En2Go International, Inc. Form 10-Q for November 30, 2009

Indicate by check mark whether the registrant (1) has 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.

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets as of November 30, 2009 (Unaudited) and August 31, 2009	1

Consolidated Statements of Operations For the Three Months Ended November 30, 2009 and 2008 (Unaudited)	2

Consolidated Statements of Cash Flows For the Three Months Ended November 30, 2009 and 2008 (Unaudited)	2

Notes to the Consolidated Financial Statements (Unaudited)	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	26

Item 4. Controls and Procedures	27

Part II. Other Information

Item 1. Legal Proceedings	27

Item 1A. Risk Factors	27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3. Defaults Upon Senior Securities	28

Item 4. Submission of Matters to a Vote of Security Holders	28

Item 5. Other Information	28

Item 6. Exhibits	29

Signatures	30

EN2GO INTERNATIONAL, INC. AND SUBSIDIARY
(a development stage company)
Consolidated Balance Sheets
	November 30,		August 31,
	2009		2009
ASSETS	(Unaudited)
CURRENT ASSETS
Cash	$	99,995	$	3,132
Prepaid expenses		32,336		20,336
TOTAL CURRENT ASSETS		132,331		23,468

PROPERTY AND EQUIPMENT, net		96,507		109,289
SOFTWARE DEVELOPMENT COSTS, net		1,032,417		967,917

TOTAL ASSETS	$	1,261,255	$	1,100,674

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	1,053,312		$	1,072,638
Accrued expense		48,211			35,836
Due to related party		320,098			274,498
Notes payable		335,417			915,246
TOTAL CURRENT LIABILITIES		1,757,038			2,298,218

TOTAL LIABILITIES		1,757,038			2,298,218

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ (DEFICIT):
Common stock, $.00001 par value, 90,000,000 shares authorized, and 24,045,542 and 5,513,540 shares issued and outstanding at November 30, 2009 and August 31, 2009, respectively		240			55
Capital in excess of par value		12,329,800			10,218,782
Prepaid stock compensation		—			—
(Deficit) accumulated during the development stage		(12,825,823	)		(11,416,381	)
Total stockholders’ (deficit)		(495,783	)		(1,197,544	)

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)	$	1,261,255		$	1,100,674

	For the Three Months Ended November 30,						From Inception on January 31, 2007 through November 30,
	2009			2008			2009
REVENUES	$	—		$	—		$	—
COST OF GOODS SOLD		—			—			—
GROSS PROFIT		—			—			—
OPERATING EXPENSES
General and administrative expenses		222,227			598,899			3,354,024
Stock issued for services		—			72,435			1,762,617
Non-Cash Compensation		—			—			3,515,447
Salaries, wages and consulting		4,670			—			2,464,663
Total operating expenses		226,897			671,334			11,096,751

LOSS FROM OPERATIONS		(226,897	)		(671,334	)		(11,096,751	)

OTHER INCOME (EXPENSE):
Other income		—			5,599			29,820
Interest expense		(12,375	)		(76,400	)		(168,347	)
Interest expense on amortization of discount notes		(1,170,170	)		—			(1,590,545	)
Total other income (expense)		(1,182,545	)		(70,801	)		(1,729,072	)

LOSS BEFORE PROVISION FOR INCOME TAXES		(1,409,442	)		(742,136	)		(12,825,823	)

Provision for income taxes		—			—			—

LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(1,409,442	)	$	(742,136	)		(12,825,823	)

NET LOSS PER SHARE OF COMMON STOCK— Basic and diluted	$	(0.08	)	$	(0.14	)

WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted		18,484,818			5,322,095

	For the Three Months Ended November 30,					Period from inception (January 31, 2007) through November 30,
	2009			2008		2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,409,442	)	$	(742,136)	$ (12,825,823)
Adjustments to reconcile net loss to net cash used in operating activities:
Debt financing costs		1,170,170			76,400	1,892,346
Depreciation expense		15,056			11,158	88,268
Options, warrants and common stock issued for services rendered		—			72,435	5,746,909
Changes in operating assets and liabilities:
Prepaid expense		(12,000	)		—	(25,936)
Accounts payable		(8,123	)		372,906	1,064,515
Accrued expense		12,375			(90,423)	48,211
Due to related party		45,600			—	320,098
Net cash used in operating activities		(186,364	)		(299,660)	(3,691,412)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(2,273	)		—	(184,775)
Software development		(64,500	)		—	(1,032,417)
Net cash used in investing activities		(66,773	)		—	(1,217,192)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable		—			165,000	2,500,000
Repayment of notes payable		—			—	(500,000)
Proceeds from issuance of common stock, net of offering costs		350,000			150,000	3,008,599
Net cash provided by financing activities		350,000			315,000	5,008,599

NET (DECREASE) INCREASE IN CASH		96,863			15,340	99,995
CASH Beginning of period		3,132			9,074	—
CASH End of period	$	99,995		$	24,414	$ 99,995

In October 2008, we entered into an agreement with Euro Trend Trader, Inc. (“ETT”) to provide investor relations and public relations. We agreed to pay ETT $5,000 start up fees and $3,000 per month thereafter. Additionally, we paid ETT 20,000 shares of our common stock for coverage of the Company by a registered market maker and 10,000 shares related to investor relations.

In August 2008, we entered into a promissory note with NSC Investments Ltd. (“NSC”) for a sum of $250,000. Under this promissory note, interest is to be prepaid at the commencement of each quarter by us issuing 1,600 shares of our common stock. The unpaid principal balance of the promissory note is due and payable in full on the sale of any assets of the Company or November 1, 2008. Further consideration for the loan shall consist of 15,000 shares of our common stock at the funding, 5,000 shares of our common stock at the beginning of the next month, and 10,000 shares at the beginning of the next month. This promissory note was extended until February 1, 2009. We agreed to pay 3,900 shares of our common stock as interest and an additional issuance of 10,000 shares of our common stock in lieu of the extension of the note. The promissory note was further extended to May 1, 2009 and we agreed to issue 3,000 shares of our common stock as interest and additional issuance of 20,040 shares of our common stock for additional compensation. The remaining $100,000 plus accrued interest shall be convertible at NSC’s option at $2.00 per share on or before May 1, 2010.

During the year ended August 31, 2009, we issued an aggregate of $1,750,000 in Convertible Debentures. At the holder’s sole discretion, the holder was entitled to convert the Debenture, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, in conjunction with the issuance of the Debentures, the Company issued 17,500,000 share purchase warrant certificates with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate. On September 25, 2009 all of the $1,750,000 of debentures were converted into 17,500,000 common shares and 17,500,000 share purchase warrants exercisable at $0.15 per share remained outstanding.

The accompanying consolidated financial statements represent the accounts of En2Go International, Inc. (“Parent”), incorporated in the State of Nevada on August 23, 2002 (formerly Medusa Style Corporation) and En2Go, Inc. (“Subsidiary”), incorporated in the State of Nevada on January 31, 2007, collectively (“the Company”).

