Filing summary
Issuer identity: The filing is for Sport Endurance, Inc., not SRX Global Inc. The issuer identity should be verified. This unaudited Form 10-Q covers the three months ended November 30, 2014, the first quarter of Sport Endurance’s fiscal 2015. The company describes itself as a development-stage business that intends to manufacture and distribute sports energy drinks; production and distribution had not commenced.
Financial results and position
| Metric | Quarter ended Nov. 30, 2014 | Comparable 2013 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $2,256 | $8,969 |
| Interest expense | $4,501 | $5,424 |
| Net loss per financial statements | $6,757 | $14,393 |
| Cash used in operations | $4,170 | $5,247 |
- No gross margin or meaningful operating margin is available because there was no revenue.
- At November 30, 2014, cash was $0; current assets were $1,500, total assets $5,332, and current liabilities $40,608. Working capital deficit was $39,108, versus $37,401 at August 31, 2014.
- Current liabilities included $19,838 of related-party convertible debt and $20,770 of accounts payable. Total stockholders’ deficit was $35,276; accumulated deficit was $388,541 per the financial statements.
- Financing activities provided $4,170 during the quarter, matching operating cash use; ending cash remained $0. No interest or income taxes were paid.
- Common shares outstanding were 37,581,903 at November 30 and January 14, 2015. No common shares were issued during the quarter.
Changes, outlook, and risks
- Compared with the prior-year quarter, operating expenses and net loss decreased; the filing attributes lower expenses mainly to reduced professional fees and depreciation. The reported net-loss reduction is $7,636, approximately 53% of the prior-year loss.
- Management anticipates operating losses in the next 12 months and says expected sales would not be sufficient to meet working-capital needs. It expects to seek equity or debt financing, third-party or bank funding, and sales income; funding is not assured.
- The filing states that recurring losses, no cash, and working-capital deficits raise substantial doubt about the company’s ability to continue as a going concern. Without additional financing, operations could be reduced or suspended.
- After quarter-end, the company received further demand, non-interest-bearing convertible loans from major shareholder BK Consulting: $2,000 on December 4, 2014 and $1,829 on January 1, 2015. These loans are convertible at $0.002 per share.
- Management reported ineffective disclosure controls, citing lack of an independent board or audit committee, insufficient segregation of duties, and reliance on a financial consultant. It said it planned improvements when resources permit.
- The company had no employees other than its unpaid CEO, reported no material off-balance-sheet arrangements, and knew of no material pending legal proceedings. It gave no quantified revenue or earnings guidance.
Investor verification priorities
- Confirm issuer identity: the supplied metadata names SRX Global Inc., while the filing names Sport Endurance, Inc.
- Reconcile inconsistencies: MD&A reports quarterly net loss of $7,257 and accumulated deficit of $389,041, whereas the financial statements report $6,757 and $388,541. MD&A also describes the loss decrease as approximately 88%, which does not match the stated period losses.
- Verify the company’s ability to obtain financing and the terms, balances, conversion features, and dilution implications of related-party debt.
- Assess progress toward launching the energy-drink business, including actual production, distribution, revenue generation, and required funding.