may seek to acquire the same or similar patents and technologies that we may seek to acquire, making it more difficult for us to acquire assets at reasonable prices.

Patent Enforcement Litigation
 
We may often be required to engage in litigation to enforce our patents and patent rights. We may become a party to ongoing patent enforcement related litigation of certain of the patents or patented technologies owned or controlled by us.  Such litigation may become increasingly expensive and there is no assurance that we will prevail in such litigation or that we will possess or be able to secure the financing necessary to engage in such activities, or that such financing, if available, will be secured on attractive terms.

Research and Development Activities

We have not spent any funds on research and development activities to date.

Environmental Law Compliance

It is our policy to conduct our operations in accordance with all applicable laws, regulations and other requirements. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect on our consolidated annual results of operations, financial position or cash flows.

Employees

We currently have one full-time employee (taking into account the resignation of Mr. Dhat as our Chief Executive Officer) and no part-time employees. In the future, if our activities grow, we may hire personnel on an as-needed basis.

 
ITEM 1A. RISK FACTORS
 
There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.
 
We focus our business on commercializing, developing and monetizing intellectual property through licensing and enforcement, when required. We may not be able to successfully monetize the patents, which we acquire, and thus we may fail to realize all of the anticipated benefits of such acquisition.
 
There is no assurance that we will be able to continue to successfully monetize the patent portfolios that we acquired from Mesh and Solid Solar or commercialize, develop or monetize any patents we acquire in the future. The acquisition of the patents could fail to produce anticipated benefits, or could have other adverse effects that we do currently foresee. Failure to continue to successfully monetize already acquired patents and any patents acquired in the future may have a material adverse effect on our business, financial condition and results of operations.
  In addition, the acquisition of any patent portfolio is subject to a number of risks, including time to revenue. There is a significant time lag between acquiring a patent portfolio and recognizing revenue from those acquired patent assets. During that time lag, material costs are likely to be incurred that would have a negative effect on our results of operations, cash flows and financial position.
 
There is no assurance that the monetization of the patent portfolios acquired will generate enough revenue to recoup our investment.
 
Our operating history makes it difficult to evaluate our current business and future prospects.
 
Prior to the acquisition of our patent portfolio of Mesh and Solid Solar in May 2013, we had been involved in businesses primarily involving home and workplace ergonomic consultancy. We have a limited operating history in executing our new business which includes, among other things, creating, commercializing, prosecuting, licensing, litigating or otherwise monetizing patent assets. Our lack of operating history in this sector makes it difficult to evaluate our new business model and long-term future prospects.

If we are unable to commercialize, license or otherwise monetize such assets and generate revenue and profit through those assets or by other means, there is a significant risk that our business would fail.
 
We acquired a portfolio of patent assets from Mesh and Solid Solar that we plan to commercialize, license or otherwise monetize. If our efforts to generate sufficient revenue from such assets fail, we will have incurred significant losses and may be unable to acquire additional assets. If this occurs, our business would likely fail.
 
Upon acquisition of the patent portfolio from Mesh and Solid Solar and commencement of our new line of business, we commenced legal proceedings against certain companies, and we expect such litigation to be time-consuming and costly, which will adversely affect our financial condition and may result in our ability to operate our business.
 
To license or otherwise monetize our patent assets, which constitute a significant focus of our future activities, we may be required to continue to commence legal proceedings against certain companies, pursuant to which we may allege that such companies infringe on one or more of our patents.
 
Our viability could be highly dependent on the outcome of this litigation, and there is a risk that we may be unable to achieve the results we desire from such litigation, which failure would harm our business to a great degree. In addition, the defendants in this litigation are likely to be much larger than we are in both size and revenue and will likely have substantially more resources than we do, which could make our litigation efforts more difficult.

 
We anticipate that these legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, we may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which we are involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may preclude our ability to derive licensing revenue from the patents. A negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact our business. Additionally, we anticipate that these legal fees and other expenses will be material and will negatively impact our financial condition and results of operations and may result in our inability to continue our business.
  
We may seek to internally develop additional new inventions and intellectual property, which would take time and be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.
 
Part of our new business focus may include the internal development of new inventions or intellectual property that we will seek to monetize. However, this aspect of our business would likely require significant capital and would take time to achieve. There is also the risk that our initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of our investment in time and resources in such activities.
  
In addition, even if we are able to internally develop new inventions, in order for those inventions to be viable and to compete effectively, we would need to develop and maintain, and we would heavily rely on, a proprietary position with respect to such inventions and intellectual property. However, there are significant risks associated with any such intellectual property we may develop principally including the following:
 
·
patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;
·
we may be subject to interference proceedings;
·
we may be subject to opposition proceedings in the U.S. or foreign countries;
·
any patents that are issued to us may not provide meaningful protection;
·
we may not be able to develop additional proprietary technologies that are patentable;
·
other companies may challenge patents issued to us;
·
other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies;
·
other companies may design around technologies we have developed; and
·
enforcement of our patents would be complex, uncertain and very expensive.
 
We cannot be certain that patents will be issued as a result of any future applications, or that any of our patents, once issued, will provide us with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we will be the first to make our additional new inventions or to file patent applications covering those inventions. It is also possible that others may have or may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we may license or otherwise monetize, our rights will depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so. Our failure to obtain or maintain intellectual property rights for our inventions would lead to the loss of our investments in such activities, which would have a material and adverse effect on us.
 
Moreover, patent application delays could cause delays in recognizing revenue from our internally generated patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market.

 
New legislation, regulations or court rulings related to enforcing patents could harm our new line of business and operating results.
 
If Congress, the United States Patent and Trademark Office or courts implement new legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders, these changes could negatively affect our new business model. For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect our ability to assert our patent or other intellectual property rights.

In addition, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The U.S. Patent Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act recently became effective. Accordingly, it is too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and our implementation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
 
On February 27, 2013, US Representatives DeFazio and Chaffetz introduced HR845.  In general, the bill known as the SHIELD Act (“Saving High-tech Innovators from Egregious Legal Disputes”), seeks to assess legal fee liability to plaintiffs in patent infringement actions for defendants costs.  In the event that the bill becomes law, the potential obligation to pay the legal fees of defendants in patent disputes could have a material adverse effect on our business or financial condition. 

On June 4, 2013, the Obama Administration issued executive actions and legislative recommendations. The legislative measures recommended by the Obama Administration include requiring patentees and patent applicants to disclose the “Real Party-in-Interest”, giving district courts more discretion to award attorney’s fees to the prevailing party, requiring public filing of demand letters such that they are accessible to the public, and protecting consumers against liability for a product being used off-the- shelf and solely for its intended use.
 
The executive actions includes ordering the USPTO to make rules to require the disclosure of the Real Party-in-Interest by requiring patent applicants and owners to regularly update ownership information when they are involved in proceedings before the USPTO (e.g. specifying the “ultimate parent entity”) and requiring the USPTO to train its examiners to better scrutinize functional claims to prevent allowing overly broad claims.

On December 5, 2013, the United States House of Representatives passed patent reforms titled the “Innovation Act” by a vote of 325-91. Representative Bob Goodlatte, with bipartisan support, introduced the Innovation Act on October 23, 2013. The Innovation Act as passed by the House has a number of major changes. Some of the changes include a heightened pleading requirement for the filing of patent infringement claims. It requires a particularized statement with detailed specificity regarding how each asserted claim term corresponds to the functionality of each accused instrumentality. The Innovation Act as passed by the House also includes fee-shifting provisions which provide that, unless the loser of a patent infringement litigation positions were objectively reasonable, such loser would have to pay the attorneys’ fees of the winner.
 
The Innovation Act also calls for discovery to be limited until after claim construction. The patent infringement plaintiff must also disclose anyone with a financial interest in either the asserted patent or the patentee and must disclose the ultimate parent entity. When a manufacturer and its customers are sued at the same time, the suit against the customer would be stayed as long as the customer agrees to be bound by the results of the case.

On April 29, 2014, the U.S. Supreme Court relaxed the standard for fee shifting in patent infringement cases. Section 285 of the Patent Act provides that attorneys’ fees may be awarded to a prevailing party in a patent infringement case in “exceptional cases.”
 
In Octane Fitness, LLC v. Icon Health & Fitness, Inc., the Supreme Court overturned the U.S. Court of Appeals for the Federal Circuit decisions limiting the meaning of “exceptional cases.” The U.S. Supreme Court held that an exceptional case “is simply one that stands out from others with respect to the substantive strength of a party’s litigation position” or “the unreasonable manner in which the case was litigated.” The U.S. Supreme Court also rejected the “clear and convincing evidence” standard for making this inquiry. The Court held that the standard should a “preponderance of the evidence.”

 
In Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., the U.S. Supreme Court held that a district court’s grant of attorneys’ fees is reviewable by the U.S. Court of Appeals for the Federal Circuit only for “abuse of discretion” by the district court instead of the de novo standard that gave no deference to the district court.

These pair of decisions lowered the threshold for obtaining attorneys’ fees in patent infringement cases and increased the level of deference given to a district court’s fee-shifting determination.

These two cases will make it much easier for district courts to shift a prevailing party’s attorneys' fees to a non-prevailing party if the district court believes that the case was weak or conducted in an abusive manner. Defendants that get sued for patent infringement by non-practicing entities may elect to fight rather than settle the case because these U.S. Supreme Court decisions make it much easier for defendants to get attorneys’ fees.

On May 21, 2014, the Chairman of the Senate Judiciary Committee, Senator Patrick Leahy (D-Vt.) announced that the patent legislation to “combat” patent trolls is now on hold indefinitely because “there is not sufficient support.” Among other provisions, the legislation would have forced a plaintiff that loses a patent infringement litigation to cover the defendant’s litigation costs. While the shelving of the legislation is great news for companies like ours, there remains uncertainty in that future similar legislation may be introduced.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws or regulations could be difficult and expensive, affect the manner in which we conduct our business and negatively impact our business, prospects, financial condition and results of operations. 

Our acquisitions of patent assets may be time consuming, complex and costly, which could adversely affect our operating results.
 
Acquisitions of patent or other intellectual property assets, which are and will be critical to our business plan, are often time consuming, complex and costly to consummate. We may utilize many different transaction structures in our acquisitions and the terms of such acquisition agreements tend to be heavily negotiated. As a result, we may incur significant operating expenses and will likely be required to raise capital during the negotiations even if the acquisition is ultimately not consummated. Even if we are able to acquire particular patent assets, there is no guarantee that we will generate sufficient revenue related to those patent assets to offset the acquisition costs. While we will seek to conduct confirmatory due diligence on the patent assets we are considering for acquisition, we may acquire patent assets from a seller who does not have proper title to those assets. In those cases, we may be required to spend significant resources to defend our interest in the patent assets and, if we are not successful, our acquisition may be invalid, in which case we could lose part or all of our investment in the assets.
 
We may also identify patent or other intellectual property assets that cost more than we are prepared to spend with our own capital resources. We may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of any patent assets or, if consummated, proves to be unprofitable for us.  These higher costs could adversely affect our operating results, and if we incur losses, the value of our securities will decline.

