UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM _________________TO _________________
0-7349
Commission file number
eNote.com Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 59-345315
-------- ---------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
188 Allen Brook Lane, Williston, VT 05495
(Address of principal executive offices)
_____(802) 288-9000_____
(Issuer's telephone number)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 2001, the Issuer had 4,650,824 shares of Common Stock, $.01 par
value, outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X ]
CONTENTS
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2001 (unaudited) and
December 31, 2000 (unaudited) 3
Consolidated Statements of Operations for the
three months ended March 31, 2001 (unaudited)
and 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 (unaudited)
and 2000 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
eNote.com Inc.
Consolidated Balance Sheets
unaudited
March 31, 2001 December 31, 2000
---------------------- -----------------------
ASSETS
Current Assets
Cash and cash equivalents $ 12,352 $ 7,742
Inventories, net of reserve
of $951,079 and $0, respectively 8,942 43,015
Prepaid expenses and other current
assets 15,597 30,597
---------------------- ----------------------
Total current assets 36,891 81,354
Property and equipment, net 403,640 556,050
Intangibles, net 47,793 232,451
Security deposits # 16,601 9,690
---------------------- ----------------------
Total assets $ 504,925 $ 879,545
====================== ======================
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable and accrued
expenses $ 691,167 $ 1,070,037
Convertible debentures, net of
unamortized discount of $366,040
and $0,respectively 1,746,060 1,413,960
Capital lease obligation 100,616 100,616
Short-term notes -- 55,000
Other current liabilities -- --
---------------------- ----------------------
Total current liabilities 2,537,844 2,639,613
---------------------- ----------------------
Stockholders' equity (deficit)
Convertible preferred stock, $1.00
par value, 5,000,000 shares
authorized, issued and outstanding 5,000,000 5,000,000
Common stock, $0.01 par value,
25,000,000 shares authorized,
11,339,461 issued at March 31,
2001 and December 31, 2000 113,395 113,395
Common stock warrants 1,297,930 1,297,930
Treasury stock (6,680,000 shares
of common stock) (53,897) (53,897)
Due from related party (150,000) (150,000)
Unearned compensation -- --
Additional paid-in capital 5,314,563 5,262,190
Accumulated deficit (13,554,909) (13,229,686)
---------------------- ----------------------
Total stockholders' equity (deficit) (2,032,918) (1,760,068)
---------------------- ----------------------
Total liabilities and stockholders'
equity (deficit) $ 504,925 879,545
====================== ======================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
eNote.com Inc.
Consolidated Statements of Operations
For the quarters ended March 31, 2001 and 2000
unaudited
March 31, 2001 March 31, 2000
Net revenue $ - $ -
------------------------- --------------------
Operating expenses:
Sales and marketing - 362,533
Product development - 323,727
General and administrative 15,741 581,475
(including $0. of stock based
compensation for the quarter
ended March 31, 2001, and $47,896
in 2000.)
Depreciation and amortization 129,942 91,098
Loss on sale of fixed assets 3,183
Loss on sale of inventory -
------------------------- --------------------
Total operating expenses 148,865 1,358,833
------------------------- --------------------
Loss from operations (148,865) (1,358,833)
Loss from transfer of Solutionet (148,158) -
Loss from early termination of lease (26,036) -
Interest and other income, net 448 6,713
Interest expense (2,611) (2,611)
------------------------- --------------------
Net loss $ (325,223) $ (1,354,731)
Preferred Stock Dividend - -
------------------------- --------------------
Net loss applicable to common
shareholders $ (325,223) $ (1,354,731)
========================= ====================
Basic net loss per common share $ (0.03) $ (0.13)
Weighted average common shares
outstanding 10,926,438 10,189,491
The accompanying notes are an integral part of these condensed consolidated
financial statements.
eNote.com Inc.
Consolidated Statements of Cash Flows
For the quarters ended March 31, 2001 and 2000
2001 2000
-------------------------------------
Cash flows from operating activities:
Net loss (325,223) $ (1,354,731)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 129,942 91,097
Stock-based compensation - 47,896
Changes in assets and liabilities:
Inventory (34,073) (463,072)
Prepaid expenses and other current
assets 15,000 (117,440)
Security deposits (6,910) 27,519
Accounts payable and accrued expenses (378,870) (262,375)
Other current liabilities - (26,485)
-------------------- ---------------
Net cash used in operating activities (600,134) (2,057,591)
-------------------- ---------------
Cash flows from investing activities:
Intangibles 175,233 -
Property and equipment 152,410 (191,354)
-------------------- ---------------
Net cash used in investing activites 327,643 (191,354)
-------------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of convertible
debentures 277,100 500,000
Proceeds from issuance of common stock
and warran - 2,952,456
-------------------- ---------------
Net cash provided by financing activities 277,100 3,452,456
-------------------- ---------------
Net increase/(decrease) in cash and cash
equivalents 4,610 1,203,511
Cash and cash equivalents at beginning of
the period 7,742 324,392
-------------------- ---------------
Cash and cash equivalents at the end of the
period $ 12,352 $ 1,527,903
==================== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
eNote.com Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
eNote.com Inc. ( the "Company") (formerly Webcor Electronics, Inc.), is a
successor of Navis Technologies, Inc. ("Navis"). The Company was organized in
1971 under the laws of Delaware and was a public shell. In April 5, 1999, the
Company acquired all of the outstanding shares of Common stock of Navis ("Navis
Acquisition") by issuing 7.6 million of it shares of Common Stock.
Simultaneously, the Company changed its name from Webcor Electronics, Inc. to
eNote.com Inc. Navis was incorporated on August 13, 1996 under the laws of the
State of Delaware.