On July 17, 2007, Parent completed an exchange agreement with Subsidiary wherein Parent issued 2,780,000 shares of its common stock in exchange for all the issued and outstanding common stock of Subsidiary. The Acquisition was accounted for as a recapitalization of Subsidiary in a manner similar to a reverse purchase as the former shareholders of Subsidiary controlled the combined Company after the acquisition. Following the acquisition, and the transfer of an additional 1,075,000 shares from the shareholders of parent to the former shareholders of the subsidiary, the former shareholders of subsidiary control approximately 77% of the total outstanding stock of the combined entity. There was no adjustment to the carrying values of the assets or the liabilities of Parent or Subsidiary as a result of the recapitalization.

We are a start-up company that plans to become a full service entertainment and technology company that will create and develop a variety of media and entertainment related programs and applications including cutting edge media delivery software, Internet video applications and high-end, innovative desktop applications. In addition to programming progress, we are currently attempting to establish a technical infrastructure, which we call “En2ools.” En2ools is an ever-expanding library of code modules and techniques designed for the rapid production or modification of software. En2ools is the foundation that enables the software applications to be fast, efficient, reliable, and user-friendly. Our primary software application is called Flyxo, which is an application that delivers high-quality video to a user’s computer desktop. Flyxo is designed to watch movies online and can eliminate the user’s frustration of long download times or waiting for buffering. It is a global Internet broadcast platform that can facilitate online television channels, movie channels, radio stations, online gaming, slide shows, 3-D objects, high-resolution graphics, interactive advertising, social media and more.

We will also offer the Channel Builder making it simple for individuals or organizations to create their own high-quality Internet media channels. Once the clients’ videos or other media is uploaded, using drag and drop functionality, the clients can create their own global HD Internet broadcast channel in a matter of minutes. This simplicity and convenience combined with the ability to distribute high-quality media to a worldwide audience opens a wide range of possibilities in terms of potential clients. Other software applications include eMaculate; a search engine that is designed to search, download and share digital images on the Web at very high speeds, VideoBlox; a custom media player that is specifically designed for the entertainment industry. It plays numerous file formats including mp4, mp3, Quicktime and Windows Media. It is designed so that the artist will be able to use their own branded player to distribute their music videos and keep in constant contact with their fans. Another unique aspect of this media player is the ability to provide a customized look and feel to its interface. Kandictionary is a downloadable personalized dictionary and translator and the En2go jukebox is a custom stand-alone media player designed to play music from social networking sites. After downloading the media player, a user does not have to be on an artist’s page to hear the artist’s music. A user can add favorite songs to the media player and listen to the artist’s music while doing other things or visiting other sites. Furthermore, the user can create a custom playlist by adding songs to the player from different artists.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. However, we have sustained losses and as of November 30, 2009, we have no business operations and have a net working capital deficiency and a negative cash flow from operations. These conditions, among others, give rise to substantial doubt about our ability to continue as a going concern. Management is continuing to seek additional equity capital. Until such time, we anticipate our working capital needs will be funded with proceeds from equity and debt financing. Management believes these steps will provide us with adequate funds to sustain our continued existence. There is, however, no assurance that the steps taken by management will meet all of our needs or that we will continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception the Company has not yet generated significant revenues and has been defining its business operations and raising capital. All of our operating results and cash flows reported in the accompanying consolidated financial statements from January 31, 2007 through November 30, 2009 are considered to be those related to development stage activities and represent the cumulative from inception amounts from our development stage activities required to be reported pursuant to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) topic 915, “Development Stage Entities”(formerly SFAS No. 7, “Development Stage Enterprises”).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

We consider all short-term securities purchased with a maturity of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. Management does not believe the Company is exposed to significant credit risk. Management, as well, does not believe the Company is exposed to significant interest rate and foreign currency fluctuation risks during the period presented in these consolidated financial statements. As of November 30, 2009, there are no amounts that exceed the federally insured limits.

Property and equipment are stated as cost less accumulated depreciation. Depreciation is provided on a straight line basis over the estimated useful lives of the assets from one to five years. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Gains or losses on sales or retirements are recognized in income.

Through the period from inception through November 30, 2009, the Company had not yet generated any revenues. However, the Company plans to recognize its revenue according to the provisions of ASC topic 605, “Revenue Recognition” (formerly Staff Accounting Bulletin 104), which takes into account the completion of the transaction, delivery of the product, a final fixed or determinable price, and that collectability is reasonably assured.

The Company has adopted the provisions of ASC topic 360, “Property, Plant and Equipment” (formerly SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets to be Disposed of”). ASC topic 360 establishes procedures for review of recoverability, and measurement of impairment whenever events of changes in circumstances indicated that the carrying amount of long-lived assets may not be recoverable. ASC topic 360 also requires that long-lived assets to be disposed of other than by sale shall continue to be classified as held and used until disposal. Further, ASC topic 360 specifies the criteria for classifying long-lived assets as “held for sale” and requires that long-lived assets to be disposed of by sale be reported at the lower of carrying amount or fair value less estimated selling costs. Management believes that there has not been any impairment of the Company’s long-lived assets at November 30, 2009 and 2008.

On January 1, 2008, the Company adopted ASC topic 820, “Fair Value Measurements and Disclosures” (formerly SFAS No. 157, “Fair Value Measurements”). ASC topic 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

The Company’s financial instruments consist of cash, receivables, payables, and notes payable. The carrying amount of cash, receivables and payables approximates fair value because of the short-term nature of these items. The carrying amount of the notes payable approximates fair value as the individual borrowings bear interest at market interest rates.

We account for income taxes in accordance with ASC topic 740, “Income Taxes” (formerly SFAS 109, “Accounting for Income Taxes”). Under this standard, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when we cannot make the determination that it is more likely than not that some portion or all of the related tax asset will be realized.

In December 2004, the FASB issued ASC topic 718, “Compensation – Stock Compensation” (formerly SFAS No. 123R,” Share-Based Payment”, amending SFAS No. 123) to require companies to record as expense the fair value of equity-based compensation, including stock options and warrants, over the applicable vesting period. ASC topic 718 also requires more extensive disclosures concerning stock options than required under previous standards. The new standard applies to option grants made after adoption, as well as options that have not vested at the date of adoption.

We capitalize software development costs in accordance with generally accepted accounting principles, under which certain software development costs incurred subsequent to the establishment of technological feasibility, may be capitalized before the product is available for general release to customers, in accordance with ASC topic 985-20, “Costs of Software to Be Sold, Leased Or Marketed” (formerly SFAS 86). We determine technological feasibility to be established upon completion of (1) a detailed program design, (2) completion of working model. Capitalized software development costs consist of costs for internally developed software to be sold publicly upon completion of development. Capitalized costs consist primarily of direct salaries and the cost of specific external consultants, where such costs qualify for capitalization under generally accepted accounting principles. Amortization shall not start until the product is available for general release to customers. On an annual basis, the Company will determine whether or not there has been impairment in value of the intangible assists and if necessary, records impairment charged to write down the assts to their estimated fair value.

