SEC Filing Summary: Sport Endurance, Inc. (Form 10-K)
Business Context and Reporting Period
Company: Sport Endurance, Inc. (formerly Cayenne Construction, Inc.)
Reporting Period: Fiscal year ended August 31, 2010
Status: Development stage company; formerly dormant from 2002 to July 2009.
Operations: The company intends to manufacture and distribute sports energy drinks and soft-gel capsules. As of the reporting date, the company has not commenced major operations, has no revenue, and has not distributed any products. It is currently marketing "Sport Endurance 8-hour Energy Soft-Gels" in the Salt Lake City, Utah area, with manufacturing contingent on receiving purchase orders.
Key Financial Metrics
| Metric | Amount (USD) |
|---|---|
| Revenue | $0 |
| Net Loss (FY 2010) | $(38,421) |
| Accumulated Deficit (Inception to 8/31/10) | $(179,621) |
| Total Assets | $23,202 |
| Cash and Cash Equivalents | $59 |
| Working Capital Deficit | $(20,249) |
| Total Liabilities | $22,303 |
| Stockholders' Equity | $899 |
Debt and Liquidity: The company holds $7,440 in unsecured loans due on demand from the CEO (Robert Timothy) bearing 10% interest. Accrued interest on this debt is $243. The company has a working capital deficit of $20,249 and insufficient cash to fund operations for the next twelve months.
Material Changes vs. Prior Period
- Operational Status: The company transitioned from a dormant state in 2009 to a development stage entity in 2010. There were no operations or expenses in the prior fiscal year (ended August 31, 2009).
- Expenses: FY 2010 incurred $38,178 in operating expenses, primarily driven by professional fees ($18,500) for legal and accounting services to revive the entity and file SEC reports, and general/administrative expenses ($15,486) for bank fees and stock servicing.
- Equity Structure: The company increased authorized common stock from 90 million to 480 million shares and preferred stock from 10 million to 20 million shares during the period. A proposed 5-for-1 stock split was approved but subsequently rescinded.
Guidance, Outlook, Risks, and Contingencies
Going Concern: Independent auditors have issued a "going concern" opinion. The company has an accumulated deficit of $179,621 and a cash balance of only $59. Management states the company requires approximately $75,000 to commence operations (marketing, manufacturing, and working capital). There is no assurance that financing will be available.
Outlook: Management intends to launch energy drinks and sugar-free shots in 2011. However, the company has no operating history and expects to incur losses for the foreseeable future.
Key Risks:
- Capital Shortage: Inability to raise additional capital could force the company to curtail or cease operations.
- Corporate Governance: The company is controlled solely by Robert Timothy (CEO, President, Secretary, and Sole Director), creating significant risks regarding segregation of duties and internal controls.
- Internal Controls: Management identified material weaknesses in internal control over financial reporting, including a lack of effective controls over the control environment and financial statement disclosure.
- Compliance: The CEO and an affiliate failed to comply with Section 16(a) filing requirements.
- Competition: The company faces competition from large, established energy drink manufacturers with substantial resources.
Investor Verification Checklist
- Cash Runway: Verify the current cash balance (reported as $59) and confirm if any new financing has been secured since the filing date.
- Related Party Transactions: Review the $7,440 loan from the CEO and the lease agreement for office space owned by the CEO's parents.
- Product Viability: Confirm if the company has secured any purchase orders for its soft-gel capsules, as manufacturing is contingent on sales.
- Stock Ownership: Note that the CEO beneficially owns approximately 60% of the common stock, giving him full control over corporate decisions.
- Regulatory Compliance: Monitor for any updates regarding the Section 16(a) filing failures and the status of the company's internal control remediation.