In connection with the Navis Acquisition, the Company sold 5 million shares of
convertible preferred stock, par value $.01 per share (the "Preferred Stock"),
and warrants to purchase 2 million shares of Common stock to Friedlander
International Limited ("Friedlander") for $5 million in cash (the "Friedlander
Transaction"). The Preferred Stock has a liquidation preference of $1 per share,
or $5 million in the aggregate, and is convertible into Common stock on a
one-for-one share basis. The warrants have an exercise price of $1 per share.
The warrants were valued at $.37 per share using the Black-Scholes valuation
model. Because the Preferred Stock is convertible immediately and the warrants
vested immediately, a dividend of $740,000 was recognized. Since the Navis
Acquisition and the Friedlander Transaction were subsequently interrelated, the
costs incurred in connection with these transactions have been accounted for as
a reduction of additional paid-in capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
REVERSE MERGER METHOD OF ACCOUNTING - Following the Navis Acquisition,
management of Navis became the management of the Company. The former
stockholders of Navis owned approximately 80% of the outstanding shares of
Common stock of the Company immediately following the Navis Acquisition.
In accordance with generally accepted accounting principles, the Navis
Acquisition was accounted for as a reverse merger. As a result, Navis is
considered to be the acquiring entity and the Company the acquired entity for
accounting purposes, even though the Company is the acquirer for legal purposes.
The historical financial information of Navis became the historical financial
information of the Company and historical stockholders' equity and earnings per
share prior to the merger have been retroactively reinstated for the equivalent
number of shares received in the merger. The financial statements subsequent to
the Navis Acquisition include: (1) the balance sheet with the net results of
Navis at historical costs; (2) the results of operations of Navis for 1999
through the date of the acquisition and the results of operations of the Company
after the acquisition date.
CASH EQUIVALENTS - For the purpose of statements of cash flows, the Company
considers all short term, highly liquid investments with an original maturity of
three months or less to be cash equivalents.
INVENTORY - Inventories are stated at the lower of cost, determined on a
first-in, first-out basis, or market.
RESEARCH AND DEVLOPMENT COSTS - Computer software costs of TVemail developed for
the internal use of the Company are capitalized during the period that the
software is being developed. Any costs incurred in the preliminary stages of
development and in the operating stages of the software are immediately expensed
to research and development. Amortization of the capitalized software costs will
begin when the software is ready for its intended use and will be amortized over
the expected life of the software. During 2000 the TVemail software was in the
testing stage and accordingly, the Company has not begun the amortization of the
capitalized software costs.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments,
including cash equivalents, accounts receivable, accounts payable, debentures
and notes payable are carried at cost, which approximates their fair value
because of the short-term maturity of these instruments.
Statement of Financial Accounting Standards ("SFAS") No. 133, accounting for
derivative instruments and hedging activities, was newly issued in June 1998
with an effective date for fiscal years beginning after June 15, 2000. SFAS No.
133 requires that all derivative financial instruments be recognized in the
financial statements and measured at fair value regardless of the purpose or
intent for holding them. The Company has not adopted SFAS No. 133 but does not
believe that there will be a material effect on the financial statements.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation
is recorded on the double declining method over the estimated useful lives of
the related assets. The Company depreciated furniture and equipment over five
years. Leasehold improvements are capitalized and amortized on the straight-line
basis over the shorter of their useful life or the term of the lease.
Maintenance and repairs are expensed as incurred. When property or equipment is
retired or otherwise disposed of, related costs and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in
operations.
INTANGIBLES - Intangible assets are amortized using the straight-line method and
consists of the following:
TYPE OF INTANGIBLE AMORT. PERIOD
Goodwill 3 years
Patents and Trademarks 5 years
Covenant not to compete 3 years
Domain names 5 years
Acquired websites 2 years
USE OF ESTIMATES - The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
STOCK-BASED COMPENSATION - Stock-based compensation is recognized using the
intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion
No. 25, accounting for stock issued to employees, and related interpretations.
Accordingly, compensation expense for stock options is measured as the excess,
if any, of the fair value of the Company's stock at the date of the grant over
the amount over the amount an employee must pay to acquire the stock and is
amortized over the vesting period. The Company has adopted the disclosure
provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which
requires the Company to disclose the pro forma effects on earnings and earnings
per share as if SFAS No. 123 had been adopted.
COMPREHENSIVE INCOME - The Company has adopted the provisions of SFAS No. 130,
reporting comprehensive income. SFAS No. 130 establishes standards for reporting
and presenting comprehensive income and its components in the financial
statements. Comprehensive income includes all changes in equity during a period
except for those resulting from investments by and distributions to owners. To
date, no elements of income exist other than net loss.
SEGMENTS - The Company has adopted the provisions of SFAS No. 131, disclosures
about segments of an enterprise and related information. SFAS No. 131
establishes standards for companies to report information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company did not have revenue in 2001, therefore no disclosure is
made.
3. CAPITAL LEASES
During September 2000, the company received computer equipment under a capital
lease expiring September 2003. The assets and liabilities under the capital
lease are recorded at the lower of the present value of the minimum lease
payments of the assets. The assets will be depreciated over the lease term.
Lease payments were to begin in October 2000, however, the Company received an
extension of the lease commencement in return for payment of $2500/month through
August of 2001, at which time further negotiations between the Company and the
lease holder will result in new lease terms. As of the date of this filing,
there has been no agreement reached between the Company and leasing company.
There has been no depreciation recorded for the quarter ended March 31, 2001.
5. STOCK OPTIONS AND EMPLOYEE BENEFIT PLAN
On April 9, 1997, the Company established a Stock Option Plan (the "1997 Plan").