In April 2008, the FASB issued ASC topic 350-30, “Intangibles Other Than Goodwill” (formerly FSP 142-3, “Determination of the Useful Life of Intangible Assets”). ASC topic 350-30 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC topic 350 – Goodwill (formerly SFAS No. 142, “Goodwill and Other Intangible Assets”). ASC topic 350-30 is effective for fiscal years beginning after December 15, 2008. We do not expect ASC topic 350-30 to have a significant impact on our results of operations or financial position.

In June 2008, the FASB issued ASC topic 260, “Earnings Per Share” (formerly FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”). ASC topic 260 clarifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. ASC topic 260 is effective for fiscal years beginning after December 15, 2008. We are currently assessing the impact of ASC topic 260 on our financial position and results of operations.

In June 2008, the FASB ratified ASC topic 815-40, “Contracts In Entity’s Own Equity” (formerly EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock”). ASC topic 815-40 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. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. ASC topic 815-40 is effective for fiscal years beginning after December 15, 2008. We are currently assessing the impact of ASC topic 815-40 on our financial position and results of operations.

In June 2008, the FASB ratified ASC topic 840, “Leases” (formerly EITF Issue No. 08-3, “Accounting for Lessees for Maintenance Deposits Under Lease Arrangements”). ASC topic 840 provides guidance for accounting for nonrefundable maintenance deposits. It also provides revenue recognition accounting guidance for the lessor. ASC topic 840 is effective for fiscal years beginning after December 15, 2008. We are currently assessing the impact of ASC topic 840 on our financial position and results of operations.

In October 2008, the FASB issued ASC topic 820, “Fair Value Measurement When the Markets Are Not Active” (formerly FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”), which addresses the application of ASC topic 820 – Fair Value Measurements (formerly SFAS No.157 for illiquid financial instruments). ASC topic 820 clarifies that approaches to determining fair value other than the market approach may be appropriate when the market for a financial asset is not active. The Company does not expect the adoption of ASC topic 820 to have a material effect on the Company’s financial statements.

In April 2009, the FASB issued ASC topic 825, “Financial Instruments” (formerly FASB Staff Position (“FSP”) SFAS No. 107-1) and ASC topic 270, “Interim Reporting” (formerly Accounting Principles Board (“APB”) Opinion No. 28-1 (“APB No. 28-1”), “Interim Disclosures about Fair Value of Financial Instruments”, which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”), and requires disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. ASC topic 825 and ASC topic 270 also amends APB Opinion No. 28, “Interim Financial Reporting”, (codified as ASC topic 270) to require those disclosures in summarized financial information for interim reporting periods. ASC topic 825 and ASC topic 270 is effective for interim reporting periods ending after June 15, 2009. The Company is in the process of evaluating the impact of ASC topic 825 and ASC topic 270 on our financial position and results of operations.

In May 2009, the FASB issued ASC topic 855, “Subsequent Events” (formerly SFAS No. 165, “Subsequent Events”). ASC topic 855 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC topic 855 requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, and is effective for interim and annual periods ending after June 15, 2009.

In June 2009 the FASB issued ASC topic 860-20, “Sale of Financial Assets” (formerly SFAS 166, “Accounting for Transfers of Financial Assets — an Amendment of FASB Statement No. 140” (SFAS 166). ASC topic 860-20 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. ASC topic 860-20 will be effective January 1, 2010. The adoption of this pronouncement is not expected to have a material impact on the Company’s consolidated financial position and results of consolidated operations.

In June 2009 the FASB issued ASC topic 810, “Consolidation” (formerly SFAS 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS 167)). ASC topic 810 eliminates Interpretation 46(R)’s exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. ASC topic 810 also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity, or a company’s obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying Interpretation 46(R)’s provisions. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions means more entities will be subject to consolidation assessments and reassessments. ASC topic 810 will be effective January 1, 2010. The adoption of this pronouncement is not expected to have a material impact on the Company’s financial position and results of operations.

In June 2009, the FASB issued ASC topic 105, “Generally Accepted Accounting Principals” (formerly SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles"). ASC topic 105 will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles ("GAAP"),superseding existing FASB, American Institute of Certified Public Accountants("AICPA"), EITF, and related accounting literature. ASC topic 105 reorganizes the thousand of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. ASC topic 105 will be effective for financial statements issued for reporting periods that end after September 15, 2009. The Company began using the new guidelines and numbering system prescribed by the Codification when referring to GAAP in this quarterly report of Form 10-Q for the period ending November 30, 2009. As the codification was not intended to change or alter existing U.S. GAAP, it will not have any impact on our financial position, results of operations and cash flows.

In September 2009, the Emerging Issues Task Force (“EITF”) reached final consensus on a new revenue recognition standard; ASC topic 605-25, “Revenue Recognition-Multiple Element Arrangements” (formerly EITF Issue No. 08-1, “Revenue Arrangements with Multiple Deliverable”). ASC topic 605-25 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting. This Issue is effective for fiscal years beginning after June 15, 2010 and may be applied retrospectively or prospectively for new or materially modified arrangements. In addition, early adoption is permitted. The Company is currently evaluating the potential impact of ASC topic 605-25 on its financial position and results of operations.

In September 2009, the EITF reached final consensus on a new revenue recognition standard, ASC topic 985-605, “Software Revenue Recognition” (formerly EITF 09-3, “Applicability of AICPA Statement of Position 97-2 to Certain Arrangements That Contain Software Elements”). ASC topic 985-605 amends the scope of AICPA Statement of Position 97-2, Software Revenue Recognition to exclude tangible products that include software and non- software components that function together to deliver the product's essential functionality. This Issue shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Earlier application is permitted as of the beginning of a company's fiscal year provided the company has not previously issued financial statements for any period within that year. An entity shall not elect early application of this Issue unless it also elects early application of ASC topic 605-25 (formerly EITF 08-1). The Company is currently evaluating the potential impact of ASC topic 985-605 on its financial position and results of operations.

The convertible debentures were issued in accordance with ASC topic 470-20, “Debt With Conversion and Other Options” (formerly EITF 98-5 –“Accounting for Convertible Securities with Beneficial Conversion Features of Contingently Adjustable”), we calculated the value of the beneficial conversion feature embedded in the Convertible Notes. In accordance with ASC topic 470-20, convertible notes are split into two components: a debt component and a component representing the embedded derivatives in the debt. The debt component represents the Company’s liability for future interest coupon payments and the redemption amount. The embedded derivatives represent the value of the option that debtholders have to convert into ordinary shares of the Company. The debt component of the convertible note is measured at amortized cost and therefore increases as the present value of the interest coupon payments and redemption amount increases, with a corresponding charge to finance cost – other than interest. The debt component decreases by the cash interest coupon payments made. The embedded derivatives are measured at fair value at each balance sheet date, and the change in the fair value is recognized in the income statement.