In addition, we may acquire patents and technologies that are in the early stages of adoption in the commercial, industrial and consumer markets. Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at which our licensees will adopt our patents and technologies in their products and services. As a result, there can be no assurance as to whether technologies we acquire or develop will have value that it can monetize.

In certain acquisitions of patent assets, we may seek to defer payment or finance a portion of the acquisition price. This approach may put us at a competitive disadvantage and could result in harm to our business.
 
We have limited capital and may seek to negotiate acquisitions of patent or other intellectual property assets where we can defer payments or finance a portion of the acquisition price. These types of debt financing or deferred payment arrangements may not be as attractive to sellers of patent assets as receiving the full purchase price for those assets in cash at the closing of the acquisition. As a result, we might not compete effectively against other companies in the market for acquiring patent assets, many of whom have greater cash resources than we have. In addition, any failure to satisfy our debt repayment obligations may result in adverse consequences to our operating results.


Any failure to maintain or protect our patent assets or other intellectual property rights could significantly impair our return on investment from such assets and harm our business and our operating results.
 
Our ability to operate our new line of business and compete in the intellectual property market largely depends on the superiority, uniqueness and value of our acquired patent assets and other intellectual property. To protect our proprietary rights, we will rely on a combination of patent, trademark, and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. No assurances can be given that any of the measures we undertake to protect and maintain our assets will have any measure of success.
 
Following the acquisition of patent assets, we will likely be required to spend significant time and resources to maintain the effectiveness of those assets by paying maintenance fees and making filings with the United States Patent and Trademark Office. We may acquire patent assets, including patent applications, which require us to spend resources to prosecute the applications with the United States Patent and Trademark Office. Further, there is a material risk that patent related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or invalidity claims) will be asserted or prosecuted against us, and such assertions or prosecutions could materially and adversely affect our business. Regardless of whether any such claims are valid or can be successfully asserted, defending such claims could cause us to incur significant costs and could divert resources away from our other activities.
 
Despite our efforts to protect our intellectual property rights, any of the following or similar occurrences may reduce the value of our intellectual property:
 
·
ours applications for patents, trademarks may not be granted and, if granted, may be challenged or invalidated;
·
issued trademarks, patents may not provide us with any competitive advantages when compared to potentially infringing other properties;
·
our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or
·
our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we acquire and/or prosecute.
 
Moreover, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business in the future or from which competitors may operate. If we fail to maintain, defend or prosecute our patent assets properly, the value of those assets would be reduced or eliminated, and our business would be harmed.
 
Weak global economic conditions may cause infringing parties to delay entering into licensing agreements, which could prolong our litigation and adversely affect our financial condition and operating results.
 
Our new business plan depends significantly on worldwide economic conditions, and the United States and world economies have recently experienced weak economic conditions. Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values. This response could have a material negative effect on the willingness of parties infringing on our assets to enter into licensing or other revenue generating agreements voluntarily. Entering into such agreements is critical to our business plan, and our failure to do so could cause material harm to our business.

 
If we are unable to adequately protect our intellectual property, we may not be able to compete effectively.
 
Our ability to compete depends in part upon the strength of our proprietary rights that we own as a result of acquisition of the patent portfolios from Mesh and Solid Solar or may hereafter acquire in our technologies, brands and content. We intend to rely on a combination of U.S. and foreign patents, trademark, trade secret laws and license agreements to establish and protect our intellectual property and proprietary rights. The efforts we take to protect our intellectual property and proprietary rights may not be sufficient or effective at stopping unauthorized use of our intellectual property and proprietary rights. In addition, effective trademark, patent and trade secret protection may not be available or cost-effective in every country in which our services are made available. There may be instances where we are not able to fully protect or utilize our intellectual property in a manner that maximizes competitive advantage. If we are unable to protect our intellectual property and proprietary rights from unauthorized use, the value of our products may be reduced, which could negatively impact our new business. Our inability to obtain appropriate protections for our intellectual property may also allow competitors to enter our markets and produce or sell the same or similar products. In addition, protecting our intellectual property and other proprietary rights is expensive and diverts critical managerial resources. If any of the foregoing were to occur, or if we are otherwise unable to protect our intellectual property and proprietary rights, our business and financial results could be adversely affected.

If we are forced to resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive. In addition, our proprietary rights could be at risk if we are unsuccessful in, or cannot afford to pursue, those proceedings. We will also rely on trade secrets and contract law to protect some of our proprietary technology. We will enter into confidentiality and invention agreements with our employees and consultants. Nevertheless, these agreements may not be honored and they may not effectively protect our right to un-patented trade secrets and know-how. Moreover, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

We are subject to the information and reporting requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
 
The costs of preparing and filing annual and quarterly reports and other information with the Securities and Exchange Commission and furnishing audited reports to stockholders causes our expenses to be higher than they would have been if we were privately held. It may be time consuming, difficult and costly for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
 
If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
 
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.
 
We currently have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements. Additionally, there is a lack of formal process and timeline for closing the books and records at the end of each reporting period. Such a documented weakness could restrict our ability to timely gather, analyze and report information relative to our financial statements.
 
Because of our limited resources, there are limited controls over our information processing. There is inadequate segregation of duties consistent with control objectives. Our management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation we would need to hire additional staff. Currently, we are unable to afford to hire additional staff to facilitate greater segregation of duties but will reassess our capabilities in the following year.
 
Management believes that the issues described above are the result of the lack of scale of our operations and are intrinsic to our small size. Nonetheless, our small size and our current internal control deficiencies may have a material adverse effect on our ability to accurately and timely report our financial information which, in turn, may have a material adverse effect on our financial condition
 
As a result of our small size and our current internal control deficiencies, our financial condition, results of operation and access to capital may be materially adversely affected.

 
Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and rules implemented by the Securities and Exchange Commission have required changes in corporate governance practices of public companies. As a public company, these rules and regulations have resulted in increased compliance costs and have made certain activities more time consuming and costly. As a public company, these rules and regulations have made it more difficult and expensive for us to obtain director and officer liability insurance, and in the future we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

Our stock price may be volatile.

The market price of our common stock may be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

·
changes in our industry;
·
competitive pricing pressures;
·
our ability to obtain working capital financing;
·
additions or departures of key personnel;
·
sales of our common stock;
·
our ability to execute our business plan;
·
operating results that fall below expectations;
·
legal or regulatory developments; and
·
economic and other external factors.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. As a result, you may be unable to resell your shares at a desired price.
 
We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

There is currently a very limited trading market for our common stock and we cannot ensure that one will ever develop or be sustained.

Our shares of common stock are very thinly traded, only a small percentage of our common stock is available to be traded and the price, if traded, may not reflect our actual or perceived value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business, among other things. We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business and trading may be at a price that does not reflect the performance of our company due to, among other things, availability of sellers of our shares. If a market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms or clearing firms may not be willing to effect transactions in the securities or accept our shares for deposit in an account. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of low priced shares of common stock as collateral for any loans.

 
We anticipate having our common stock continue to be quoted for trading on the OTC Bulletin Board; however, we cannot be sure that such quotations will continue. As soon as is practicable, we anticipate applying for listing of our common stock on the NYSE MKT or other national securities exchange, assuming that we can satisfy the initial listing standards for such exchange. We currently do not satisfy the initial listing standards, and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock is otherwise rejected for listing and remain listed on the OTC Bulletin Board or suspended from the OTC Bulletin Board, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.

Our common stock is deemed a “penny stock,” which would make it more difficult for our investors to sell their shares.

Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if a company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
   
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market or upon the expiration of any statutory holding period, under Rule 144, or upon expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Our articles of incorporation allow for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.

Our stockholder rights agreement could have an adverse consequence to you and could limit your opportunity to receive a premium on our stock.

In September 2015, our board of directors approved the adoption of a stockholder rights agreement and declared a dividend distribution of one right for each outstanding share of our common stock. This stockholders rights agreement is described in more detail below under Note 10 to our audited consolidated financial statements.  The stockholder rights agreement may make it more difficult for other persons or entities, without the approval of our board of directors, to make a tender offer or otherwise acquire substantial amounts of our common stock, or to launch other takeover attempts that a stockholder might consider to be in such stockholder’s best interests.  The stockholder rights plan also may limit the price that certain investors might be willing to pay in the future for shares of our common stock.

 
ITEM 2. PROPERTIES.

We currently rent offices at 140 Broadway, 46th Floor, New York, New York 10014.

ITEM 3. LEGAL PROCEEDINGS.

In the ordinary course of business, we may pursue legal remedies to enforce our intellectual property rights. Other than ordinary routine litigation incidental to the business, we know of no material, active or pending legal proceedings against us. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder is an adverse party or has a material interest adverse to us. Following is a summary of our pending patent infringement litigation to enforce our intellectual property rights:
 
We, through our wholly-owned subsidiary, Endeavor Energy, Inc. (“Endeavor Energy”), filed a patent infringement lawsuit against Tucson Electric Power Company (“TEP”) in the United States District Court of Arizona, Case No. 4:13-CV-2396-TUC-RCC. Endeavor Energy is asserting claims of patent infringement related to U.S. Patent No. 7,366,201 (the ‘201 patent), entitled “Remote Access Energy Meter System and Method.” The lawsuit alleges that the defendant has infringed, and continues to infringe, the claims of the ‘201 patent. Endeavor requested and was granted a stay of the lawsuit against TEP because Endeavor initiated a Reissue, which results in a patent application being filed post-grant to correct an error in an issued patent where the error renders the patent wholly or partially inoperable or invalid.
 
Our wholly-owned subsidiary, Endeavor MeshTech, Inc. (“Endeavor MeshTech”), filed patent infringement lawsuits against: Zenner Performance Meters, Inc. (“Zenner”) in the United States District Court for the Eastern District of Texas; Strix Systems, Inc. (“Strix”) in the United States District Court for the Southern District of New York; Firetide, Inc. (“Firetide”) in the United States District Court for the Southern District of New York.; and S&C Electric Company (“S&C”) in the United States District Court for the Northern District of Illinois.

The lawsuits allege that Zenner, Strix, Firetide and S&C have infringed and continue to infringe the claims of U.S. Patent Nos. 7,379,981, 8,700,749, and 8,855,019.

In addition, Endeavor MeshTech filed patent infringement lawsuits against: Fluidmesh Networks LLC (“Fluidmesh”) in the United States District Court for the Northern District of Illinois; 3E Technologies International, Inc. (“3E”) in the United States District Court for the District of Maryland; and Rajant Corporation (“Rajant”) in the United States District Court for the Eastern District of Pennsylvania.

The lawsuits allege that Fluidmesh, 3E and Rajant have infringed and continue to infringe the claims of U.S. Patent Nos. 7,379,981, 8,700,749, and 8,855,019.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

 
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is currently quoted on the OTC Bulletin Board under the symbol “ENIP.” Our common stock has been quoted on the OTC Bulletin Board since July 20, 2011. Because we are quoted on the OTC Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth the high and low bid quotations for our common stock as reported on the OTC Bulletin Board for the periods indicated.