The plan provides for the grant of (i) non-qualified stock options, (ii)
incentive stock options, (iii) shares of restricted stock, (iv) shares of
phantom stock, and (v) stock bonuses (collectively "Incentive Awards"). In
addition, the Incentive Stock Plan permits the grant of cash bonuses payable
when a participant is required to recognize income for federal income tax
purposes in connection with the vesting of shares of restricted stock or the
grant of a stock bonus. Full-time employees of the Company and its subsidiaries,
including officers and directors, will be eligible to participate in the
Incentive Stock Plan. The Incentive Stock Plan is administered by a Compensation
Committee of the Board of Directors (the "Committee"), which will consist of two
or more directors, each of whom shall be a "disinterested person" within the
meaning of Rule 16b-3 (c ) (2) under Section 16 of the Exchange Act. The
Committee will determine which employees receive grants of Incentive Awards, the
type of Incentive Awards and bonuses granted and the number of shares subject to
each Incentive Award. The Incentive Stock Plan does not prescribe any specific
factors to be considered by the Committee in determining who is to receive
Incentive Awards and the amount of such awards. The total number of shares
available for grants can not exceed 1% of the total number of shares outstanding
on the date of the grant with certain limited exceptions.
EMPLOYEE BENEFIT PLANS - On July 19, 1999 the Board of Directors approved the
Company's 401 K plan ("401K Plan"). The 401K Plan was established for the
purpose of providing retirement benefits to eligible employees and to enable
employees to to supplement their retirement by election to have the Company
contribute amounts to the 401K Plan in lieu of payments to such employees in
cash. The 401K Plan is intended to satisfy the provisions of section 401(K) of
the Internal Revenue Code of 1986, as amended. There were no contributions made
by the Company for the quarter.
6. NET LOSS PER COMMON SHARE
Net loss per common share for the three months ended March 31, 2001 is based on
the weighted average number of shares of Common Stock outstanding during the
periods. Potentially dilutive securities include options, warrants and
convertible preferred stock; however, such securities have not been included in
the calculations of loss per common share as their effect would be antidilutive.
Therefore, diluted net loss per share is not presented.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Forward-Looking Statements
When used in this Report, press releases or elsewhere by eNote.com Inc.
(the "Company") and its management, the words "believes," "anticipates,"
"intends" and "expects" and similar expressions are intended to identify
forward-looking statements that involve a number of risks and uncertainties.
Additionally, statements contained in this discussion that are not historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act,
including statements regarding expectations, beliefs, intentions or strategies
regarding the future. The Company intends that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the Company's views
as of the date they are made with respect to future events and financial
performance, but are subject to many risks and uncertainties, which could cause
the actual results of the Company to differ materially from any future results
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially or adversely include, without
limitation, the lack of further ongoing funding by Friedlander Capital
Management Corp. or its related entities or the inability of the Company to
complete development of and commercially deploy the Company's TVemail(TM)
System, including the in-home TVemail(TM) terminals (the "Client Hardware"), the
Company's proprietary back-end server systems (the "Server Systems") and the
graphical user interface ("GUI"), as well as the other risks described in this
Report under the caption "Management's Discussion and Analysis or Plan of
Operation--Certain Trends and Uncertainties." The Company does not undertake to
update forward-looking statements.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
OVERVIEW
We are a Delaware corporation that was formerly known as Webcor
Electronics, Inc ("Webcor"). As a result of a 1989 bankruptcy proceeding, Webcor
became an inactive shell that had no assets, liabilities or business activities.
Webcor remained inactive until March 11, 1997, when its stockholders approved a
plan of reorganization proposed by Capston Network Company of Clearwater,
Florida ("Capston"). This plan of reorganization authorized Capston to seek a
suitable business combination opportunity for Webcor, authorized a series of
changes in Webcor's corporate structure, and granted stock to Capston and others
for services rendered in connection with the implementation of the plan of
reorganization. After investigating a number of opportunities, Capston
negotiated an agreement with the stockholders of Navis Technologies, Ltd.
("Navis") in March of 1999 whereby Webcor acquired Navis in a business
combination transaction that was structured as a reverse takeover (the "Navis
Transaction"). Promptly after the Navis Transaction, we sold 5,000,000 shares of
Convertible Preferred Stock ("Preferred Stock") and 2,000,000 Common Stock
Purchase Warrants ("Warrants") to Friedlander Capital Management Corp.
("Friedlander") for $5,000,000 in cash (the "Friedlander Transaction").
After the Navis Transaction, we continued the operations of Navis,
which focused exclusively on the development of the TVemail(TM) System, under
our new name eNote.com Inc. The TVemail(TM) System is designed to function as a
low cost Internet alternative for customers who want access to e-mail and other
limited online services, but want to avoid the cost and complexity of a personal
computer ("PC") or network computer ("NC") based system. Between April 1999 and
July 2000, we actively expanded our operations and a working prototype of the
TVemail(TM) System was completed. During that period of time the Company was not
generating revenue and we funded operations primarily with the capital received
in the Friedlander Transaction and the sale of equity in an offshore private
placement for approximately $4,963,878 in cash (the "Offshore Transaction").
Commencing in August 2000, as a result of a lack of additional capital to fund
ongoing operations, the Company rapidly scaled back operations, decreased its
number of employees and slowed development of the TVemail(TM) System. From
August 2000 through December 31, 2000, the Company's operations were reduced to
a minimum and the Company's Board of Directors and majority stockholder,
Friedlander, evaluated the TVemail(TM) System and the best strategic plan in
order to commercialize the technology developed in connection with the
TVemail(TM) System.
On December 31, 2000, the Company had reduced the number of full-time
employees employed by the Company to 9. In addition to an overall reduction in
employees, the Company's management team was significantly reduced by the
departure of several key executives, whom, with one exception, the Company has
not replaced. These departures include Daniel Peterson, Vice President of
Business Development, John R. Varsames, President and Chief Executive Officer
(who was replaced for a limited period of time by George Horton), George Horton,
President and Chief Executive Officer, Mark Boucher, Vice President of Finance,
Erik Lundberg, Vice President of Information Technology, Richard Schaaf, Vice
President of Market Deployment, and Michael T. Grennan, Chief Financial Officer.