NOTE 4 – SOFTWARE DEVELOPMENT COSTS

Software development costs comprise of costs for internally developed production software to be sold publicly upon completion of development. Capitalized software development costs, amounted to $64,500 and $0 at November 30, 2009 and 2008, respectively. These costs were not amortized since the product is not available for general release to customers. Revenue generating activities have not yet commenced.

NOTE 5 – RELATED PARTY TRANSACTIONS

As at November 30, 2009, a Director of the Company is owed $320,098 ($0- November 30, 2008) for cash advanced to the Company. No arrangement has been made for repayment of the loan and none have been made by the Company as of November 30, 2009. The advance is non-interest bearing and due upon demand. There are no other related party transactions.


	November 30 2009	August 31 2009
The Company converted $1,750,000 of Convertible Debentures into 17,500,000 common shares at $0.10 per share during the three month period ended November 30, 2009 and issued notes payable of $1,750,000 for August 31, 2009.	$ 350,000	$ 2,100,000

Discount on note payable net of amortization	(14,584)	(1,184,754)

Total	$ 335,416	$ 915,246

The promissory note was further extended to May 1, 2009 and we agreed to make payments on the principal of $50,000 by February 15, 2009; repay a further $100,000 by May 1, 2009; issue 3,000 shares of our common stock as interest and additional issuance of 20,040 shares of our common stock for additional compensation. All the terms of the amended agreement have been complied with. The remaining $100,000 plus accrued interest is convertible at NSC’s option at $2.00 per share on or before May 1, 2010. Pursuant to EITF 06-6, the modification of the Note agreement was not treated as an extinguishment but rather reduced the carrying amount of the debt through an adjustment to the note discounts, with a corresponding increase in APIC.

On January 15, 2009 we entered into an agreement with Genovese whereby Genovese and/or his affiliates (collectively “Genovese”) advanced to the Company $250,000 for a convertible debenture (“Debenture”) for the aggregate principle amount of $250,000. The Debenture was non-interest bearing and had a maturity date of December 5, 2010. At the holder’s sole discretion, the holder may elect to convert the Debenture, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate. The Company and Genovese further agreed to establish five (5) mutually agreed upon milestones to be attained no later than September 2009 with each milestone generally occurring approximately every forty five (45) days. In conjunction with the attainment of each individual milestone, Genovese agreed to advance to the Company an additional $250,000. In connection with each $250,000 advance, Genovese was issued an additional $250,000 Convertible Debenture. The Debenture was non interest bearing and had a maturity date of two years from the date of issuance of each subsequent debenture (“Subsequent Debentures”).

At the Holders’ sole discretion, the Holder may elect to convert the Subsequent Debentures, in whole or in part, at any time prior to maturity, into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate for each Subsequent Debenture issued. We further agreed that (1) Genovese would be granted the right of first refusal/ right of participation in connection with any additional financing of the Company for two (2) years, (2) Genovese would be entitled to two board seats, (3) we would obtain directors and officers insurance, and (4) the parties would work together commencing December 2008 to address other matters. We offered the convertible notes and warrants in reliance on Section 506 of Regulation D and/or Regulation S of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws. The Debenture was subsequently amended for an aggregate principle amount of $545,000.

Additional Debentures for $455,000, $250,000, and $50,000 and $195,000 were issued during the year ended August 31, 2009. In April 2009, the amount of convertible debentures available to be issued was increased by $255,000 for an aggregate of $1,750,000. As of August 31, 2009 a total of $1,750,000 had been issued as Debentures. The amount of the Debentures outstanding at August 31, 2009 was classified as “permanent equity” as capital in excess of par value and a corresponding amount was recorded as a discount against the note payable. This discount will be amortized over 24 months on a straight-line basis as interest expense. On September 25, 2009, all issued debentures were converted into 17,500,000 shares of common stock.

In April 2009, we entered into a loan agreement with Janst Limited for $250,000. The loan bears interest at 15% per annum and matures on May 1, 2010 (the “Maturity Date”). The principal and accrued interest is convertible into common stock at the conversion rate of $0.35 per share. From November 1, 2009 to Maturity Date, should the average closing prices for the five trading days ending on the day prior to the conversion notice not exceed $0.35, the conversion rate shall be 80% of the average closing prices for the five trading days ending on the day prior to the conversion notice.

On July 17, 2007, in connection with its Exchange Agreement with Subsidiary, Parent issued 2,780,000 shares of its previously authorized but unissued common stock in exchange for all the issued and outstanding common stock of Subsidiary. The 2,780,000 shares have been reflected as though they were issued at the inception of the Subsidiary, with a reverse merger adjustment that represents the shareholders of the public shell at the time of the recapitalization.

On October 31, 2007 the Board of Directors approved the issuance of a private placement memorandum for 135,000 shares of common stock at $10.00 per share. On January 22, 2008, we completed a private placement of 135,000 shares of our common stock at a purchase price of $10.00 per share to persons who were not “U.S. Persons” within the meaning of Regulation S (“Regulation S”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Also, stock offering costs of $91,401 have been recorded against capital in excess of par value.

During November 2007, the Board of Directors authorized the granting of options to purchase 200,000 shares of common stock at $10.00 per share. The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions; risk-free interest rates of 4.4%, expected dividend yields of zero, expected life of 10 years, and expected volatility of 147.95%. The options vested immediately and were valued in total at $2,366,186. Options granted under the Plan are subject to the Plan being approved by the stockholders of the Company within one year from the date the Plan was adopted.

On January 22, 2008, the Company completed a private placement of 135,000 shares of its common stock at a purchase price of $10.00 per share to persons who were not “U.S. Persons” within the meaning of Regulation S (“Regulation S”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company received gross proceeds from the placement of $1,350,000 and net proceeds of approximately $1,258,600 after deducting $30,000 in placement fees paid to registered investment dealers in Canada and other offering costs. The foregoing sales of common stock were made in reliance on the exemption from registration provided by Regulation S. Each of the purchasers signed a subscription agreement containing the representations required by Regulation S and the certificates for the shares will be stamped with restricted stock legends indicating the shares have not been registered under the Securities Act, have been issued in reliance on the exemption from registration provided by Regulation S, and may not be reoffered or sold except in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or an available exemption from registration under the Securities Act.

During August 2008, the Company issued 45,000 warrants valued at approximately $338,000 to purchase stock for services rendered. The warrants vest over various terms. During the year ended August 31, 2009, the Company recognized compensation expense of $216,479. The fair value of each warrant granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rates of 3.74% to 3.97%, expected dividend yields of zero, expected life of 10 years and expected volatility of 136.94% to 140.60%.