   
High
   
Low
 
Fiscal 2015
               
First Quarter
 
$
0.0240
   
$
0.0042
 
Second Quarter
   
0.0092
     
0.0004
 
Third Quarter
   
0.0007
     
0.0001
 
Fourth Quarter
   
0.0010
     
0.0001
 
                 
Fiscal 2014
               
First Quarter
 
$
1.25
   
$
0.44
 
Second Quarter
   
0.45
     
0.05
 
Third Quarter
   
0.06
     
0.01
 
Fourth Quarter
   
0.04
     
0.01
 

Holders

As of January 28, 2016, there were 2,303,191,008 shares of our common stock outstanding and there were 17 holders of record of our common stock.

Dividends

We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
 
Securities Authorized for Issuance under Equity Compensation Plans

On May 13, 2013, the Board of Directors approved the adoption of a 2013 Equity Incentive Plan (the “2013 Plan”).  The 2013 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to our employees, officers, directors and consultants.  Pursuant to the terms of the 2013 Plan, either the Board or a board committee is authorized to administer the plan, including by determining which eligible participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards. Up to 28 million shares of common stock are issuable pursuant to awards under the 2013 Plan. Unless earlier terminated by the Board, the 2013 Plan shall terminate at the close of business on May 13, 2023.

 
The following table sets forth information regarding the 2013 Plan.
Plan category
 
Number of securities underlying outstanding options, warrants, restricted stock and rights
   
Weighted-average exercise price of shares underlying outstanding options, warrants and rights
   
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
Equity compensation plans approved by security holders
   
28,000,000
   
$
0
     
0
 
Equity compensation plans not approved by security holders
   
1,169,578
     
0
     
0
 
Total
   
29,169,578
   
$
0
     
0
 

Recent Sales of Unregistered Securities

See Note 10 to our audited consolidated financial statements for information with respect to unregistered sales of securities.

Conversion of Convertible Notes into Shares of Common Stock

From November 1, 2014 to October 31, 2015, six holders of convertible notes converted an aggregate of $363,566 of principal and accrued interest into an aggregate of 1,124,294,085 shares of common stock.

From November 1, 2015 to January 28, 2016, five holders of convertible notes converted an aggregate of $89,446 of principal and accrued interest into an aggregate of 1,107,060,679 shares of common stock.

The issuance of the shares of common stock upon conversion of the convertible notes was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof, as a transaction by an issuer not involving a public offering.

Issuance of Shares for Services

On November 7, 2014, the Company issued 5,403,352 shares of common stock to our former Chief Executive Officer and Chairman of the Board, Mr. Ravinder Dhat, for services at a fair value of $109,148 ($0.0202 per share).

On November 7, 2014, the Company issued 14,150,697 shares of common stock to our current Chief Executive Officer and Chairman of the Board, Mr. Franciscus Diaba, for services at a fair value of $285,844 ($0.0202 per share).

On February 26, 2015, the Company issued 3,000,000 shares of common stock to our current Chief Executive Officer and Chairman of the Board, Mr. Franciscus Diaba, for board services at a fair value of $8,100 ($0.0027 per share).

On February 26, 2015, the Company issued 3,000,000 shares of common stock to a board member for board services at a fair value of $8,100 ($0.0027 per share).

On February 26, 2015, the Company issued 3,000,000 shares of common stock to a board member for board services at a fair value of $8,100 ($0.0027 per share).

The issuance of the shares of common stock upon exercise of the options was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof, as a transaction by an issuer not involving a public offering.

 
ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements and Associated Risks.

The information and financial data discussed below is derived from the audited consolidated financial statements of Endeavor IP, Inc. for its fiscal years ended October 31, 2015 and 2014. The consolidated financial statements of Endeavor IP, Inc. were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes of Endeavor IP, Inc. contained elsewhere in this Report. The financial statements contained elsewhere in this Report fully represent Endeavor IP, Inc.’s financial condition and operations; however, they are not indicative of the Company’s future performance. See “Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Report.

References in this report to “Endeavor IP, Inc.,” “Company,” “we,” “our,” or “us” refer to Endeavor IP, Inc. and its subsidiaries, on a consolidated basis, unless otherwise indicated or the context otherwise requires.

Our Business

General

Endeavor IP, Inc., f/k/a Finishing Touches Home Goods Inc. was formed as a corporation under the laws of the State of Nevada on December 8, 2009.  On June 14, 2012, we disposed of our wholly-owned subsidiary, Finishing Touches Home Goods, Inc. (Canada) (the “FTHG Canada”) for nominal consideration.  This subsidiary did not conduct any material operations prior to its disposition. The disposition followed a determination by management that it would be in the best interest of the Company to enter other business opportunities. The Company is now solely in the business of the development, commercialization and monetization of intellectual property assets.  Our activities generally include the acquisition, development and monetization of patents.

On May 13, 2013, the Company purchased certain intellectual property rights from Mesh Comm, LLC (“Mesh”) and Solid Solar Energy, Inc., f/k/a Spiral Energy Tech, Inc. (“Solid Solar”).  The Company acquired from Mesh two U.S. patents and one pending patent application relating to wireless communication networks, as well as all right, title and interest in all related causes of actions and other enforcement rights under or on account of any of such acquired patents in consideration for (i) Eight Hundred Thousand Dollars ($800,000) and (ii) a royalty equal to 20% of the net revenues from any Enforcement Activities or Sales Transactions (as defined in the Mesh Purchase Agreement) related to the purchased patents pursuant to the terms of a Proceeds Interest Agreement.  Additionally, the Company assumed all obligations of Mesh under that certain license agreement between Mesh and a third party licensor.

The Company acquired from Solid Solar two patents relating to remote access energy monitoring systems and electric alternating current sensors for measuring alternating currents in circuit conductors, as well as all right, title and interest in all related causes of actions and other enforcement rights under or on account of any of such acquired patents in consideration for (i) One Hundred Thousand Dollars ($100,000), (ii) 666,666 shares of common stock and (ii) a royalty equal to 20% of the net revenues from any Enforcement Activities or Sales Transactions (as defined in the Solid Solar Purchase Agreement) related to the purchased patents pursuant to the terms of a Proceeds Interest Agreement.  Additionally, the Company granted Solid Solar a personal, royalty-free, irrevocable, non-exclusive and worldwide license (without the right to sublicense) to, among other things, develop, distribute and sell Solid Solar’s products and services covered by the patents sold to the Company.

 
Upon the closing of the above described acquisitions, Mark Hunter resigned from all officer and director positions he held with us and Cameron Gray was appointed as our Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and director and Andrew Uribe was appointed as a director.  In connection with his resignation, Mr. Hunter agreed to return 84,000,000 shares of the Company’s common stock to the Company for cancellation and was issued a two year nonqualified stock option to purchase 500,000 shares of common stock at a per share exercise price of $0.75, which were fully vested upon issuance.

On May 13, 2013, our Board of Directors approved the amendment and restatement of our Bylaws in order to, among other things, include revised provisions relating to board and stockholder meetings and indemnification of officers and directors.

On May 13, 2013, our Board of Directors approved an Amended and Restated Articles of Incorporation to authorize (i) the change of our name to “Endeavor IP, Inc.” from “Finishing Touches Home Goods, Inc.,” (ii) increase our authorized capital stock to 225,000,000 shares, consisting of 200,000,000 shares of common stock and 25,000,000 shares of “Blank Check” Preferred Stock, and (iii) change the par value of our capital stock to $0.0001 per share from $0.001 per share. On May 15, 2013, we filed the Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada.
 
On May 13, 2013, we sold a 12% unsecured promissory note to an accredited investor pursuant to the terms of a Note Purchase Agreement with gross proceeds to us of $1,500,000.  The Note accrues interest at the rate of 12% per annum and is due and payable eighteen months from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part without penalty or premium.  Notwithstanding the foregoing, the maturity date of the Note shall accelerate and the Note shall become due and payable within 15 days following the date that we (i) obtain recoveries from enforcement of any patents or intellectual property rights of a minimum aggregate amount of $1,000,000 through settlement judgment or licensing and (i) we close on the sale of any equity or equity linked securities in the minimum amount of $1,000,000 net proceeds to us. On October 23, 2015, we were awarded a declaratory judgment by the Supreme Court of the State of New York, County of Onondaga, against this Note Holder. The declaratory judgment provides that the Company is no longer obligated under the promissory note. Thus, we no longer owe the principal amount plus interest under the Note.
 
On August 28, 2013, the Company announced the implementation of a forward split of its issued and outstanding common stock on a 14 for 1 basis.  All per share numbers herein are reflective of such forward split.
 
On December 24, 2013, the Board of Directors of the Company appointed Franciscus Diaba as a director of the Company. On January 3, 2014, the Company appointed Ravinder Dhat as its Chief Executive Officer and Chairman of the Board upon the resignation of Camron Gray as an officer and director of the Company.

On April 15, 2014, the U.S. Patent and Trademark Office issued U.S. Patent No. 8,700,749 (the “’749 Patent”). The ’749 Patent resulted from Patent Application No. 13/227,590 that was acquired from Mesh.

On October 7, 2014, the U.S. Patent and Trademark Office issued U.S. Patent No. 8,855,019 (the “’019 Patent”). The ’019 Patent resulted from a continuation of Patent Application No. 13/227,590. The continuation was filed by Endeavor on January 31, 2014.
 
On January 23, 2015, we reached an agreement with our Chief Executive Officer, Ravinder Dhat resulting in his resignation as our Chief Executive Officer and Chairman of the Board on January 23, 2015, but at that time Mr. Dhat remained a member of our Board of Directors. We entered into a Separation Agreement and Release (the “Separation Agreement”) with Mr. Dhat that provided for, among other things, Mr. Dhat’s agreement to forfeit in full the following items as part of the Separation Agreement: (i) waiver in full of the 2014 bonus payment; (ii) non-payment of portions of various settlement proceeds that we entered into from ongoing litigation which payment was provided to Mr. Dhat by a board resolution offering such compensation; and (iii) agreement to terminate in full any and all obligations due and owing to Mr. Dhat under the amendment agreement we and Mr. Dhat entered into on November 7, 2014 (less vested equity grants). The Separation Agreement also terminated in full Mr. Dhat’s right to receive any further compensation resulting from any litigation settlements or license agreement that we enter into after January 23, 2015. In addition, the Separation Agreement also provided for the right to receive 20% of the proceeds that we may have received if we had sold or executed a letter of intent relating to the sale of our patent portfolio prior to June 23, 2015; payment of $8,653.85 for all earned, but unused vacation time as provided for in the Dhat Initial Employment Agreement; continuation of insurance coverage for Mr. Dhat and his family for a period of six (6) months from his resignation date; acknowledgement that the covenants with respect to our confidential information (as defined in the Dhat Initial Employment Agreement) will remain in place; waiver of any non-competition or non-solicitation provisions as well as any clawback rights described in Section 10 of the Dhat Initial Employment Agreement; and  cooperation on the part of Mr. Dhat from time to time on matters that we may request and the right to retain 5,670,362 shares of restricted stock.  
 

On January 23, 2015, our Board of Directors appointed Franciscus Diaba as our new Chief Executive Officer and Chairman of the Board of Directors. We also entered into an amendment to the Employment Agreement with Franciscus Diaba that appoints him as our new Chief Executive Officer and Chairman of the Board assuming the duties formerly held by Ravinder Dhat in addition to his current role as our President.