Mr. Grennan rejoined the Company as Vice President and Chief Financial Officer
on December 26, 2000 and he is currently the only executive officer employed by
the Company.
Commencing in August of 2000, our operations have been funded almost
entirely by Friedlander through the issuance of additional convertible debt and
equity securities.
RESULTS OF OPERATIONS : Three Months Ended March 31, 2001:
Our financial condition and results from operations were dramatically
different between the three months ended March 31, 2000 and 2001.
Three Months Ended March 31, 2001
During the three months ended March 30, 2000, the Company had no
revenues. Operating expenses were $1,354,731, consisting of sales and marketing
expenses of $362,533, product development expenses of $323,727, general and
administrative expenses of $581,475 and depreciation and amortization expenses
of $91,098. Interest expense was $2,611 resulting in a net loss of $1,354,731 or
$0.13 per share.
The Company had no revenues in the three months ended March 31, 2001.
Operating expenses decreased to $174,905 an 87% decrease over the comparable
2000 period as the Company substantially decreased operations and ceased product
development. Operating expenses included no sales and marketing expenses, no
product development expenses, general and administrative expenses of $41,781, a
93% decrease, and depreciation and amortization expenses of $129,942.
Interest expense remained the same at $2,611 resulting in a net loss of
$351,263 or $.03 per share; a 74% decrease from the net loss incurred for the
three months ended March 31, 2000.
We originally intended to commence full-scale commercial deployment of
the TVemail(TM) System in the United States near the end of the second quarter
of 2000. As a result of lack of capital resources and the rapid decrease in our
operations, we currently expect to commence limited commercial deployment in the
first quarter of 2002. This schedule is subject to many risks and uncertainties,
including those set forth below under the caption "Certain Trends and
Uncertainties," and the Company's progress towards commercial deployment of the
TVemail(TM) system may be made at a significantly slower rate, through different
avenues, or not at all.
During 2000, the Company spent a substantial portion of its working
capital on product development efforts related to the TVemail(TM) System. We
believe that the TVemail System is substantially ready to be used in limited
commercial markets and that no substantial further development costs need to be
incurred prior to commercialization of TVemail(TM) Service prior to its
commercialization, however, there can be no assurance that unanticipated
technical obstacles or changes in strategy or other factors will not cause
actual research and development expenses to differ materially from the Company's
expectations. In addition, the Company will likely need a substantial capital
investment in order to fund third-party manufacturing costs associated with any
wide-spread commercialization of the TVemail(TM) System.
We do not anticipate generating any revenue until the TVemail(TM)
System is successfully launched and there can be no assurance that we will be
able to launch the TVemail(TM) System or generate any revenue.
The Company does not plan to purchase any material computer equipment,
lab equipment or development tools in 2001. The Company's capital outlay
could be material, if the Company decides to handle certain functions,
such as manufacturing, marketing or customer service in-house as opposed to
contracting them out.
Liquidity and Capital Resources
We have funded our business through the issuance of debt and equity. We
raised $5,000,000 through the Friedlander Transaction on April 6, 1999. On March
13, 2000, we raised an additional $500,000 through the issuance of a one-year
ten percent-subordinated convertible debenture in an offshore transaction to
Seafont, Pty. Ltd., an Australian corporation. This debenture is convertible
into shares of Common Stock at an initial conversion rate equal to one share for
each $7 of principal converted.
Also, during the first and seconds quarter of 2000, we raised
approximately $4,963,878 through the sale of approximately 825,000 shares of the
Company's Common Stock and approximately 413,000 Common Stock Purchase Warrants
with an exercise price of $.01 per share in an offshore private placement to
various European entities.
During the first, second and third quarters of 2000, the Company
expended substantially all of its working capital to cover its operating costs,
including development costs related to the TVemail(TM) System. Beginning in
August 2000, the Company did not have sufficient capital to continue operations.
On August 17, 2000, the Company borrowed $250,000 from Friedlander and on August
31, 2000, the Company borrowed $250,000 from eNote International. Since that
time on going operations have been funded entirely by Friedlander through the
purchase of additional secured short term 8% notes and warrants to acquire
additional shares of the Company's Common Stock. Friedlander has repeatedly
extended the maturity dates of such notes, however, in the event Friedlander
refused to extend such maturity dates, Friedlander, as a secured creditor could
likely take possession of the Company's remaining assets with no assets
remaining for distribution to the Company's shareholders.
The Company's current capital resources are insufficient to continue
operations and the Company's continued operations are currently contingent upon
ongoing capital investment by Friedlander. There can be no assurances that
Friedlander will continue to fund the Company's operations or fund the
commercially launch its TVemail(TM) System. In order for the Company, to raise
additional equity capital from investors other than Friedlander, the Company
believes that current debt and equity holders, including without limitation,
Friedlander, eNote International and Seafont, Pty. Ltd., would have to agree to
surrender or terminate certain debt or equity positions in the Company,
including without limitation a substantial portion of the 519,241,985 warrants
that are issued and outstanding to acquire shares of the Company's Common Stock.
There can be no assurances that such holders will surrender or terminate such
positions.
CERTAIN TRENDS AND UNCERTAINTIES
In addition to the other information contained in this Report on Form
10-QSB for the quarter ending March 31, 2001, the following factors should be
considered carefully.