In November 2008, we borrowed $5,000 from a consultant to the Company which was payable by December 6, 2008. The lender was to receive 200 shares of our common stock per month as interest and an additional consideration of 25,000 warrants with an exercise price of $0.25. In February 2009 we repaid the principal and interest in full and did not issue any shares or warrants.

On September 15, 2009, the Company completed a reverse stock split on a 1:10 basis, whereby each shareholder holds one new share for every ten shares previously issued. The Company’s share transactions disclosed in the financial statements have been restated retroactively to reflect the reverse stock split for all periods presented.

During the year ended August 31, 2009, the Company issued an aggregate of $1,750,000 in Convertible Debentures. At the holder’s sole discretion, the holder was entitled to convert the Debenture, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, in conjunction with the issuance of the Debentures, the Company issued 17,500,000 share purchase warrant certificates with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate. On September 25, 2009 all of the $1,750,000 of debentures were converted into 17,500,000 common shares and 17,500,000 share purchase warrants exercisable at $0.15 per share remained outstanding.

During November 2007 the Board of Directors of the Company adopted and the stockholders at that time approved the 2007 Stock Plan (“the Plan”). The Plan provides both for the direct award or sale of shares and for the granting of options to purchase shares. Options granted under the plan may include qualified and non-qualified stock options. The aggregate number of shares that may be issued under the plan shall not exceed 750,000 shares of common stock, and are issuable to directors, officers, and employees of the Company. Awards under the plan will be granted as determined by Committees of the Board of Directors or by the Board of Directors. The options will expire after 10 years or 5 years if the option holder owns at least 10% of the common stock of the Company. The exercise price of a non-qualified option must be at least 85% of the market price on the date of issue. The exercise price of a qualified option must be at least equal to the market price or 110% of the market price on the date of issue if the option holder owns at least 10% of the common stock of the Company.

The estimated value of the compensatory common stock purchase options granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions: expected term of 10 years, a risk free interest rate of 3.97% to 4.40%, a dividend yield of 0% and volatility of 136.94% to 147.95%. During the three month period ended November 30, 2009 and 2008, the amount of the expense charged to operations for compensatory options granted in exchange for services was $11,200 and $30,435 respectively.

	Shares		Weighted Average Exercise Price
Outstanding, beginning of the year ended August 31, 2007		-		-

Granted		230,000		$9.70

Expired / Cancelled		-		-

Exercised		-		-

Outstanding, end of the year ended August 31, 2008		230,000		$9.70

Exercisable at August 31, 2008		230,000		$9.70

Granted		15,000		$7.10

Expired/Cancelled		-		-

Exercised		-		-

Outstanding, end of the year ended August 31, 2009		245,000		$9.50

Exercisable at August 31, 2009		245,000		$9.50

Granted		-		-

Expired/Cancelled		-		-

Exercised		-		-

Outstanding, end of the period ended November 30, 2009		245,000		$9.50

Exercisable at November 30, 2009		245,000		$9.50

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. These options were granted in lieu of cash compensation for services performed or financing expenses. The number of options stated in the table below are retroactively restated due to the reverse stock split.

	Options Outstanding			Options Exercisable
Year		Exercise Price	Number shares outstanding	Weighted Average Contractual Life (Years)	Number Exercisable		Weighted Average Exercise Price
2007	$	10.00	200,000	7.92	200,000	$	10.00

2008	$	6.00 – 9.00	30,000	8.68	30,000	$	6.00 – 9.00
2008		7.10	15,000	8.76	15,000		7.10

Total			245,000		245,000

Stock Warrants

At the Holders’ sole discretion, the Holder may elect to convert the Subsequent Debentures, in whole or in part, at any time prior to maturity, into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate for each Subsequent Debenture issued. We would further agreed that (1) Genovese would be granted the right of first refusal/ right of participation in connection with any additional financing of the Company for two (2) years, (2) Genovese would be entitled to two board seats, (3) we would obtain directors and officers insurance, and (4) the parties would work together commencing December 2008 to address other matters. We offered the convertible notes and warrants in reliance on Section 506 of Regulation D and/or Regulation S of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws. The Debenture was subsequently amended for an aggregate principle amount of $545,000.

Additional Debentures for $455,000, $250,000, and $50,000 and $195,000 were issued during the year ended August 31, 2009. In April 2009, the amount of convertible debentures available to be issued was increased by $255,000 for an aggregate of $1,750,000. As of August 31, 2009 a total of $1,750,000 had been issued as Debentures. On September 25, 2009 all of the $1,750,000 of debentures were converted into 17,500,000 common shares and 17,500,000 share purchase warrants exercisable at $0.15 per share remained outstanding.

The Company has determined the estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses using the Black-Scholes pricing model and the following assumptions: expected term of 1year, a risk free interest rate of 1.79%, a dividend yield of 0% and volatility of 193.92% in 2009.

	Warrants		Weighted Average Exercise Price
Outstanding, beginning of the year ended August 31, 2008		-		-

Granted		100,000		$2.00

Expired / Cancelled		-		-

Exercised		-		-

Outstanding, end of the year ended August 31, 2008		100,000		$2.00

Exercisable at August 31, 2008		100,000		$2.00

Granted		17,500,000		$0.15

Expired/Cancelled		-		-

Exercised		-		-

Granted		37,500		$3.00

Outstanding, end of the period ended August 31, 2009		17,637,500

Exercisable at August 31, 2009		17,637,500

Granted		1,000,002		$0.60

Expired/Cancelled		-		-

Exercised		-		-

Outstanding, end of the period ended November 30, 2009		18,637,502		$0.60

Exercisable at November 30, 2009		18,637,502		$0.60

		Warrants Outstanding			Warrants Exercisable
Year		Exercise Price	Number of Warrants Outstanding	Weighted Average Contractual Life (Years)	Number Exercisable	Weighted Average Exercise Price
2008	$	2.00	100,000	3.91	100,000	2.00
2009		0.15	*10,000,000	2.17	10,000,000	0.15
2009		0.15	*2,500,000	2.22	2,500,000	0.15
2009		0.15	*500,000	2.25	500,000	0.15
2009		0.15	*1,700,000	2.39	1,700,000	0.15
2009		0.15	*150,000	2.42	150,000	0.15
2009		0.15	*50,000	2.43	50,000	0.15
2009		0.15	*50,000	2.46	50,000	0.15
2009		3.00	37,500	0.45	37,500	3.00
2009		0.15	*500,000	2.72	500,000	0.15
2009		0.15	*2,050,000	2.72	2,050,000	0.15
2009		0.60	428,572	1.92	428,572	0.60
2009		0.60	285,715	1.94	285,715	0.60
2009		0.60	285,715	1.95	285,715	0.60
Total			18,637,502		18,637,502

* Pursuant to the terms of the debentures issued under the Genovese Agreement, the warrants contain an anti-dilusion provision that states it is specifically agreed that in the event that the Company shall reduce the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then, in such case, the then applicable Exercise Price per Warrant Share purchasable pursuant to the Warrant Certificate in effect at the time of such action will not be changed.