On February 5, 2015, the Company appointed David Waldman as a director of the Company.

On February 9, 2015, Ravinder Dhat resigned from the board of directors of the Company.

On July 15, 2015, in addition to his position of Chief Executive Officer and Chairman of the Board of Directors, the Board also appointed Franciscus Diaba as General Counsel of the Company.

For the Year Ended October 31, 2015 compared to the Year Ended October 31, 2014

Revenue and Cost of Revenues

We recognized revenue of $ $1,415,256 and $ 1,395,001 for the year ended October 31, 2015 and 2014. The revenue for the current year period is the result of the settlement of eleven patent infringement lawsuits compared to four during the prior year. The cost of revenues related to these settlements during the current period were legal fees of $353,328 and inventor fees of $210,018 compared to legal fees of $563,907 and inventor fees of $178,972 for the year ended October 31, 2014. Settlement revenue compensation related to these settlements during the year ended October 31, 2015 was $353,814 compared to $418,500 for the year ended October 31, 2014. The Company accrued $150,755 and $0 for unpaid settlement revenue compensation owed to Mr. Diaba as of October 31, 2015 and 2014, respectively.
 
Operating Expenses
 
During the year ended October 31, 2015, we incurred compensation expense of $1,285,009, an increase of $825,075 or 179% from $459,934 during the year ended October 31, 2014. The primary reason for the increase was that on November 7, 2014, the Company entered into an employment agreement with Franciscus Diaba as President of the Company as further detailed elsewhere in this document. On January 23, 2015 we entered into an amendment to the employment agreement with Mr. Diaba that appoints him as our new Chief Executive Officer and Chairman of the Board assuming the duties formerly held by Ravinder Dhat in addition to his current role as our President. Except as noted above, the amendment to the employment agreement with Mr. Diaba did not modify Mr. Diaba’s the November 7, 2014 agreement. During the year ended October 31, 2015 the Company recorded $962,886 in compensation to Mr. Diaba, which excludes settlement fee compensation of $353,814 and director fees of $80,100, as a result of the agreement consisting of $300,000 in salary, a $450,000 performance bonus, and $212,886 in stock based compensation. At October 31, 2015 the Company had total accrued and unpaid compensation due, excluding accrued settlement revenue compensation, to Mr. Diaba of $684,231.
 
In addition during the year ended October 31, 2015 the Company recorded $291,021 in compensation to Ravinder Dhat, our former Chief Executive Officer and Chairman of the Board, consisting of $64,344 in salary and $226,677 in stock based compensation. During the year ended October 31, 2014 the Company recorded $394,078 in salary and stock based compensation to Mr. Dhat, which excludes settlement fee compensation of $418,500 .
 
During the year ended October 31, 2015, we incurred director fees of $131,099, a decrease of $260,748 or 67% from $391,847 during the year ended October 31, 2014. The decrease in directors fees was primarily the result of Mr. Diaba executing an employment agreement with the Company in November 2014. As a result of the employment agreement, Mr. Diaba’s compensation is now primarily recorded in compensation expense. During the year ended October 31, 2015 Mr. Diaba was paid director fees of $80,100. During the year ended October 31, 2014 Mr. Diaba was paid director fees of $346,597 for services rendered.

During the year ended October 31, 2015, we incurred professional fees of $377,397, a decrease of $75,253 or 17% compared to $452,650 during the year ended October 31, 2014. During the year ended October 31, 2015 the Company incurred a decrease in consulting fees related to business development, financial advisory services and investor relations, and a decrease in auditing and accounting fees. These decreases were partially offset by an increase in legal fees primarily related to public filing requirements, debt conversion agreements, a rights agreement entered into during the year and various employment agreements, consulting agreements and amendments thereto entered into during the year.

 
During the year ended October 31, 2015, we incurred other general and administrative expenses of $258,052, a decrease of $22,018 or 8% from $280,070 during the year ended October 31, 2014. The decrease primarily resulted from a decrease in travel and travel related expenses and a decrease in miscellaneous service fees. The decrease was partially offset by an increase in insurance expense and other miscellaneous overhead expenses which we incurred during the year ended October 31, 2015 due to an increase in operations compared to the year ended October 31, 2014.
 
Other Income (Expense)-net: Other income (expenses) consist primarily of gains and losses on the change in fair value of derivative liabilities, gains and losses on extinguishment of debt and interest expense all primarily related to the Company’s convertible promissory notes, promissory notes and warrant issuances.

Other income (expenses) - net increased by $2,573,566 to $1,781,276 during the year ended October 31, 2015 as compared to other income (expenses) - net of $(792,290) during the year ended October 31, 2014. For the year ended October 31, 2015 other income (expenses) consisted of $(747,797) in interest expense, a loss on change in fair value of derivative liabilities of $(253,487), a gain on extinguishment of debt of $2,718,560, and a gain on settlement of liabilities of $64,000. For the year ended October 31, 2014 other income (expenses) consisted of $(431,906) in interest expense, a loss on change in fair value of derivative liabilities of $(365,404), and a gain on foreign currency transaction of $5,020.

On March 26, 2015 the Company filed a declaratory judgment action against certain noteholders and on October 23, 2015 the Company was awarded a declaratory judgment by the Supreme Court of the State of New York, County of Onondaga. The declaratory judgment provides that the Company is no longer obligated under certain notes totaling $1.9 million plus accrued interest. The Company recorded a gain on extinguishment of debt as a result of the judgment in the amount of $2,698,979 during the year ended October 31, 2015. In addition, on August 21, 2015, the Company entered into a note termination agreement with a note holder. The note balance including accrued interest on the date of the termination agreement was $25,263. The noteholder agreed to accept a $15,000 cash payment in full payment of the note. Upon paying off the note, the note and all obligations were terminated with no remaining obligations due by the Company. The Company recorded a gain on extinguishment of debt as a result of the note termination agreement in the amount of $19,581 during the year ended October 31, 2015.
 
Net Income / Loss

For the year ended October 31, 2015, we had net income of $227,815, as compared to a net loss of $(2,148,175) for the year ended October 31, 2014. The increase in net income compared to the prior year net loss was primarily attributable to the gain on extinguishment of debt as discussed above partially offset by an increase in operating expenses and other expenses as detailed above.
 
Liquidity and Capital Resources
 
As of October 31, 2015 and 2014, we had cash balances of $87,589 and $210,704, respectively.  As of October 31, 2015, we had a working capital deficit of $1,443,543, a decrease of $1,750,856 or 55% compared to a working capital deficit of $3,194,399 at October 31, 2014.   The change is primarily a result of decreases in accounts payable and accrued expenses, notes payable and accrued interest on notes payable and a decrease in the current portion of derivative liabilities. These decreases were partially offset by an increase in   accrued officer compensation.
 
Net cash used in operating activities for the year ended October 31, 2015 was $230,015, a decrease of $196,331 or 46% compared with net cash used in operating activities of $426,346 for the year ended October 31, 2014.  

Cash used in operating activities consist of net income (loss) adjusted for certain non-cash items, including stock-based compensation expense, depreciation, amortization, changes in fair value of derivative liabilities, gain on extinguishment of debt, as well as the effect of changes in working capital and other activities.

The adjustments for the non-cash items decreased from the year ended October 31, 2014 to the year ended October 31, 2015 primarily attributed to a decrease in stock-based compensation expense as a result of a lower fair value of equity awards issued during the year ended October 31, 2015 and a decrease in loss on change in fair value of derivative liabilities due primarily to the mark to market of the Company’s derivatives embedded in the convertible notes and warrants. These decreases are offset by an increase in gain on extinguishment of debt due to

 
the amendment of a debt instrument, the settlement of certain liabilities and a declaratory judgment awarded to the Company. In addition, the net increase in cash from changes in working capital activities from the year ended October 31, 2014 to the year ended October 31, 2015 primarily consisted of an in increase in accounts receivable, a decrease in accounts payable and accrued expenses primarily due to a decrease in accrued professional fees, interest accrued on the Company’s debt instruments, and an increase in accrued compensation to an officer.

Net cash used in investing activities for the year ended October 31, 2015 was $0. Net cash used in investing activities for the year ended October 31, 2014 was $4,801 for the purchase of equipment.
 
During the year ended October 31, 2015, we raised gross proceeds of $132,000 through the issuance of convertible notes.. We also paid $10,100 in debt issuance costs in relation to the convertible notes. During the year ended October 31, 2014, we raised gross proceeds of $372,000 through the issuance of convertible notes. We also paid $22,650 in debt issuance costs in relation to the convertible notes.
 
For the long term; however, we must raise additional funds or increase revenues from licensing our patents in order to fund our continuing operations.  We may not be successful in our efforts to raise additional funds or achieve profitable operations. Even if we are able to raise additional funds through the sale of our equity or debt securities, or loans from financial institutions, our cash needs could be greater than anticipated in which case we could be forced to raise additional capital. Management believes that that the market value of our common stock as traded on the OTCBQB is significantly undervalued and the market has underestimated the value of our patent portfolio. Management will consider various options to increase the value of our common stock.  Management has informed the members of the board of directors that it will not continue to defer compensation and have initiated a dialog to consider various alternatives given our lack of liquidity.
 
At the present time, aside from that identified above, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all. These conditions raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional capital when needed. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.

Going Concern
 
As reflected in the accompanying consolidated financial statements, we incurred a net loss from operations of $1,553,461 and had net cash used in operations of $230,015 for the year ended October 31, 2015 and a working deficit and stockholders’ deficit of $1,443,543 and $853,559, respectively as of October 31, 2015.  These factors raise substantial doubts about our ability to continue as a going-concern.
 
We expect to incur losses as we implement our business plan to develop and commercialize intellectual property assets. During the prior fiscal year, our cash flow requirements were primarily met by revenues from licensing efforts. Management expects to keep operating costs to a minimum until sufficient cash is available through financing or operating activities. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. If we are unable to generate sufficient revenues or obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements for our operations. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
 
Recent Accounting Pronouncements

In May 2014, the FASB issued the FASB Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)

This guidance amends the existing FASB Accounting Standards Codification, creating a new Topic 606, Revenue from Contracts with Customer. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 
To achieve that core principle, an entity should apply the following steps:

1.  
Identify the contract(s) with the customer
2.  
Identify the performance obligations in the contract
3.  
Determine the transaction price
4.  
Allocate the transaction price to the performance obligations in the contract
5.  
Recognize revenue when (or as) the entity satisfies a performance obligations

The ASU also provides guidance on disclosures that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue recognition and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about the following:

1.  
Contracts with customers – including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations)
2.  
Significant judgments and changes in judgments – determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations
3.  
Assets recognized from the costs to obtain or fulfill a contract.

ASU 2014-09 is effective for periods beginning after December 15, 2016, including interim reporting periods within that reporting period for all public entities.  Early application is not permitted. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-09 on the consolidated financial statements.
 
In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-12 on the consolidated financial statements.