RISKS RELATING TO THE COMPANY'S NEED FOR ADDITIONAL
FINANCIAL RESOURCES
Need for Additional Funds
Our existing capital is insufficient to continue our current operations for
any substantial period of time without additional investment by Friedlander or
otherwise. If for any reason Friedlander ceased funding our current level of
operations it is likely that Company would not be able to raise any additional
capital or be able to continue as a going concern. In addition, in order for us
to begin continued mass production of the Client Hardware or to initiate
widespread sales and marketing efforts relating to the TVemail(TM) service, we
anticipate that we will have to raise substantial additional funds. We currently
are seeking additional funding through public or private financings, which may
include debt or equity financings. Adequate funds for these purposes, whether
obtained through financial markets or collaborative or other arrangements with
corporate partners, existing shareholders or from other sources, may not be
available when needed or on terms acceptable to the Company. Insufficient funds
may require us to license to third parties our technology to commercialize
products or technologies that the Company would otherwise seek to develop
itself; to sell ourselves to a third party; to cease operations; or to declare
bankruptcy.
If we raise additional funds through the issuance of debt securities,
the holders of the debt securities will have a claim to the Company's assets
that will be prior to any claim of the stockholders. Interest on any debt
securities could increase our costs and negatively impact our operating results.
If we raise additional funds through the issuance of preferred stock, the terms
of such preferred stock may provide that the holders of such preferred stock are
entitled to receive dividends and/or distributions upon liquidation prior to the
holders of Common Stock. Furthermore, any such preferred stock may have class
voting rights, conversion features and/or antidilution protections of which the
Common Stock does not have the benefit. If we raise additional funds through the
issuance of Common Stock or securities convertible into or exchangeable for
Common Stock, the percentage ownership of the Company's then-existing
stockholders will decrease. In addition, any such convertible or exchangeable
securities may have rights, preferences and privileges more favorable to the
holders than those of the Common Stock.
Subordination of Common Stock to Preferred Stock; Risk of Dilution;
Anti-Dilution Adjustments.
In the event of the liquidation, dissolution or winding up of the
Company, the Common Stock is expressly subordinate to the $5 million preference
of the 5 million outstanding shares of Preferred Stock. The conversion rate of
the Preferred Stock is subject to adjustment, among other things, upon issuances
of Common Stock or securities convertible into Common Stock or rights to
purchase Common Stock that have not been expressly approved in writing by a
majority in interest of the holders of Preferred Stock or their elected
representatives. As of March 31, 2001, each share of Preferred Stock was
convertible into 1 share of Common Stock.
RISKS RELATING TO THE COMPANY'S OPERATIONS AND TECHNOLOGIES
Limited Operating History; Recent Shift in Business Strategy.
Immediately prior to the acquisition of Navis on April 5, 1999, the
Company had no business operations. Navis itself was founded in June 1996 and
until the fourth quarter of 1998 supplied infrared protocol and advanced input
devices to NC manufacturers and provided contract engineering and consulting
services. However, Navis' revenues from operations never exceeded $703,000 in
any given year. During 1998, Navis shifted its business emphasis to focus
entirely on the development of the TVemail(TM) service. We have yet to launch
the TVemail(TM) service commercially or to receive any revenue from such
service. As a result, we have only a limited operating history and there is
little historical information on which to evaluate our business and prospects.
Our revenue, if any, for the foreseeable future is almost entirely dependent on
successfully bringing the TVemail(TM) service to market. There can be no
assurance that we will be successful in implementing any of our business
strategies.
The Company Depends on its Intellectual Property, Which May Be Difficult and
Costly to Protect.
Our intellectual property includes proprietary and confidential
information that is not currently subject to patent, trademark or similar
protection. The Company has filed federal trademark applications to register the
trademarks "TVemail," "eNote.com," "EZ Color," and "Simply Communicate,"
however, the Company may not be able to secure significant protection for these
trademarks. If our competitors or others adopt product or service names similar
to the names listed above that we anticipate using, it may impede our ability to
build brand identity and customer loyalty. We rely primarily on secrecy to
protect technology. No assurance can be given that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the our trade secrets, or that the we can effectively
protect its rights to its unpatented trade secrets.
The validity, enforceability and scope of protection of certain
proprietary rights in Internet-related businesses are uncertain and still
evolving. If unauthorized third parties are able to copy our service or our
business model or to use our confidential information to develop competing
services, we could lose customers and our business could be negatively impacted.
We may not be able to effectively police unauthorized use of our technology
because such policing is difficult and expensive. In particular, the global
nature of the Internet makes it difficult to control the ultimate destination or
security of software or other data transmitted. Furthermore, the laws of other
countries may not adequately protect our intellectual property.
Our business activities and the TVemail(TM) service may infringe upon
the proprietary rights of others. In addition, other parties may assert
infringement claims against the Company. Any such claims and any resulting
litigation could subject us to significant liability for damages and could also
result in invalidation of our proprietary rights. We could be required to enter
into costly and burdensome royalty and licensing agreements. These agreements
may not be available on acceptable terms, or may not be available at all. We may
also need to file lawsuits to defend the validity of our intellectual property
rights and trade secrets, or to determine the validity and scope of the
proprietary rights of others. Litigation is expensive and time-consuming and
could divert management's attention away from our business.
Technology Licensed From Third Parties.
We have entered into agreements with, and have licensed certain
technology from, third parties. The Company has relied on scientific, technical,
commercial and other data supplied and disclosed by others in entering into
these agreements and will rely on such data in support of development of certain
products. Furthermore, we believe that we will license additional technologies
from third parties in the future. Although we have no reason to believe that
this information contains errors of omission or fact, there can be no assurance
that there are no errors of omission or fact that would materially affect the
commercial viability of these products.
Rapid Technological Change, Customer Demands and Intense Competition.