We maintain an operating lease obligation to John D. Howard Family Limited Partnership to lease 9,678 square feet of office space at a rate of $19,536 per month. Our lease started on May 1, 2008 and ends on April 30, 2010. To fulfill our future commitment obligation to John D. Howard Partnership Family Trust, we are obligated to pay $156,288 for lease of our office space until April 30, 2010. Rent expense for the periods ended November 30, 2009 and 2008 was $51,072 and $58,608 respectively.

The following discussion contains certain statements that constitute “forward-looking statements”. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Our future results may differ materially from those currently anticipated depending on a variety of factors, including those described below under “Risks Related to Our Future Operations” and our filings with the Securities and Exchange Commission. The following should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto that appear elsewhere in this report and in conjunction with our 2009 annual report on Form 10-K.

Capitalizing on the recent growth and explosion of digital media, wireless devices, and web 2.0, we are currently in the process of completing the development of software solutions to better manage data sets and present them in a user-friendly way. Our management and outside consultants are in the process of determining the types of programming that would most appeal to the viewing public, and utilizing developmental resources to deliver such programming via Virtual Server environments. We believe these original environments will enhance the user’s experience with superior quality video and audio Internet content. Our emphasis on video and communication technologies has enabled us to pursue digital delivery, content development and merging desktop technologies through our software applications.

Underlying this technology is our developing code in the C++, C# and Objective-C programming languages for use with Microsoft’s Vista Operating System, Windows Mobile, other mobile devices, and Apple’s Mac OSX platform. We have successfully built prototypes of these applications using our proprietary technology although we have not completed the final versions of such applications and no assurances can be given that we will be able to do so.

In addition to the unique aspects of our En2ools framework, we believe our uniqueness stems from our development team led by experienced management who have previously been able to attract world-class leaders in technology, music, entertainment, and communications. We believe this team will facilitate our growth and establish us as an innovative leader of entertainment and technology convergence on desktops.

We are currently working to complete development of the following products and applications. Each of the below listed products are in various stages of development. However, no assurances can be given that we will be successful in completing the development of all or any such items or that if development is completed, we will be able to manufacture and market such products on a profitable basis.

En2ools. We are currently attempting to establish a technical infrastructure, which we call “En2ools.” En2ools is an ever-expanding library of code modules and techniques designed for the rapid production or modification of software. En2ools is the foundation that enables the software applications to be fast, efficient, reliable, and user-friendly. If we are successful in establishing workable version of En2ools, we plan to partner with larger organizations using our En2ools proprietary framework.

Desktop Video: Flyxo. Flyxo is an application that delivers high-quality video to a user’s computer desktop. We will provide this service in a unique manner using the latest in compression technology, H.264, combined with our proprietary media delivery system. Flyxo is designed to enable users to watch movies, music videos and TV shows conveniently on their computer desktop, in the background with a full-screen view. Also, the consumer will be able to continue to work on other projects on the desktop while the media plays. Our software works through a simple, on-time download and then enables users to watch the media they desire as a stream, bypassing the inconvenient need to first download the video, and then delete it afterwards to free up memory. In addition, because Flyxo seamlessly delivers high quality images, music and games it also enables content owners to create their own channel of interactive media for global distribution.

Using Flyxo to watch movies online can eliminate the user’s frustration of long download times or waiting for buffering. Flyxo delivers movies, TV shows, podcasts, music, games, web sites, flash, quartz, openGL and more in extraordinary quality, whether on a mobile device or a big screen. Flyxo’s competitive edge is that it is more than a media player. It is a global Internet broadcast platform that can facilitate online television channels, movie channels, radio stations, online gaming, slide shows, 3-D objects, high-resolution graphics, interactive advertising, social media and more. With seamless delivery capable of streaming HD and beyond, Flyxo provides for a superior media experience and enhanced user engagement.

When prospective clients such as film distribution companies, studios, independent producers, television networks, or other businesses and individuals desire to have their movies, trailers, videos, games and other media made available on Flyxo, they can seek distribution with En2go. If approved, En2go will host the content making it available through Flyxo on a VOD (video on demand) basis, sharing in revenue if it is pay-per-view or supported by advertising. For those clients who opt to use the Flyxo platform to build their own private or public channels or networks, they can pay the appropriate licensing fees and become “Channel Partners.” Channel Partners have creative control over what is shown on their programming schedules, which programs they want to feature, how they want to monetize their content, the locations they want to target or block, how much advertising they will include if any, and more. Through the Flyxo platform, En2go gives its clients the opportunity to bypass the bottleneck of film or television distribution and showcase their media to niche or global audiences.

En2go can offer media and shopping to end-users through micro-transactions such as pay-per-view, subscription, and ecommerce. En2go can also generate revenue from advertisers as well as managed services: monthly service plans, hosting, storage, encoding, uploading, advanced training or support, custom solutions, and more. Marketing collateral such as brochures, power points, videos and web sites have been developed to facilitate such sales, but more are needed and in development.

The Channel Builder. Channel Partners are set up with an administrative account on the En2go Channel Builder System that can be accessed from the browser. The Channel Builder makes it simple for individuals or organizations to create their own high-quality Internet media channels. Once the clients’ videos or other media is uploaded, using drag and drop functionality, the clients can create their own global HD Internet broadcast channel in a matter of minutes. This simplicity and convenience combined with the ability to distribute high-quality media to a worldwide audience opens a wide range of possibilities in terms of potential clients.

Image Search and Download: eMaculate. eMaculate is a search engine that is designed to search, download and share digital images on the Web at very high speeds. It is also easy-to-use with a state-of-the-art user interface. In addition, each captured image contains complete URL information, allowing the user to go straight to the source of the image. In the typical time it takes to download, save and review a single image using existing search technologies eMaculate users can instantly download hundreds of images. The selected images can be enlarged, minimized, rotated, shared, burned to a disk, corners can be rounded and photo borders can be added.

Media: VideoBlox. VideoBlox is a custom media player that is specifically designed for the entertainment industry. It plays numerous file formats including mp4, mp3, Quicktime and Windows Media. It is designed to enable artists to communicate directly with their fan base. Instead of simply sending a video, the artist will be able to use their own branded player to distribute their music videos and keep in constant contact with their fans. Another unique aspect of this media player is the ability to provide a customized look and feel to its interface.

Kandictionary. Kandictionary is a downloadable personalized dictionary and translator. It is designed for the desktop and allows users to choose from 80 different databases, including Wikipedia, Dictionary.com, Bible.com and the CIA reference manual. The user needs only to type in a word and see it defined or displayed in a myriad of different contexts. When the user rolls his or her cursor over different places on the user interface, the Kandictionary will perform many actions, such as streaming music from an artist that is featured on the user interface.