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 
If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

a.
Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
b.
Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c.
Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

a.
Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
b.
Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c.
Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has elected to adopt early application of Accounting Standards Update No. 2014-15

In November 2014, the FASB issued the FASB Accounting Standards Update No. 2014-16 “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”). The amendments in ASU No. 2014-16 clarify that an entity must take into account all relevant terms and features when reviewing the nature of the host contract. Additionally, the amendments state that no one term or feature would define the host contract’s economic characteristics and risks. Instead, the economic characteristics and risks of the hybrid financial instrument as a whole would determine the nature of the host contract. The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-16 on the consolidated financial statements.
 
In February 2015, the FASB issued Accounting Standards Update No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact, if any, of the adoption of ASU 2015-02 on the consolidated financial statements.

In March 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). The Company is currently assessing the impact, if any, of the adoption of ASU 2015-03 on the consolidated financial statements.

In August 2015, the FASB issued the FASB Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606):Deferral of the Effective Date” (“ASU 2015-14”).The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the impact, if any, of the adoption of ASU 2015-04 on the consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Endeavor IP, Inc. and Subsidiaries
 
We have audited the balance sheets of Endeavor IP, Inc. and Subsidiaries (the “Company”) as of October 31, 2015 and 2014 and the related statements of operations and comprehensive income (loss), changes in stockholders’ deficit and cash flows for the fiscal years then ended.  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 the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  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 the Company as of October 31, 2015 and 2014 and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America.

The financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at October 31, 2015, net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Li and Company, PC
Li and Company, PC

Skillman, New Jersey
January 28, 2016


ENDEAVOR IP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
October 31, 2015
   
October 31, 2014
 
             
CURRENT ASSETS:
           
 Cash
  $ 87,589     $ 210,704  
 Accounts receivable
    50,000       -  
 Prepaid expenses
    -       10,604  
 Total Current Assets
    137,589       221,308  
                 
 Property and equipment, net
    3,031       4,633  
 Debt issuance costs
    1,018       14,981  
 Patents, net
    587,510       714,128  
                 
 Total Assets
  $ 729,148     $ 955,050  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES:
               
 Accounts payable and accrued expenses
  $ 122,697     $ 274,375  
 Notes payable
    -       1,900,000  
 Convertible notes payable - net of debt discount
    154,402       141,152  
 Payroll tax payable
    87,583       64,132  
 Accrued compensation - officers
    834,986       -  
 Accrued interest
    11,052       483,909  
 Derivative liabilities, current portion
    370,412       552,139  
 Total Current Liabilities
    1,581,132       3,415,707  
                 
Long Term Liabilities
               
 Derivative liabilities, net of current portion
    1,575       175,587  
Total Long Term Liabilities
    1,575       175,587  
                 
Total Liabilities
    1,582,707       3,591,294  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' DEFICIT:
               
Preferred Stock par value $0.0001: 25,000,000 shares authorized; none issued and outstanding
               
Common stock par value $0.0001: 3,000,000,000 shares authorized; 1,196,130,329 and 44,086,726 shares issued and outstanding at October 31, 2015 and October 31, 2014, respectively
    119,613       4,409  
 Additional paid-in capital
    2,157,038       717,372  
 Accumulated deficit
    (3,119,403 )     (3,347,218 )
 Accumulated other comprehensive income (loss):
               
Foreign currency translation gain (loss)
    (10,807 )     (10,807 )
                 
 Total Stockholders' Deficit
    (853,559 )     (2,636,244 )
                 
 Total Liabilities and Stockholders' Deficit
  $ 729,148     $ 955,050  
 
See accompanying notes to the consolidated financial statements.


   
For the year
   
For the year
 
   
Ended
   
Ended
 
   
October 31, 2015
   
October 31, 2014
 
 REVENUE
  $ 1,415,256     $ 1,395,001  
                 
 COST OF REVENUES
               
 Legal and inventor fees
    563,346       742,879  
 Settlement revenue fees and compensation
    353,814       418,500  
                 
 GROSS MARGIN
    498,096       233,622  
                 
 OPERATING EXPENSES
               
 Compensation
    1,285,009       459,934  
 Director fees
    131,099       391,847  
 Professional fees
    377,397       452,650  
 General and administrative
    258,052       280,070  
                 
 Total operating expenses
    2,051,557       1,584,501  
                 
 (LOSS) FROM OPERATIONS
    (1,553,461 )     (1,350,879 )
                 
 OTHER INCOME (EXPENSE):
               
 Gain on extinguishment of debt
    2,718,560       -  
 Gain on settlement of accounts payable
    64,000       -  
 Interest expense
    (747,797 )     (431,906 )
 Change in fair value of derivative liabilities
    (253,487 )     (365,404 )
 Foreign currency transaction gain (loss)
    -       5,020  
                 
 Other income (expense), net
    1,781,276       (792,290 )
                 
 INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAX PROVISION
    227,815       (2,143,169 )
                 
 INCOME TAX PROVISION
    -       -  
                 
 INCOME (LOSS) FROM CONTINUING OPERATIONS
    227,815       (2,143,169 )
                 
 NET INCOME (LOSS)
    227,815       (2,143,169 )
                 
 OTHER COMPREHENSIVE LOSS:
               
 Foreign currency translation loss
    -       (5,006 )
                 
 COMPREHENSIVE INCOME (LOSS)
  $ 227,815     $ (2,148,175 )
                 
 NET INCOME (LOSS) PER SHARE - BASIC:
  $ 0.00     $ (0.05 )
 NET INCOME (LOSS) PER SHARE - DILUTED:
  $ 0.00     $ (0.05 )
                 
 WEIGHTED AVERAGE SHARE OUTSTANDING - BASIC
    335,566,621       43,745,355  
 WEIGHTED AVERAGE SHARE OUTSTANDING - DILUTED
    1,905,580,811       43,745,355  
 
See accompanying notes to the consolidated financial statements.


ENDEAVOR IP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE FISCAL YEARS ENDED OCTOBER 31, 2015 AND 2014

   
Common stock, $0.0001
   
Additional
Paid-in Capital
   
Accumulated
Deficit
   
Accumulated other comprehensive Income (Loss)
   
Total
Stockholders'
Deficit
 
    Par Value              Foreign      
   
Number
of Shares
   
Amount
           
currency
translation
     
                                                 
 Balance, October 31, 2013
    42,847,621     $ 4,285     $ 124,875     $ (1,204,049 )   $ (5,801 )   $ (1,080,690 )
                                                 
Stock issued for services - related party ($0.72 - $0.735/share)
    1,172,441       117       860,127       -       -       860,244  
Stock issued for services - related party ($0.72 - $0.735/share)
                    (860,244 )     -       -       (860,244 )
Stock issued for services - ($1.05/share)
    50,000       5       52,495       -       -       52,500  
Stock issued for services - ($0.43/share)
    50,000       5       35,995       -       -       36,000  
Stock issued for services - ($0.12/share)
    100,000       10       27,992       -       -       28,002  
Other comprehensive income (loss)
                                               
Foreign currency translation gain (loss)
    -       -       -       -               -  
Recognition of deferred compensation - related party
    -       -       -               -       -  
Options granted for services rendered - officer
    -       -       260,597       -       -       260,597  
Reversal of unvested deferred compensation - related party
    (133,336 )     (13 )     (12,472 )     -       -       (12,485 )
                                                 
Comprehensive income (loss)
                                               
Foreign currency translation gain (loss)
                                    (5,006 )     (5,006 )
Net loss
    -       -       -       (2,143,169 )     -       (2,143,169 )
Total comprehensive income (loss)
                                            (2,148,175 )
                                                 
 Balance, October 31, 2014
    44,086,726       4,409       717,372       (3,347,218 )     (10,807 )     (2,636,244 )
                                                 
Stock issued for services - related party ($0.0027 - $0.0202/share)
    27,749,518       2,775       388,989       -       -       391,764  
Options granted for services rendered - officers
    -       -       72,099       -       -       72,099  
Conversion of notes to equity
    1,124,294,085       112,429       251,137                       363,566  
Derivative cease to exist upon conversion of notes
                    727,441                       727,441  
                                                 
Comprehensive income (loss)
                                               
Net income
                            227,815               227,815  
Total comprehensive income (loss)
                                            227,815  
                                                 
 Balance, October 31, 2015
    1,196,130,329     $ 119,613     $ 2,157,038     $ (3,119,403 )   $ (10,807 )   $ (853,559 )
 
See accompanying notes to the consolidated financial statements.


ENDEAVOR IP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2015 AND 2014
 
   
For the year
   
For the year
 
   
Ended
   
Ended
 
   
October 31, 2015
   
October 31, 2014
 
 CASH FLOWS FROM OPERATING ACTIVITIES:
           
 Net income (loss)
  $ 227,815     $ (2,143,169 )
 Adjustments to reconcile net income (loss) to net cash used in operating activities
               
 Depreciation
    1,602       168  
 Stock based compensation
    463,863       592,621  
 Gain on settlement of accounts payable
    (64,000 )     -  
 Gain on extinguishment of debt
    (2,718,560 )      -  
 Amortization of patents
    126,618       126,619  
 Amortization of debt issuance costs
    24,063       7,669  
 Accretion of debt discount
    375,559       131,474  
 Interest expense - conversion of notes
    2,190        -  
 Change in fair value of derivative liabilities
    253,487       365,404  
 Changes in operating assets and liabilities
               
 Assets of discontinued operations
    -       1,054  
 Liabilities of discontinued operations
    -       (1,557 )
 Prepaid expenses
    10,604       (4,104 )
 Accounts receivable
    (50,000 )      -  
 Accounts payable and accrued expenses
    (87,678 )     184,158  
 Accrued interest
    345,985       292,763  
 Payroll taxes payable
    23,451       60,554  
 Accrued compensation-officers
    834,986       (40,000 )
                 
 NET CASH USED IN OPERATING ACTIVITIES
    (230,015 )     (426,346 )
                 
 CASH FLOWS FROM INVESTING ACTIVITIES:
               
 Purchase of equipment
    -       (4,801 )
                 
 NET CASH USED IN INVESTING ACTIVITIES
    -       (4,801 )
                 
 CASH FLOWS FROM FINANCING ACTIVITIES
               
 Repayments on convertible notes payable
    (15,000 )     -  
 Proceeds from convertible notes payable
    132,000       372,000  
 Cash paid for debt issuance costs
    (10,100 )     (22,650 )
                 
 NET CASH PROVIDED BY FINANCING ACTIVITIES
    106,900       349,350  
                 
 EFFECT OF EXCHANGE RATE CHANGES ON CASH
    -       (5,006 )
                 
 NET CHANGE IN CASH
    (123,115 )     (86,803 )
                 
 Cash at beginning of year
    210,704       297,507  
                 
 Cash at end of year
  $ 87,589     $ 210,704  
                 
 NON CASH FINANCING AND INVESTING ACTIVITIES:
               
 Stock issued upon conversion of notes
  $ 361,376     $ -  
 Cancellation of shares - former related party
  $ -     $ 27,240  
 Derivative cease to exist upon conversion of notes
  $ 727,441     $ -  
 Debt discount recorded on convertible debt and warrants
  $ 138,005     $ 362,322  
 
See accompanying notes to the consolidated financial statements.
 

 
F-5

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements

Note 1 - Nature of Operations

Nature of Operations and Discontinued Operations

Endeavor IP, Inc.