The e-mail service market is characterized by rapidly changing
technology, customer demands and intense competition. If we cannot keep pace
with these changes, our TVemail(TM) service could become uncompetitive and its
business could suffer. If we are not successful in developing and marketing
enhancements to the TVemail(TM) service or new services that respond to
technological change or customer demands, our business may be materially and
adversely effected.
The competitive market for e-mail and online service access may limit
demand or pricing for the TVemail(TM) system. We expect to experience intense
competition from established online service providers such as America Online,
Inc., Prodigy Communications Corporation and Microsoft Corporation's WebTV(TM)
as well as competition from Internet appliance manufactures such as Sony. Many
companies provide e-mail and online service access and other services, which
provide functionality superior to those included in the TVemail(TM) system. As a
result of this competition, demand for the TVemail(TM) system may suffer, we may
be restricted in the service rates we can charge for the TVemail(TM) system and
our business, financial condition and results of operations may be adversely
affected. Many of our competitors have significantly greater financial,
technical, marketing, distribution, customer support and other resources than we
does. Furthermore, many of our competitors have significantly greater
experience, better name recognition, more compelling content and easier access
to consumers, advertisers and online service providers than we do.
Management of Growth.
Our ability to implement our business plan successfully in a new and
rapidly-evolving market will require effective planning and growth management.
If we cannot manage our anticipated growth effectively, our business and
financial results may suffer. We plan on expanding our existing operations
substantially. Although we anticipate out sourcing manufacturing and procurement
and limited components of marketing and technical services, we may be forced to
expand our manufacturing, sales and marketing and technical support. We expect
that we will need to manage and broaden multiple relationships with customers,
on line providers and other third parties. We also expect that we will need to
expand our financial systems, procedures and controls and will need to augment,
train and manage our workforce, particularly our information technology staff.
As a result, our management and operating systems may be strained by any growth
and the Company may be unable to timely complete necessary improvements to its
operating systems, procedures and controls to support future operations.
Capacity Constraints May Impede Revenue Growth and Profitability.
We believe that satisfactory performance, reliability and availability
of our TVemail(TM) appliances and Server Systems infrastructure will be critical
to the Company's reputation and ability to attract customers and maintain
adequate customer service levels. Any significant or prolonged capacity
constraints could delay or prevent customers from sending or gaining access to
their documents or other data or services. Such constraints could decrease our
ability to acquire and retain customers and prevent us from achieving the
necessary growth in revenue to achieve profitability. If the amount of traffic
increases substantially and we experience capacity constraints, we may need to
spend significant amounts to expand and upgrade our technology and network
infrastructure. Furthermore, we may be unable to predict the rate or timing of
any increases in the use of its services in order to respond in a timely manner.
Systems Failures and Business Interruptions Which Would Harm our Business.
Our success will depend in part on the efficient and reliable operation
of TVemail(TM) service sufficient to accommodate a large number of subscribers.
We intend to locate our Server Systems at multiple sites with redundant
functions in order to reduce the risks of system failure, however, the Server
Systems are vulnerable to damage from fire, power loss, telecommunications
failures, break-ins and other events, which could lead to: interruptions or
delays in our service; loss of data; or the inability to accept, transmit and
confirm customer documents and data. Our business may be materially adversely
effected if its service is interrupted. Although we intend to implement network
security measures, our systems may be vulnerable to computer viruses, electronic
break-ins, attempts by third parties deliberately to exceed the capacity of the
systems and similar disruptions, any of which could have a material adverse
effect on our business.
RISKS RELATING TO THE INTERNET AND ONLINE COMMERCE
Privacy Concerns May Discourage Customers From Using The Company's Services.
Concerns over the security of online transactions and the privacy of
users may inhibit the growth of the Internet as a means of delivering documents
and data. We may need to incur significant expenses and use significant
resources to protect against the threat of security breaches or to alleviate
problems caused by such breaches. We plan to rely on encryption and
authentication technology to provide secure transmission of confidential
information. If our security measures do not prevent security breaches, we could
suffer operating losses, damage to its reputation, litigation and possible
liability. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise or breach of our
encryption and authentication technology and could enable an outside party to
steal proprietary information or interrupt its operations.
Government Regulation and Legal Uncertainties Relating to the Internet Could
Harm our Business.
Changes in the regulatory environment could negatively impact our
ability to generate revenues and increase our expenses. The Internet is largely
unregulated and the laws governing the Internet remain unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy and taxation apply to the Internet. In addition, because of increasing
popularity and use of the internet, any number of laws and regulations may be
adopted with respect to the internet or other online services covering issues
such as: user privacy; security; pricing; content; copyrights; distribution;
taxation; and characteristics and quality of services. Such regulations could
impose additional costs or interdicts on our activities, which could have a
material adverse effect.
If the Internet Infrastructure Fails, Our Business May Suffer.
We cannot be certain that the infrastructure or complementary services
necessary to maintain the Internet as a useful, convenient or secure means of
transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it, and the
performance and reliability of the Internet may decline, which could have a
material adverse effect on our business.
The Company Depends on Third-Party Providers of Internet and Telecommunications
Service.
Our operations depend on third parties for Internet access and
telecommunications. Frequent or prolonged interruptions of these services could
result in significant losses of revenues. These types of occurrences could also
cause users to perceive our products as not functioning properly and therefore
encourage them to use other methods to deliver and receive information. We have
limited control over these third parties and there can be no assurance that we
will be able to maintain relationships with them on acceptable commercial terms.
Nor can there be any assurance that the quality of services that they provide
will remain at the levels needed to enable us to conduct our business
effectively. Each of these third parties has likely experienced outages in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to the Company's systems.
Costs of Transmitting Documents and Data Could Increase.