En2go Jukebox. The En2go jukebox is a custom stand-alone media player designed to play music from social networking sites. After downloading the media player, a user does not have to be on an artist’s page to hear the artist’s music. A user can add favorite songs to the media player and listen to the artist’s music while doing other things or visiting other sites. Furthermore, the user

En2go has advanced its flagship software and is near-ready to take it to the market place. En2go was able to improve its technology to better support its core business model, modify the company’s operational structure, and gain a pipeline of prospects in various stages of evolution. In the technology department, the company implemented a new Engagement Tracking System complete with geoLocation and geoBlocking features, reporting and analytics, and a custom payment solution has been designed and is well under way. Additionally, new GUI models and menu layouts have been added along with core animation, quartz integration, live streaming capability, back-end reporting, an interactive scrolling advertising ticker, a channel builder and much more. En2go has now transitioned from being a start up company doing only R & D to preparing for product roll out.

En2go was able to make robust improvements in its technology architecture at a discounted market value because developers were facilitated by the proprietary software infrastructure called En2ools. En2ools is an ever-expanding library of code modules and techniques designed for the rapid production or modification of software. En2ools is the foundation that enables the software applications to be fast, efficient, reliable, and user-friendly.

En2go platforms and applications have been developed for use with Apple’s Mac OSX, Microsoft Windows XP and Vista, as well as the iPhone and other mobile devices. Working prototypes of these applications have been completed; although the final versions of such applications have not yet been completed and no assurances can be given that we will be able to do so.

En2go presented a sneak preview of its online video software, known as Flyxo or Flyxo HD, at the 2009 Cannes Film Festival where it was well received. Several dozens of industry leaders, content providers and independent producers had a surprisingly enthusiastic response to the Flyxo product demonstration, provided valuable feedback, and expressed interest in partnering or licensing when the product is ready. This expert feedback was invaluable and served as a catalyst for modifying the functionality of Flyxo for stronger competitive advantages in the world of online film distribution.

En2go has strengthened its relationship with its CDN (content delivery network); Limelight Networks, to prepare for large scale Flyxo use and ensure the fastest video delivery to Flyxo end-users worldwide. Limelight maintains a dedicated high-speed network which spans the globe, interconnecting all of its 900 regional data centers over a fiber-optic backbone. When video is uploaded to Flyxo, it is directed to En2go’s location in Limelight and is then propagated to thousands of servers worldwide so users can receive the videos as quickly as possible.

Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR60”) issued by the SEC, suggests that companies provide additional disclosure and commentary on those accounting policies considered most critical. FRR 60 considers an accounting policy to be critical if it is important to the Company’s financial condition and results of operations, and requires significant judgment and estimates on the part of management in its application. For a summary of the Company’s significant accounting policies, including the critical accounting policies discussed below, see the accompanying notes to the consolidated financial statements.

We account for our business acquisitions under the purchase method of accounting in accordance with ASC topic 805, “Business Combinations” (formerly SFAS 141, "Business Combinations”) The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair value of the tangible net assets acquired is recorded as intangibles. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items.

We assess the potential impairment of long-lived assets and identifiable intangibles under the guidance of ASC topic 360; “Property, Plant and Equipment”, (formerly SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets”), which states that a long-lived asset should be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset exceeds its fair value. An impairment loss is recognized only if the carrying amount of the long-lived asset exceeds its fair value and is not recoverable.

We account for equity instruments issued to consultants and vendors in exchange for goods and services in accordance with the provisions of ASC topic 505-50, “Equity Based Payments to Non-Employees”, (formerly EITF Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services”), and EITF Issue No. 00-18, “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other than Employees”. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. In accordance with EITF Issue No. 00-18, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor’s balance sheet once the equity instrument is granted for accounting purposes. Accordingly, the Company records the fair value of the fully vested, non-forfeitable common stock issued for future consulting services as prepaid expenses in its consolidated balance sheet.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There is no assurance that actual results will not differ from these estimates.

Operating Expenses: Operating expenses were $226,897 and $671,334 for the three months ended November 30, 2009 and 2008, respectively. The decrease of $444,437 was primarily due to a decrease of $ 376,672 in General and Administrative expenses, a decrease of $72,435 in Stock Issued for Services offset by an increased in Salaries, Wages and Consulting of $4,670.

As of the date of this report, we have not generated any revenues. As a result, we have generated significant operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future as we attempt to expand our infrastructure and development activities. Our ability to continue may prove more expensive than we currently anticipate and we may incur significant additional costs and expenses.

We are a development stage company and are in the early stages of developing our products and services. We have not yet successfully developed any of our products and services to the final completion stage. The diversity of our products, the competitive entertainment industry, lack of liquidity and the current economic downturn, make it difficult for us to project our near-term results of operations. These conditions could further impact our business and have an adverse effect on our financial position, results of operations and/or cash flows.

Net cash used in operating activities was $186,364 and $299,660 for the period ended November 30, 2009 and 2008, respectively. The decrease of $113,296 in cash used by operating activities was primarily due to the decrease in accounts payable and options, warrants and common stock issued for services rendered. Net cash used in investing activities was $66,773 and $0 for the periods ended November 30, 2009 and 2008, respectively. Investing activities for the periods ended November 30, 2009 and 2008 resulted from the purchase of computers and furniture and software development costs. Net cash provided by financing activities was $350,000 and $315,000 for the periods ended November 30, 2009 and 2008, respectively.

The Company suffered recurring losses from operations and has an accumulated deficit of $12,825,823 at November 30, 2009. Primarily as a result of our recurring losses and our lack of liquidity, the Company has received a report from our independent auditors that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. We have delayed payment of a substantial amount of accounts payable and accrued expenses and reduced our expenses to a minimum level. Our existing cash and cash equivalents will not be sufficient to fund our operations. Unless we receive liquidity from new purchase orders, obtain additional capital, loans or sell or license assets, we may be required to seek to reorganize our business or discontinue operations and liquidate our assets. There can be no assurance that the Company will be able to secure sufficient financing or on terms acceptable to the Company. If additional funds are raised through the issuance of equity securities, the percentage ownership of our current stockholders is likely to or will be reduced.

On January 15, 2009 we entered into an agreement with Genovese whereby Genovese and/or his affiliates (collectively “Genovese”) advanced to the Company $250,000 for a convertible debenture (“Debenture”) for the aggregate principle amount of $250,000. The Debenture was non-interest bearing and had a maturity date of December 5, 2010. At the holder’s sole discretion, the holder may elect to convert the Debenture, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate for each Subsequent Debenture issued. The Company and Genovese further agreed to establish five (5) mutually agreed upon milestones to be attained no later than September 2009 with each milestone generally occurring approximately every forty five (45) days. In conjunction with the attainment of each individual milestone, Genovese agreed to advance to the Company an additional $250,000. In connection with each $250,000 advance, Genovese was issued an additional $250,000 Convertible Debenture. The Debenture was non interest bearing and had a maturity date of two years from the date of issuance of each subsequent debenture (“Subsequent Debentures”).