Endeavor IP, Inc. (“Endeavor” or the “Company”), was incorporated under the laws of the State of Nevada on December 8, 2009.

On January 13, 2012, Mark Hunter, the Company’s former officer and director, formed a private limited company Endeavour Principle Capital Limited (“Endeavour UK”), a corporation in the United Kingdom, on behalf of the Company and later transferred the 100% ownership to the Company at no charge.

On May 13, 2013, the Company decided to no longer operate Endeavor UK.  As a result, this subsidiary is reported as a discontinued operation.

In accordance with ASC Topic 205-20 “Presentation of Financial Statements—Discontinued Operations” (ASC 205-20), the Company determined that the wind down of this entity should be classified as “to be disposed of other than by sale” at July 31, 2013.
  
A long-lived asset to be disposed of other than by sale (for example, by abandonment, in an exchange measured based on the recorded amount of the nonmonetary asset relinquished, or in a distribution to owners in a spinoff) shall continue to be classified as held and used until it is disposed of. The guidance on long-lived assets to be held and used in ASC No.’s 360-10-35, 360-10-45, and 360-10-50 shall apply while the asset is classified as held and used. If a long-lived asset is to be abandoned or distributed to owners in a spinoff together with other assets (and liabilities) as a group and that disposal group is a component of an entity, paragraphs 205-20-45-1 through 45-5 and 205-20-50-5 shall apply to the disposal group at the date it is disposed of.

The Company has classified the UK subsidiary as discontinued operations and its results of operations, financial position and cash flows are separately reported for all periods presented.

Endeavor UK was inactive for the reporting periods presented. During the year ended October 31, 2014, the Company elected to write-off the assets and liabilities of Endeavor UK and recorded a gain of $489.

Name Change and Change in Business

Effective May 15, 2013, the Company filed with the State of Nevada, a Certificate of Amendment to its Articles of Incorporation, changing its name from Finishing Touches Home Goods, Inc. to Endeavor IP, Inc.

On May 13, 2013, Endeavor, through its wholly owned subsidiary IP Acquisition Sub I, Inc. purchased certain intellectual property rights from Mesh Comm, LLC (“Mesh”) under the terms of a patent purchase agreement. Mesh was incorporated in the State of Georgia on November 7, 2008. Subsequent to the purchase IP Acquisition Sub I, Inc. transferred the intellectual property to Endeavor MeshTech, Inc. See below regarding the formation of Endeavor MeshTech, Inc. IP Acquisition Sub I, Inc. is currently inactive.

On May 13, 2013, Endeavor, through its wholly owned subsidiary IP Acquisition Sub I, Inc. purchased certain intellectual property rights from Solid Solar Energy, Inc., n/k/a Spiral Energy Tech, Inc. under the terms of a patent purchase agreement. Subsequent to the purchase IP Acquisition Sub II, Inc. transferred the intellectual property to Endeavor Energy, Inc. See below regarding the formation of Endeavor Energy, Inc.
 
The Company is engaged in the commercialization and development of intellectual property assets in the United States. The Company actively pursues licensing revenues by providing a license to its intellectual property to those entities that wish to acquire a right to use the technology. The intellectual property was acquired from a third parties and includes U.S. issued patents and applications.

 
F-6

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Formation of Subsidiaries to Acquire Intellectual Property

On May 6, 2013, the Company formed a wholly-owned subsidiary in the State of Delaware, Endeavor MeshTech, Inc. (“MeshTech”). MeshTech owns the two patents and one patent application acquired in connection with the business acquisition of Mesh Comm, LLC.

On July 8, 2013, the Company formed a wholly-owned subsidiary in the State of Delaware, Endeavor Energy, Inc. (“Endeavor Energy”).  Endeavor Energy owns the patents acquired from Solid Solar Energy, Inc. under the terms of a patent purchase agreement.  
 
Note 2 - Significant and Critical Accounting Policies

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application.  Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of Presentation

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fiscal Year-End

The Company elected October 31st as its fiscal year ending date.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i)           Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

(ii)           Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.

 
F-7

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
(iii)             Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes.  The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
 
(iv)             Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, or other capital-raising transaction, among other factors.

(v)             Estimates and assumptions used in valuation of derivative liability and equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value derivative liability, share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Principles of Consolidation and Corporate Structure

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification ("ASC") to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 
F-8

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
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
 
               
Endeavor MeshTech, Inc.
 
Delaware
 
May 6, 2013
   
100
%
                 
Endeavor Energy, Inc.
 
Delaware
 
July 8, 2013
   
100
%

All inter-company balances and transactions have been eliminated.
 
Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.  These reclassifications had no effect on reported losses.
 
Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
 
Level 1
 
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2
 
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3
 
Pricing inputs that are generally unobservable inputs and not corroborated by market data.
 
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued expenses, payroll tax payable and accrued interest approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable and notes payable approximate their fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at October 31, 2015 and 2014.
 
The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liability at every reporting period and recognizes gains or losses in the statements of operations that are attributable to the change in the fair value of the derivative conversion feature and warrant liability.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 
F-9

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities – Derivative conversion features

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability and derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the consolidated statements of operations that are attributable to the change in the fair value of the derivative liabilities.
 
Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
 
Pursuant to ASC Paragraphs 360-10-35-29 through 35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information communicated to others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity.  For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with which to estimate fair value.
 
Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 
F-10

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Accounts Receivable and Allowance for Doubtful Accounts
 
Pursuant to FASB ASC Paragraph 310-10-35-47, trade receivables that management has the intent and ability to hold for the foreseeable future shall be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. The Company follows FASB ASC Paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC Paragraph 310-10-35-9, losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) the amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative expenses, if any.
 
Pursuant to FASB ASC Paragraph 310-10-35-41, credit losses for trade receivables (uncollectible trade receivables), which may be for all or part of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall be recorded when received. The Company charges off its trade account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
 
The Company had no bad debt expense for the reporting period ended October 31, 2015 or 2014.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

   
Estimated Useful Life
(Years)
 
         
Computer equipment
   
3
 

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

Debt Issuance Costs

Debt issuance costs are amortized using the straight line method over the terms of the notes.

Intangible Assets Other Than Goodwill

The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill.  Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over the estimated useful lives of the respective assets as follows:

Patent portfolios 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.

 
F-11

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment.
 
Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
 
Pursuant to Section 850-10-20 the Related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b). Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of the Company and members of their immediate families; (e.) management of the Company and members of their immediate families; (f.) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g.) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
 
Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
Derivative Liability

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification.  The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense.  Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.  Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date.  Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 
F-12

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock.  Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.   The adoption of Section 815-40-15 has affected the accounting for (i) certain freestanding warrants that contain exercise price adjustment features and (ii) convertible bonds issued by foreign subsidiaries with a strike price denominated in a foreign currency.

The Company marks to market the fair value of the embedded derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative warrants as other income or expense in the consolidated statements of operations and comprehensive income (loss).

The Company utilizes the Lattice model that values the liability of the derivative warrants based on a probability weighted discounted cash flow model.  The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument.  Therefore, the fair value may not be appropriately captured by simple models.  In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives).  The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features.  Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.).  Projections were then made on the underlying factors which led to potential scenarios.  Probabilities were assigned to each scenario based on management projections.  This led to a cash flow projection and a probability associated with that cash flow.  A discounted weighted average cash flow over the various scenarios was completed to determine the value of the derivative warrants.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
 
Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 
F-13

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Revenue is recognized, for paid-up licenses, as of the date each license agreement or settlement is signed, or when an enforceable agreement is reached.

The Company makes estimates and judgments when determining whether the collectability of fees receivable from licensees is reasonably assured. The Company assesses the collectability of fees receivable based on a number of factors, including past transaction history and the credit-worthiness of licensees. If it is determined that collection is not reasonably assured, the fee is recognized when collectability becomes reasonably assured, assuming all other revenue recognition criteria have been met, which is generally upon receipt of cash for transactions where collectability may have been an issue. The Company’s estimates regarding collectability impact the actual revenues recognized each period and the timing of the recognition of revenues. The Company’s assumptions and judgments regarding future collectability could differ from actual events and thus materially impact our financial position and results of operations.

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

During the year ended October 31, 2015, the Company entered into eleven settlement agreements. During the year ended October 31, 2014, the Company entered into four settlement agreements. Revenues from patent enforcement activities accounted for 100% of revenues since the Company’s inception.

Costs of Revenue

Costs of revenue include the costs and expenses incurred in connection with the Company’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees and other patent related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties. These expenses are included in the consolidated statements of operations in the period that the related revenues are recognized.

The Company pays approximately 25% to 40% of gross recoveries from litigation settlements to its legal counsel. These fees are based upon a gradual scale as negotiated between the Company and its legal counsel.
 
Settlement revenue fees and compensation include the costs and expenses incurred in connection with the Company’s patent licensing and enforcement activities for services provided pursuant to the employment agreement of the Company’s CEO, President and General Counsel. The Company pays approximately 25% to 30% of gross recoveries from litigation settlements. These expenses are included in the consolidated statements of operations in the period that the related revenues are recognized.
 
Costs of revenue do not include expenses related to product development, integration or support, as these are included in general and administrative expenses.

Stock-Based Compensation for Obtaining Employee Services

The Company accounts for share-based payment transactions issued to employees under the guidance of the Topic 718 Compensation—Stock Compensation of the FASB Accounting Standards Codification (“ASC Topic 718”).

Pursuant to ASC Section 718-10-20 an employee is an individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. Internal Revenue Service (“IRS”) Revenue Ruling 87-41. A non-employee director does not satisfy this definition of employee. Nevertheless, non-employee directors acting in their role as members of a board of directors are treated as employees if those directors were elected by the employer’s shareholders or appointed to a board position that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted to non-employee directors for their services as directors. Awards granted to non-employee directors for other services shall be accounted for as awards to non-employees.

 
F-14

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Pursuant to ASC Paragraphs 718-10-30-2 and 718-10-30-3 a share-based payment transaction with employees shall be measured based on the fair value of the equity instruments issued and an entity shall account for the compensation cost from share-based payment transactions with employees in accordance with the fair value-based method, i.e., the cost of services received from employees in exchange for awards of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments issued or the fair value of the liabilities incurred/settled.

Pursuant to ASC Paragraphs 718-10-30-6 and 718-10-30-9 the measurement objective for equity instruments awarded to employees is to estimate the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example, to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected volatility, at the grant date. As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation technique such as an option pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic value, that is, an instrument that has time value.

If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in its most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
 
a.
The exercise price of the option.
 
b.
The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 
c.
The current price of the underlying share.
 
d.
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 

 
F-15

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
e.
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 
f.
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
 
Pursuant to ASC Paragraphs 718-10-30-11 and 718-10-30-17 a restriction that stems from the forfeit ability of instruments to which employees have not yet earned the right, such as the inability either to exercise a non-vested equity share option or to sell non-vested shares, is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions are taken into account by recognizing compensation cost only for awards for which employees render the requisite service and a non-vested equity share or non-vested equity share unit awarded to an employee shall be measured at its fair value as if it were vested and issued on the grant date.

