SEC Filing Summary: Sport Endurance, Inc. (10-Q)
Business Context and Reporting Period
Company: Sport Endurance, Inc. (formerly Cayenne Construction, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: May 31, 2010
Status: Development Stage Company
Business Overview: The Company intends to manufacture and distribute sports energy drinks and energy gel capsules. It ceased its original concrete business operations in 2002 and was revived in 2009. As of the reporting date, the Company has no operating revenues and is in the pre-revenue development stage.
Key Financial Metrics
| Metric | Three Months Ended May 31, 2010 | Nine Months Ended May 31, 2010 | Balance Sheet (May 31, 2010) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(3,833) | $(20,194) | N/A |
| Cash and Equivalents | N/A | N/A | $3,092 |
| Total Assets | N/A | N/A | $27,283 |
| Total Liabilities | N/A | N/A | $8,157 |
| Working Capital | N/A | N/A | $(3,070) |
| Accumulated Deficit | N/A | N/A | $(161,394) |
Debt and Liquidity: The Company has no long-term debt. Current liabilities consist primarily of $7,415 due to an officer (CEO) and $649 in accounts payable. Cash on hand is $3,092.
Material Changes vs. Prior Period
- Operations: The Company had no operations, revenues, or expenses for the three and nine months ended May 31, 2009. The current period reflects the costs of reviving the entity and preparing for product launch.
- Expenses: General and administrative expenses increased from $0 to $2,785 (3-month) and $17,050 (9-month), driven by bank fees, stock servicing costs, and professional fees for SEC filings.
- Depreciation: Depreciation expense of $1,048 (3-month) and $3,144 (9-month) was recorded on equipment acquired in August 2009, compared to $0 in the prior year.
- Financing: The Company received $7,415 in loans from the CEO and $8,980 in proceeds from the sale of founder's shares during the nine-month period.
Outlook, Risks, and Management Commentary
Going Concern: Management states that the Company's poor financial condition, recurring losses, and working capital deficit raise substantial doubt about its ability to continue as a going concern. The Company is dependent on securing additional equity or debt financing to fund operations.
Future Plans: The Company anticipates incurring significant costs to launch its product line, including approximately $75,000 for direct sales implementation, $10,000 for strategic relationships with convenience stores, and $17,000 for manufacturing and packaging initial inventory.
Risks:
- Lack of Operating History: No revenues have been generated; the business model is unproven.
- Capital Requirements: Immediate need for additional capital to cover working capital deficits and product development.
- Corporate Governance: The Company lacks an independent board of directors or audit committee. The CEO (Robert Timothy) holds all executive and director roles, creating a lack of segregation of duties.
- Internal Controls: Disclosure controls and procedures are deemed ineffective due to the lack of independent oversight and reliance on a financial consultant.
- Stock Split: A 5-for-1 stock split was approved on June 7, 2010, but shares have not yet been distributed.
Investor Verification Checklist
- Capital Sufficiency: Verify if the Company has secured the estimated $135,000+ in additional funding required for marketing, manufacturing, and working capital.
- Product Development: Confirm the status of the "8 hour Energy Gel Caps" and energy drink manufacturing and whether purchase orders have been received.
- Related Party Transactions: Review the terms of the $7,415 loan from the CEO and the lease agreement with the CEO's parents.
- Stock Liquidity: Assess the impact of the "penny stock" designation and the lack of an established public trading market on the ability to sell shares.
- Internal Controls: Monitor progress on implementing an independent board and segregating financial duties to address the ineffective disclosure controls.