We further agreed that (1) Genovese would be granted the right of first refusal/ right of participation in connection with any additional financing of the Company for two (2) years, (2) Genovese would be entitled to two board seats, (3) we would obtain directors and officers insurance, and (4) the parties would work together commencing December 2008 to address other matters. We offered the convertible notes and warrants in reliance on Section 506 of Regulation D and/or Regulation S of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws. The Debenture was subsequently amended for an aggregate principle amount of $545,000.

During the period ended May 31, 2009, Richard Genovese advanced $210,000 to us for additional working capital. From June 1, 2009 to August 31, 2009, Richard Genovese advanced a further $319,498. The aggregate of $529,498 advanced was converted into the balance of the convertible debentures for the amount of $255,000 and the remaining $274,498 was applied as an advance to the Company. During the quarter ended November 30, 2009, Richard Genovese advanced a further $45,600 to the Company for working capital. No arrangement has been made for repayment of the loan. The advance is non-interest bearing and due upon demand.

As of the date of this report, there is doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations and loan commitments. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.

Operating lease obligations refer to our commercial single-tenant lease with John D. Howard Family Limited Partnership. We own no real estate. We lease 9,678 square feet of office space from John D. Howard Family Limited Partnership at a rate of $19,536 per month. Our lease started on May 1, 2008 and ends on April 30, 2010. Our corporate offices are located at 2921 West Olive Avenue, Burbank, California 91505.

Paul E. Fishkin. In connection with the En2Go Nevada acquisition, we approved an employment agreement with Paul E. Fishkin, which was entered into concurrently with the completion of the acquisition. The employment agreement was effective as of July 13, 2007. Under the terms of the agreement, Mr. Fishkin agreed to continue as EN2Go’s President, Chief Executive Officer and Director. Pursuant to the agreement, Mr. Fishkin will receive an annual base salary of not less than $90,000 per year, incentive compensation as determined by the Board and reimbursement of all ordinary and reasonable out-of-pocket business expenses he incurs. The agreement is for an initial term ending July 13, 2008 and automatically renews each year thereafter unless terminated by either party by written notice given at least 180 days prior to the expiration of the agreement. We may terminate the agreement for cause (as defined in the agreement).

Tolga F. Katas. In connection with the En2Go Nevada acquisition, we approved an employment agreement with Tolga F. Katas, which we entered into concurrently with the completion of the acquisition. The employment agreement was effective as of July 13, 2007. Prior to the agreement, Mr. Katas received no annual compensation. Pursuant to the agreement, Mr. Katas will receive an annual base salary of not less than $90,000 per year, incentive compensation as determined by the Board and reimbursement of all ordinary and reasonable out-of-pocket business expenses he incurs. The agreement is for an initial term ending July 13, 2008 and automatically renews each year thereafter unless terminated by either party by written notice given at least 180 days prior to the expiration of the agreement. We may terminate the agreement for cause (as defined in the agreement).

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective since the following material weaknesses exist:

The foregoing material weaknesses identified in our disclosure controls and procedures were identified in June 2009, by our external consultants responsible for the preparation of our financial reporting package. The aforementioned material weaknesses did not impact our financial reporting or result in a material misstatement of our financial statements. As of November 30, 2009 we have not taken action to correct the material weaknesses identified in our disclosure controls and procedures.

Once the Company has sufficient personnel available, our Board of Directors will nominate an audit committee and audit committee financial expert and we will appoint additional personnel to assist with the preparation of our financial statements; which will allow for proper segregation of duties as well as additional manpower for proper documentation.

Our net loss for the three months ended November 30, 2009 was $1,409,442. From inception at January 31, 2007 through November 30, 2009 we had an accumulated net loss of $12,825,823. We have not yet achieved profitability and expect to continue to incur net losses until we recognize sufficient revenues from licensing activities, customer contracts, product sales or other sources. Because we have a limited history upon which an evaluation of our prospects can be based, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies seeking to develop new and rapidly evolving technologies. To address these risks, we must, among other things, respond to competitive factors, continue to attract, retain and motivate qualified personnel and commercialize and continue to develop our technologies. We may not be successful in addressing these risks. We can give no assurance that we will achieve or sustain profitability.


	10.1		Convertible Debenture Agreement between Richard Genovese and the Company dated January 15, 2009 (filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2008 filed on January 20, 2009 and incorporated herein by reference thereto).
	10.2		Form Convertible Debenture (filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2008 filed on January 20, 2009 and incorporated herein by reference thereto).

	10.3		Form Common Stock Warrant (filed as exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2008 filed on January 20, 2009 and incorporated herein by reference thereto).

	10.4		Amended Convertible Debenture Agreement between Richard Genovese and the Company Dated January 15, 2009 (filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2009 filed on April 20, 2009 and incorporated herein by reference thereto).

	10.5		Premium Network License and Reseller Agreement between Digital Stream, Inc. and the Company dated June 10, 2009 (filed as exhibit 10.1 to the Company’s Report on Form 8-K filed on June 16, 2009 and incorporated herein by reference thereto).

	31.1		Certification of Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

	32.1		Certification of Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. *


Nevada		98-0389557
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)


Large accelerated filer 	Accelerated filer 	Non-accelerated filer 	Smaller reporting company þ
		(Do not check if a smaller reporting company)


		November 30	August 31
		2009	2009
Computer Equipment	$	26,171	$ 23,897
Other Equipment		158,604	158,604
Total		184,775	182,501

Accumulated Depreciation		88,268	(73,212)

Total Property and Equipment (net)	$	96,507	$ 109,289

	Payments Due by Period

	Total	Less than 1 year	1 -3 years	3-5 years	More than 5 years
Long term debt	--	--	--	--
Interest expense on long term debt	--	--	--	--
Operating leases	156,288	156,288	--	--	--
Other long-term liabilities	--	--	--	--	--

TOTAL	$ 156,288	$ 156,288	$--	$--	$--


		EN2GO INTERNATIONAL, INC. (Registrant)

Date: January 19, 2010		By: PAUL E. FISHKIN Paul E. Fishkin
		President, Principal Executive and Chief Financial Officer and Principal Accounting Officer


þ		Quarterly Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
		For the quarterly period ended November 30, 2009


		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	—	$	—	$ —
Income taxes		—		—	—

	For the Three Months Ended November 30
	2009		2008
NET LOSS	$	(1,409,442)	$	(742,136)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		18,484,818		5,322,095
BASIC LOSS PER COMMON SHARE		(0.08)	$	(0.14)