Filing identity and reporting period
Important discrepancy: The supplied filing is for Load Guard Logistics, Inc., not Skye Bioscience, Inc. It is a Form 10-Q for the quarter ended July 31, 2014. The company’s fiscal year ends October 31, making this its third fiscal quarter; results are also presented for the nine months ended July 31. The filing describes a Miami-based trucking and freight-brokerage business. Financial amounts below are in dollars.
Financial performance and condition
| Metric | Three months ended July 31, 2014 | Three months ended July 31, 2013 | Nine months ended July 31, 2014 | Nine months ended July 31, 2013 |
|---|---|---|---|---|
| Revenue | $71,097 | $91,152 | $207,271 | $257,081 |
| Operating income (loss) | $4,052 | $744 | $(10,712) | $(1,968) |
| Net income (loss) | $7,760 | $(712) | $(2,236) | $1,387 |
| Operating margin | 5.7% | 0.8% | (5.2%) | (0.8%) |
Quarterly revenue fell 22% year over year, while the company moved to quarterly net income from a loss. Nine-month revenue declined 19%, and the company shifted from a small profit to a net loss. Nine-month other income included a $4,853 insurance-claim gain and a $3,897 gain on equipment disposal; these items helped offset the operating loss. Basic and diluted EPS rounded to $0.00 or $(0.00).
Management attributed lower trucking revenue to fewer drivers: trucking revenue declined 32% for the nine months, while brokerage income rose 91% as the company added independent contractors. Nine-month operating expenses fell 16%, chiefly with reduced fuel, wages, and maintenance costs; professional and general and administrative expenses increased.
| Balance-sheet and cash-flow item | July 31, 2014 | October 31, 2013 or prior-period comparison |
|---|---|---|
| Cash and cash equivalents | $39,236 | $52,186 |
| Current assets / current liabilities | $78,591 / $43,478 | $106,134 / $62,317 |
| Working capital | $35,113 | $43,817 |
| Total liabilities | $86,484 | $62,317 |
| Net cash from operating activities, nine months | $7,092 | $(5,739) in 2013 |
| Net cash used in investing activities, nine months | $(67,832) | $(38,116) in 2013 |
| Net cash from financing activities, nine months | $47,790 | $54,602 in 2013 |
Current assets exceeded current liabilities, but working capital declined. Cash decreased by $12,950 over the nine-month period. Equipment purchases were $67,832. At July 31, debt included $49,664 on a company note payable and $30,772 in related-party notes payable; the company note carries 8.75% interest and matures in 2020. Related-party notes were unsecured or equipment-related, and one bore no interest.
Outlook, risks, and unusual matters
- Going concern: The notes state that substantial doubt exists about the company’s ability to continue as a going concern. Management planned to seek public or private financing and loans from officers and directors, but said there was no assurance the plan would succeed. The notes warn financing may be insufficient for capital expenditures, working capital, and other needs. Separately, MD&A says cash and operating income are expected to cover the next twelve months; these statements present differing levels of concern.
- Customer concentration: One customer generated approximately $90,166, or 44% of reported revenue, and represented approximately 32% of receivables.
- Operating dependence and costs: The business relied on one company-operated tractor and trailer, a limited driver base, and independent contractors. Management cited competitive freight-broker tender pricing and high fuel costs relative to trucking revenue.
- Governance and controls: Management concluded disclosure controls and procedures were not effective and identified material weaknesses, including no functioning audit committee, no majority of outside directors, inadequate segregation of duties, and management concentration in two individuals.
- Other disclosures: The filing reports no material pending legal proceedings, commitments or contingencies, or material off-balance-sheet arrangements. It provides no specific revenue or earnings guidance and says no material capital-expenditure commitments were in place.
Key facts for investors to verify
- Confirm the intended issuer: this filing identifies Load Guard Logistics, Inc., not Skye Bioscience, Inc.
- Reconcile the going-concern warning with management’s statement that liquidity should cover the next twelve months, and assess the availability of planned financing.
- Assess customer concentration, driver capacity, and whether brokerage growth can offset declining direct trucking revenue.
- Review debt repayment terms, related-party financing and support, and the company’s ability to fund operations and equipment needs.
- Monitor whether the disclosed material weaknesses in financial reporting controls are remediated.