The cost of transmitting documents and data over the Internet could
increase, and the Company may not be able to increase its prices to cover such
rising costs. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet and on-line service providers in
a manner similar to long distance telephone carriers and to impose access fees
on such providers. Also, foreign laws and state tax laws and regulations
relating to the provision of services over the Internet are still developing. If
individual states impose taxes on services provided over the Internet, our cost
of providing TVemail(TM) and other services may increase.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in an action entitled Dennis C. Wallach v. eNote.com
Inc. filed on April 2, 2001 in the Superior Court of Delaware, New Castle
County. Plaintiff is seeking damages of $27,587 plus interest and issuance of a
stock option for 25,000 shares for services rendered. eNote has filed an Answer
and Counterclaim.
The Company is a defendant in an action entitled David Wilson Associates, Inc. v
eNote.com Inc. filed on March 16, 2001 in Dedham District Court, Dedham
Massachusetts. Plaintiff sought damages in the amount of $3,200. A default
judgment in the amount of $3,200 has been entered in favor of Plaintiff.
The Company is a defendant in an action entitled Globtek v eNote.com Inc. filed
on March 29, 2001 in Chittenden Superior Court, Chittenden County, Vermont.
Plaintiff alleges an account due in the amount of $356, 521 plus interest. eNote
has filed an Answer and Counterclaim.
The Company is a defendant in an action entitled Pca v eNote.com Inc. filed on
April 13, 2001 in Chittenden Superior Court, Chittenden County, Vermont.
Defendant has entered into a Stipulation to Judgment in the amount of $5,471.91
plus interest at the rate of 12% per annum. Plaintiff has agreed to withhold
execution of the Judgment subject to the payment of $$744 per month commencing
June 15, 2001. Defendant has not made the September 15th payment.
The Company is a defendant in action entitled Reptron Electronics, Inc. v.
eNote.com Inc. filed on June 8, 2001 in Chittenden Superior Court, Chittenden
County, Vermont. Plaintiff alleges an amount due for goods sold in the
amount of $259,543 plus interest. eNote has filed an Answer and Counterclaim.
The Company is a defendant in an action entitled PC Connection v. eNote.com Inc.
filed on August 20, 2001 in Chittenden Superior Court, Chittenden County,
Vermont. Plaintiff alleges an account due in the amount of $42,234.71 plus
interest. eNote has filed an Answer.
Item 2. Changes in Securities.
On January 4, 2001 the Company borrowed $50,000 from Friedlander
pursuant to an 8% Secured Convertible Note due March 1, 2001 and subsequently
extended to December 31, 2001 convertible into Common Stock at the ratio of $.44
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 2,272,727 shares of Common Stock at a price of $.44 per share at any
time on or prior to January 4, 2004.
On January 19, 2001 the Company borrowed $44,000 from Friedlander
pursuant to an 8% Secured Convertible Note due March 1, 2001 and subsequently
extended to December 31, 2001 convertible into Common Stock at the ratio of $.31
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 2,816,000 shares of Common Stock at a price of $.31 per share at any
time on or prior to January 19, 2004.
On February 2, 2001 the Company borrowed $41,000 from Friedlander
pursuant to an 8% Secured Convertible Note due March 1, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.28 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 2,928,571 shares of Common Stock at a price of $.28 per share at any
time on or prior to February 2, 2004.
On February 15, 2001 the Company borrowed $46,000 from Friedlander
pursuant to an 8% Secured Convertible Note due March 1, 2001 and subsequently
extended to December 31, 2001 convertible into Common Stock at the ratio of $.31
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 2,967,742 shares of Common Stock at a price of $.31 per share at any
time on or prior to February 15, 2004.
On March 1, 2001 the Company borrowed $38,000 from Friedlander pursuant
to an 8% Secured Convertible Note due July 1, 2001 and subsequently extended to
December 31, 2001 convertible into Common Stock at the ratio of $.18 principal
for each share of Common Stock. The Company also issued a Warrant to acquire
4,222,222 shares of Common Stock at a price of $.18 per share at any time on or
prior to March 1, 2004.
On March 15, 2001 the Company borrowed $37,000 from Friedlander
pursuant to an 8% Secured Convertible Note due July 1, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.16 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 4,625,000 shares of Common Stock at a price of $.16 per share at any
time on or prior to March 15, 2004.
On March 29, 2001 the Company borrowed $21,100 from Friedlander
pursuant to an 8% Secured Convertible Note due March 29, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.16 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 2,637,500 shares of Common Stock at a price of $.16 per share at any
time on or prior to March 29, 2004.
On April 12, 2001 the Company borrowed $40,000 from Friedlander
pursuant to an 8% Secured Convertible Note due July 1, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.08 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 10,000,000 shares of Common Stock at a price of $.08 per share at any
time on or prior to April 12, 2004.
On April 26, 2001 the Company borrowed $43,000 from Friedlander
pursuant to an 8% Secured Convertible Note due July 1, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.02 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 43,000,000 shares of Common Stock at a price of $.02 per share at any
time on or prior to April 26, 2004.
On May 10, 2001 the Company borrowed $40,000 from Friedlander pursuant
to an 8% Secured Convertible Note due July 1, 2001 and subsequently extended to
December 31, 2001 and convertible into Common Stock at the ratio of $.08
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 10,000,000 shares of Common Stock at a price of $.08 per share at any
time on or prior to May 10, 2004.
On May 24, 2001 the Company borrowed $23,000 from Friedlander pursuant
to an 8% Secured Convertible Note due July 1, 2001 and subsequently extended to
December 31, 2001 and convertible into Common Stock at the ratio of $.08
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 5,750,000 shares of Common Stock at a price of $.08 per share at any
time on or prior to May 24, 2004.
On June 7, 2001 the Company borrowed $40,000 from Friedlander pursuant
to an 8% Secured Convertible Note due July 1, 2001 and subsequently extended to
December 31, 2001 and convertible into Common Stock at the ratio of $.08
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 5,333,333 shares of Common Stock at a price of $.08 per share at any
time on or prior to June 7, 2004.