Pursuant to ASC Paragraphs 718-10-35-2 and 718-10-35-3 the compensation cost for an award of share-based employee compensation classified as equity shall be recognized over the requisite service period, with a corresponding credit to equity (generally, paid-in capital). The requisite service period is the period during which an employee is required to provide service in exchange for an award, which often is the vesting period.  The total amount of compensation cost recognized at the end of the requisite service period for an award of share-based compensation shall be based on the number of instruments for which the requisite service has been rendered (that is, for which the requisite service period has been completed). An entity shall base initial accruals of compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. That estimate shall be revised if subsequent information indicates that the actual number of instruments is likely to differ from previous estimates. The cumulative effect on current and prior periods of a change in the estimated number of instruments for which the requisite service is expected to be or has been rendered shall be recognized in compensation cost in the period of the change. Previously recognized compensation cost shall not be reversed if an employee share option (or share unit) for which the requisite service has been rendered expires unexercised (or unconverted).

Under the requirement of ASC Paragraph 718-10-35-8 the Company made a policy decision to recognize compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).
 
Pursuant to ASC paragraphs 505-50-25-6 and 505-50-25-7, a grantor shall recognize the goods acquired or services received in a share-based payment transaction when it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually receives goods or services if it first exchanges share-based payment for an enforceable right to receive those goods or services. Nevertheless, the goods or services themselves are not recognized before they are received. If fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

 
F-16

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.  The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

a.
The exercise price of the instrument.
 
b.
The expected term of the instrument, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 
c.
The current price of the underlying share.
 
d.
The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 

 
F-17

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
e.
The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 
f.
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
 
Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Deferred Tax Assets and Income Tax Provision
 
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 
F-18

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Earnings per Share
 
Earnings Per Share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share.  EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period.  Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from net income (loss).  The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder.  The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions.  Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of the if-converted method.  The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive.
 
The Company’s contingent shares issuance arrangement, stock options or warrants are as follows:
 
   
Year
   
Year
 
   
Ended
   
Ended
 
   
October 31, 2015
   
October 31, 2014
 
             
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
 
Warrants
   
5,248,619
     
55,800
 
Unvested restricted common shares
   
8,108,631
     
-
 
Convertible notes payable
   
1,565,959,875
     
54,235,022
 
     
1,579,317,125
     
56,955,703
 

There were approximately 1,579,317,125 potentially outstanding dilutive common shares for the year ended October 31, 2015. Since the Company incurred a net loss for year ended October 31, 2014, the inclusion of any common stock equivalents would have been anti-dilutive.
 
Shares outstanding
 
Shares outstanding include shares of unvested restricted stock. Unvested restricted stock included in reportable shares outstanding was 8,108,631 shares as of October 31, 2015. Shares of unvested restricted stock are excluded from our calculation of basic weighted average shares outstanding, but their dilutive impact is added back in the calculation of diluted weighted average shares outstanding.

 
F-19

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Foreign Currency Translation

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars.  Section 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. Pursuant to Section 830-10-45, the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.

The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered.  If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the consolidated statements of income and comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the consolidated statements of income and comprehensive income (loss).  If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of income and comprehensive income (loss).

Based on an assessment of the factors discussed above, the management of the Company determined the relevant subsidiaries’ local currencies to be their respective functional currencies.

The financial records of the Company's discontinued subsidiaries are maintained in their local currency, which is the functional currency.  Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date.  Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements.  Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders’ equity.
 
Foreign Currency Transactions

The Company has bank accounts in foreign currency. The balances 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 condensed consolidated statement of operations. The Company did not enter into any financial instruments to offset the impact of foreign currency fluctuations.

 
F-20

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification. 
 
Subsequent Events
 
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
 
Recently Issued Accounting Pronouncements
 
In May 2014, the FASB issued the FASB Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)

This guidance amends the existing FASB Accounting Standards Codification, creating a new Topic 606, Revenue from Contracts with Customer. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To achieve that core principle, an entity should apply the following steps:

1.  
Identify the contract(s) with the customer
2.  
Identify the performance obligations in the contract
3.  
Determine the transaction price
4.  
Allocate the transaction price to the performance obligations in the contract
5.  
Recognize revenue when (or as) the entity satisfies a performance obligations

The ASU also provides guidance on disclosures that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue recognition and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about the following:

1.  
Contracts with customers – including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations)
2.  
Significant judgments and changes in judgments – determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations
3.  
Assets recognized from the costs to obtain or fulfill a contract.

ASU 2014-09 is effective for periods beginning after December 15, 2016, including interim reporting periods within that reporting period for all public entities.  Early application is not permitted. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-09 on the consolidated financial statements.

 
F-21

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-12 on the consolidated financial statements.

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

a.
Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
b.
Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c.
Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

a.
Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern

 
F-22

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
b.
Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
c.
Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has elected to adopt early application of Accounting Standards Update No. 2014-15

In November 2014, the FASB issued the FASB Accounting Standards Update No. 2014-16 “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”). The amendments in ASU No. 2014-16 clarify that an entity must take into account all relevant terms and features when reviewing the nature of the host contract. Additionally, the amendments state that no one term or feature would define the host contract’s economic characteristics and risks. Instead, the economic characteristics and risks of the hybrid financial instrument as a whole would determine the nature of the host contract. The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company is currently assessing the impact, if any, of the adoption of ASU 2014-16 on the consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact, if any, of the adoption of ASU 2015-02 on the consolidated financial statements.

In March 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). The Company is currently assessing the impact, if any, of the adoption of ASU 2015-03 on the consolidated financial statements.

In August 2015, the FASB issued the FASB Accounting Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606):Deferral of the Effective Date” (“ASU 2015-14”).The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the impact, if any, of the adoption of ASU 2015-04 on the consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

 
F-23

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Note 3 – Going Concern

The Company has elected to adopt early application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the consolidated financial statements, the Company had an accumulated deficit at October 31, 2015 and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
  
The Company is attempting to further implement its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations.  While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering or other capital-raising transaction, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering or other capital-raising transaction.
 
The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
Note 4 - Patents and Cost of Revenues
 
On May 13, 2013, the Company, through its wholly owned subsidiary IP Acquisition Sub I, Inc. purchased two patents from Mesh under the terms of a patent purchase agreement (“Patent Purchase Agreement”).
 
Under the terms of the Patent Purchase Agreement, in exchange for $800,000 and a 20% royalty on future net revenues associated with enforcement activities, Endeavor acquired from Mesh two U.S. patents and one pending patent application relating to wireless communication networks, as well as all right, title and interest in all related causes of actions and other enforcement rights under or on account of any of such acquired patents. Endeavor assumed all obligations of Mesh under that certain license agreement.
 
For the year ended October 31, 2015 and 2014, the Company recognized $210,018 and $178,972, respectively, as inventor fee expense and recorded it as a component of cost of revenue.

The $800,000 is classified as patents.  In connection with this transaction, no other assets were acquired or liabilities assumed.

On May 13, 2013, the Company, through its wholly owned subsidiary IP Acquisition Sub I, Inc. purchased certain patents from Solid Solar, n/k/a Spiral Energy Tech, Inc. under the terms of a patent purchase agreement.

In connection with this purchase of patents held by Spiral Energy Tech, Inc., the Company paid $100,000 in cash and issued 666,666 shares of common stock, valued at $0.0001 per share or $67, for total consideration of $100,067.  The acquisition of these patents was treated as an acquisition of assets, and not deemed to be the acquisition of a business.
 
 
F-24

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Patents were comprised of the following at October 31, 2015:
 
 
Estimated Life
(years)
 
Gross
Amount
   
Accumulated
Amortization
   
Impairment
Charges
   
Net
 
Patent #1
7
 
$
800,000
   
$
(293,726
 
$
-
   
$
506,274
 
Patent #2
16
 
$
50,034
   
$
(7,763
 
$
-
   
$
42,271
 
Patent #3
11
 
$
50,034
   
$
(11,069
 
$
-
   
$
38,965
 
Total
   
$
900,068
   
$
(312,558
 
$
-
   
$
587,510
 
 
Patents were comprised of the following at October 31, 2014:
 
 
Estimated Life
(years)
 
Gross
Amount
   
Accumulated
Amortization
   
Impairment
Charges
   
Net
 
Patent #1
7
 
$
800,000
   
$
(174,735
 
$
-
   
$
625,265
 
Patent #2
16
 
$
50,034
   
$
(4,624
 
$
-
   
$
45,410
 
Patent #3
11
 
$
50,034
   
$
(6,581
 
$
-
   
$
43,353
 
Total
   
$
900,068
   
$
(185,940
 
$
-
   
$
714,128
 

For the year ended October 31, 2015 and 2014, amortization expense related to the intangibles with finite lives totaled $126,618 and $126,619, respectively, and was included in general and administrative expenses in the consolidated statements of operations.
 
At October 31, 2015, future amortization of intangible assets is as follows:

Year Ending October 31,
     
2016
  $
126,963
 
2017
   
126,616
 
2018
   
126,616
 
2019     126,616  
2020 and Thereafter
   
80,699
 
   
$
587,510
 

Note 5 – Notes Payable
 
On March 23, 2012, June 10, 2012 and July 26, 2012 the Company issued unsecured notes payable with a third-party for the principal amounts of $100,000, $100,000 and $200,000 respectively, all due on demand with simple interest at 16% per annum. 
 
In May 2013, the Company executed a note for $1,500,000. The note bears an interest rate of 12%, per annum and matured in October 2014.

On March 26, 2015 the Company filed a declaratory judgment action against the aforementioned note holders and on October 23, 2015 the Company was awarded a declaratory judgment by the Supreme Court of the State of New York, County of Onondaga. The declaratory judgment provides that the Company is no longer obligated under the aforementioned promissory notes totaling $1.9 million plus accrued interest. The Company recorded a gain on extinguishment of debt as a result of the judgment in the amount of $2,698,979 during the year ended October 31, 2015.

 
F-25

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
Note 6 - Convertible Notes Payable
 
On June 10, 2014, the Company entered into an agreement for the issuance of two convertible notes to a third party lender totaling $63,000. Each note accrues interest at 8% per annum maturing on June 10, 2015. The notes are convertible at the discretion of the lender after 180 days from execution of the agreement at a conversion price of approximately 55% of the average of the lowest trading price for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the notice of conversion. The gross proceeds of $31,500 from the first note were received upon execution of the agreement. The remaining $31,500 or “back-end note” was received by the Company on December 19, 2014. During the year ended October 31, 2015, the lender converted an aggregate of $32,111 of principal and accrued interest of the first note into 54,244,495 shares of Common Stock. As of October 31, 2015, the balance on the first note due to the lender after the above conversions was $0. During the year ended October 31, 2015, the lender converted an aggregate of $15,557 of principal and accrued interest of the back-end note into 151,497,618 shares of Common Stock. As of October 31, 2015, the principal balance on the notes due to the lender was $17,190. Subsequent to October 31, 2015, the lender elected to convert an aggregate of $16,959 of principal and accrued interest of its June 10, 2014 back-end note into 238,299,271 shares of common stock. As of January 28, 2016, the principal balance on the notes due to the lender was $2,000.
 