On June 21, 2001 the Company borrowed $40,000 from Friedlander pursuant
to an 8% Secured Convertible Note due July 1, 2001 and subsequently extended to
December 31, 2001 and convertible into Common Stock at the ratio of $.01
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 80,000,000 shares of Common Stock at a price of $.01 per share at any
time on or prior to June 21, 2004.
On July 5, 2001 the Company borrowed $40,000 from Friedlander pursuant
to an 8% Secured Convertible Note due December 1, 2001 and subsequently extended
to December 31, 2001 and convertible into Common Stock at the ratio of $.05
principal for each share of Common Stock. The Company also issued a Warrant to
acquire 16,000,000 shares of Common Stock at a price of $.05 per share at any
time on or prior to July 5, 2004.
On July 19, 2001 the Company borrowed $38,000 from Friedlander pursuant
to an 8% Secured Convertible Note due December 31, 2001 and subsequently
extended to December 31, 2001 and convertible into Common Stock at the ratio of
$.01 principal for each share of Common Stock. The Company also issued a Warrant
to acquire 76,000,000 shares of Common Stock at a price of $.01 per share at any
time on or prior to July 19, 2004.
On August 2, 2001 the Company borrowed $38,000 from Friedlander
pursuant to an 8% Secured Convertible Note due December 31, 2001 and convertible
into Common Stock at the ratio of $.01 principal for each share of Common Stock.
The Company also issued a Warrant to acquire 76,000,000 shares of Common Stock
at a price of $.01 per share at any time on or prior to August 2, 2004.
On August 16, 2001 the Company borrowed $30,000 from Friedlander
pursuant to an 8% Secured Convertible Note due December 31, 2001 and convertible
into Common Stock at the ratio of $.05 principal for each share of Common Stock.
The Company also issued a Warrant to acquire 12,000,000 shares of Common Stock
at a price of $.05 per share at any time on or prior to August 16, 2004.
On September 5, 2001 the Company borrowed $20,000 from Friedlander
pursuant to an 8% Secured Convertible Note due December 31, 2001 and convertible
into Common Stock at the ratio of $.01 principal for each share of Common Stock.
The Company also issued a Warrant to acquire 40,000,000 shares of Common Stock
at a price of $.01 per share at any time on or prior to September 5, 2004.
On September 13, 2001 the Company borrowed $30,000 from Friedlander
pursuant to an 8% Secured Convertible Note due December 31, 2001 and convertible
into Common Stock at the ratio of $.01 principal for each share of Common Stock.
The Company also issued a Warrant to acquire 60,000,000 shares of Common Stock
at a price of $.01 per share at any time on or prior to September 13, 2004.
On September 28, 2001 the Company borrowed $15,000 from Friedlander
pursuant to an 8% Secured Convertible Note due December 31, 2001 and convertible
into Common Stock at the ratio of $.01 principal for each share of Common Stock.
The Company also issued a Warrant to acquire 30,000,000 shares of Common Stock
at a price of $.01 per share at any time on or prior to September 28, 2004.
The Notes and Warrants were issued in transactions exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
The Company is in default under its 8% Secured Convertible Note issued
to eNote International.com in the principal amount of $250,000 due December 2,
2000. As of October 15, 2000 the principal amount of $250,000 and interest in
the approximate amount of $22,500 is in arrears.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
EXHIBIT TABLE
3(a) Amended and Restated Certificate of Incorporation
(incorporated by reference as Exhibit 3(a) to the
Company's Form 10-KSB filed September 22, 1999).
3(b) Amended By-laws (incorporated by reference as Exhibit
3(b) to the Company's Form 10-KSB filed September 22,
1999).
4.1 Form of 8% Subordinated Convertible Note issued to
Friedlander Capital Management Corp. in a series of
transactions from August 17, 2000 through September
28, 2001(incorporated by reference as Exhibit 4.1 to
the Company's Form 8-K filed September 1, 2000).
4.2 Form of Warrant to purchase shares of Common Stock
issued to Friedlander Capital Management Corp. and
affiliated entities in a series of transactions from
August 17, 2000 through September 28,2001
(incorporated by reference as Exhibit 4.2 to the
Company's Form 8-K filed September 1, 2000).
4.3 Letter Agreement dated as of December 20, 2000
between the Company and Friedlander Capital
Management Corp. extending the expiration date of
Warrants issued between August 17, 2000 and November
22, 2000 until the third anniversary of each such
Warrant's respective issue date (incorporated by
reference as Exhibit 4.48 to the Company's Form
10-QSB filed December 29, 2001)
4.4 Letter Agreement dated as of December 31, 2000
between the Company and Friedlander Capital
Management Corp. adjusting the Warrant exercise price
to $.18 with respect to Warrants issued between
August 17, 2000 and December 20, 2000(incorporated by
reference as Exhibit 4.10 to the Company's Form
10-KSB filed October 15, 2001).
4.5 Letter Agreement dated as of October 4, 2001 between
the Company and Friedlander Capital Management Corp.
extending the maturity dates of the 8% Subordinated
Convertible Notes to December 31, 2001 (incorporated
by reference as Exhibit 4.11 to the Company's Form
10-KSB filed October 15, 2001).
(b) Reports on Form 8-K.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
_____________ eNote.com Inc.________
---------------
(Registrant)
October 17, 2001
/s/ Michael T. Grennan
-----------------------------------
Michael T. Grennan,
Vice President
(Principal Executive Officer)
October 17, 2001 /s/ Michael T. Grennan
-----------------------------------
Michael T. Grennan
Vice President
(Principal Financial Officer and
Principal Accounting Officer)