On June 11, 2014, the Company entered into a $335,000 convertible note agreement with a third party lender. The Company received $75,000 from the lender upon execution of the note. The note contains a total original issue discount of approximately 10% or $35,000 which is pro-rated according to the consideration provided to the Company by the lender. The note remained interest free during the first 90 days after execution of the agreement, after that date, a one-time interest charge of 12% will be applied to the principal. The maturity date of the note is two years from the date of the agreement. The note can be converted into shares of common stock at any time at a conversion rate of the lesser of $0.05 per share of 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company can request additional advances from the lender when deemed necessary to fund operations. During the year ended October 31, 2015, the lender converted an aggregate of $68,537 of principal into 112,230,000 shares of Common Stock. On August 21, 2015, the Company entered into a note termination agreement with the note holder. The note balance including accrued interest on the date of the termination agreement was $25,263. The note holder agreed to accept a $15,000 cash payment in full payment of the note. Upon paying off the note, the note and all obligations were terminated with no remaining obligations due by the Company. The Company recorded a gain on extinguishment of debt as a result of the note termination agreement in the amount of $19,581 during the year ended October 31, 2015. As of October 31, 2015, the balance on the notes due to the lender was $0. Thus, there will be no more conversions on this note.
 
On June 13, 2014 and July 14, 2014, the Company entered into an agreement for the issuance of two convertible notes to a third party lender for $68,000 and $42,500, respectively. The notes accrue interest at 8% per annum maturing on March 17, 2015. The notes are convertible into shares of common stock at a conversion price equal to approximately 58% of the average of the lowest 3 trading prices for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the conversion. During the year ended October 31, 2015, the lender converted an aggregate of $114,920 of principal and accrued interest into 48,433,322 shares of Common Stock. As of October 31, 2015, the balance on the notes due to the lender after the above conversions was $0. Thus, there will be no more conversions on this note.
 
On June 24, 2014, the Company entered into an agreement for the issuance of two convertible notes to a third party lender totaling $70,000. Each note accrues interest at 8% per annum maturing on June 24, 2015. The notes are convertible at the discretion of the lender after 180 days from execution of the agreement at a conversion price of approximately 55% of the average of the lowest trading price for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the notice of conversion. The gross proceeds of $35,000 from the first note were received upon execution of the agreement. The remaining $35,000 or “back-end note” is due to the Company from the lender. During the year ended October 31, 2015, the lender converted an aggregate of $36,775 of principal and accrued interest into 30,586,989 shares of Common Stock. As of October 31, 2015, the balance on the notes due to the lender after the above conversions was $0. Thus, there will be no more conversions on this note.

 
F-26

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
On June 24, 2014, the Company entered into an agreement for the issuance of two convertible notes to a third party lender totaling $40,000. Each note accrues interest at 8% per annum maturing on June 24, 2015. The notes are convertible at the discretion of the lender after 180 days from execution of the agreement at a conversion price of approximately 55% of the average of the lowest trading price for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the notice of conversion. The gross proceeds of $20,000 from the first note were received upon execution of the agreement. The remaining $20,000 or “back-end note” was received by the Company on March 23, 2015. During the year ended October 31, 2015, the lender converted an aggregate of $21,124 of principal and accrued interest into 60,521,372 shares of Common Stock. As of October 31, 2015, the balance on the first note due to the lender after the above conversions was $0. During the year ended October 31, 2015, the lender converted an aggregate of $8,215 of principal and accrued interest of the back-end note into 98,987,151 shares of Common Stock. As of October 31, 2015, the principal balance on the notes due to the lender was $12,110. Subsequent to October 31, 2015, the lender elected to convert an aggregate of $12,721 of principal and accrued interest of its June 24, 2014 back-end note into 231,284,909 shares of common stock. As of January 28, 2016, the principal and accrued interest on the notes due to the lender was $0. Thus, there will be no more conversions on this note.
 
On July 16, 2014, the Company entered into an agreement with a third party lender, under which the Company issued a secured convertible note in the amount of $279,000. The note includes an original issue discount of $25,000 plus an additional $4,000 to cover the lender’s due diligence and legal fees. The principal amount will be paid to the lender in five tranches of an initial amount under the note of $100,000 and four additional amounts of $37,500. The initial $100,000 in cash has been paid to the Company and the remaining $150,000 has yet to be funded as of or subsequent to October 31, 2015 because the Company has yet to request additional funding. The notes are convertible into common stock, at the option of the lender, at $0.06 per share subject to adjustment in the case of a default, a dilutive issuance, an installment payment in stock, a reorganization or recapitalization as set forth in the agreement. In the event the Company elects to prepay all or any portion of the notes, the Company is required to pay the lender an amount in cash equal to 125% of the outstanding balance of the note, plus accrued interest and any other amounts owing. Beginning on the date that is six months after the initial funding of the note and on the same day of each month thereafter until the maturity date, the Company shall pay to the note holder the applicable installment amount due, as per the installment formula further outlined in the agreement, in cash or by converting such installment amount into shares of common stock. The installment conversion price shall be the lesser of (i) $0.06 per share, and (ii) 60% of the lowest closing bid price in the fifteen trading days immediately preceding the applicable conversion. If at any time the lowest closing bid price in the fifteen trading days immediately preceding any date of measurement is below $0.01, then in such event the then-current conversion factor shall be reduced to 55% for all future conversions. On the date that is twenty-three trading days (a “True-Up Date”) from each date the Company delivers free trading installment conversion shares to the note holder, there shall be a true-up where the Company shall deliver to the note holder additional conversion shares (“True-Up Shares”) if the installment conversion price as of the True-Up Date is less than the installment conversion price used in the applicable installment notice. Concurrently with the issuance of the note, 5,248,619 warrants were issued with an exercise price of $0.06 per share. The warrants are fully vested, have a life of five years from date of issuance and contain a cashless exercise provision. On October 14, 2015 the Company entered into an amendment to the note. The note balance including accrued interest on the date of the amendment was $104,492. The material modifications of the note terms as per the amendment are summarized below:

·
In exchange for the note amendment the aggregate principal and accrued interest amount of the note was increased to $107,367;
·
The notes are convertible into common stock, at the option of the lender, at the lesser of (i) $0.06 per share, and (ii) 55% of the lowest closing bid price in the fifteen trading days immediately preceding the applicable conversion;
·
All down round anti-dilution provisions, installment provisions and true-up provisions were deleted in their entirety;
·
The note holder waives any and all breaches of the note and any and all events of default that may have occurred prior to the execution of the amendment;
·
The original note had a maturity date of Decemeber 18, 2015. The amendment is silent as to the date of maturity.

In accordance with ASC 470-50-40-10, since the present value of the cash flows under the new debt instrument was not at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the amendment to the secured convertible note agreement as a debt modification. Accordingly, the Company recorded a debt discount of $2,875 which will be amortized over the remaining life of the debt to interest expense.

 
F-27

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements

During the year ended October 31, 2015, the lender converted an aggregate of $26,797 of principal and accrued interest into 209,100,000 shares of Common Stock. As of October 31, 2015, the principal balance on the notes due to the lender was $98,508. Subsequent to October 31, 2015, the lender elected to convert an aggregate of $11,456 of principal and accrued interest into 138,855,000 shares of common stock. As of January 28, 2016, the principal balance on the notes due to the lender was approximately $88,000.
  
On January 16, 2015, the Company entered into an agreement for the issuance of a convertible note to a third party lender for $42,500. The note accrues interest at 8% per annum maturing on October 9, 2015. The notes are convertible into shares of common stock at a conversion price equal to approximately 58% of the average of the lowest 3 trading prices for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the conversion. During the year ended October 31, 2015, the lender converted an aggregate of $35,410 of principal into 358,693,138 shares of Common Stock. As of October 31, 2015, the principal balance on the notes due to the lender was $7,090. Subsequent to October 31, 2015, the lender elected to convert an aggregate of $8,790 of principal and accrued interest into 146,500,000 shares of common stock. As of January 28, 2016, the principal and accrued interest on the notes due to the lender was $0. Thus, there will be no more conversions on this note.
 
On April 6, 2015, the Company entered into an agreement for the issuance of a convertible note to a third party lender for $38,000. The note accrues interest at 8% per annum maturing on January 9, 2016. The note is convertible into shares of common stock at a conversion price equal to approximately 58% of the average of the lowest 3 trading prices for the common stock during the 10 day trading period ending on the latest and complete trading day prior to the conversion. As of October 31, 2015, the principal balance on the notes due to the lender was $38,000. Subsequent to October 31, 2015, the lender elected to convert an aggregate of $39,520 of principal and accrued interest into 352,121,499 shares of common stock. As of January 28, 2016, the principal and accrued interest on the notes due to the lender was $0. Thus, there will be no more conversions on this note.
 
Derivative Analysis
 
Because the conversion feature included in the convertible note payable and the warrants have full reset adjustments tied to future issuances of equity securities by the Company, they are subject to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”).
 
Generally accepted accounting principles require that:
 
a.  
Derivative financial instruments be recorded at their fair value on the date of issuance and then adjusted to fair value at each subsequent balance sheet date with any change in fair value reported in the statement of operations; and
 
b.  
The classification of derivative financial instruments be reassessed as of each balance sheet date and, if appropriate, be reclassified as a result of events during the reporting period then ended.
 
Upon issuance of the notes, a debt discount was recorded and any difference in comparison to the face value of the note, representing the fair value of the conversion feature and the warrants in excess of the debt discount, was immediately charged to interest expense.  The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the interest method. The amortization of debt discount is included as a component of interest expense in the consolidated statements of operations. There was unamortized debt discount of $18,497 and $230,848 as of October 31, 2015 and October 31, 2014, respectively.
 
The fair value of the embedded conversion feature and the warrants was estimated using the Black-Scholes option-pricing model, with the following estimates and assumptions at October 31, 2015:

Risk-free interest rate
0.08% to 0.34%
Expected life of grants
0.5 to 3.71 years
Expected volatility of underlying stock
611%
Dividends
$0


 
F-28

Endeavor IP, Inc.
October 31, 2015 and 2014
Notes to Consolidated Financial Statements
 
The fair value of the embedded conversion feature and the warrants was estimated using the Black-Scholes option-pricing model with the followings estimates and assumptions at October 31, 2014:

Risk-free interest rate
0.05% to 1.76%
Expected life of grants
1 to 5 years
Expected volatility of underlying stock
58% to 103%
Dividends
$0
 
The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities.  Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.
 
Future minimum principal payments of the Company’s notes payable and convertible notes payable are as follows:
 
For the year ending October 31,
     
 2016
 
$
172,898
 
   
$
172,898
 
 
Interest expense on the promissory and convertible notes for year ended October 31, 2015 and 2014 totaled $373,377 and $292,763, respectively.

Accrued interest as of October 31, 2015 and 2014 totaled $11,052 and $483,909, respectively.
 
The following are the major categories of assets and liabilities that were measured at fair value during the year ended October 31, 2015 and 2014, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):

   
Quoted Prices
In Active
Markets for
Identical
Liabilities
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Balance
 
                         
Embedded conversion feature
 
$
--
   
$
--
   
$
727,122
   
$
727,122
 
Warrant liability
   
--
     
--
     
604
     
604
 
October 31, 2014
 
$
--
   
$
--
   
$
727,726
   
$
727,726