Filing summary
Entity and period: The supplied filing is for Load Guard Logistics, Inc., not Skye Bioscience, Inc. It is a Form 10-Q for the quarter ended April 30, 2014, and includes six-month results through that date. The interim financial statements are unaudited. Amounts below are as presented in the filing.
Business and financial performance
Load Guard provides trucking, freight delivery, and brokerage services. It operated one company-owned tractor and trailer and also generated revenue by arranging transportation through independent contractors.
| Metric | Three months ended April 30, 2014 | Three months ended April 30, 2013 | Six months ended April 30, 2014 | Six months ended April 30, 2013 |
|---|---|---|---|---|
| Revenue | $72,840 | $108,929 | $136,175 | $166,059 |
| Operating expenses | $86,271 | $105,317 | $150,939 | $168,641 |
| Operating income (loss) | ($13,431) | $3,612 | ($14,764) | ($2,582) |
| Net income (loss) | ($13,514) | $2,069 | ($9,996) | $2,229 |
- Quarterly revenue declined about 33%; six-month revenue declined about 18%. Management attributed the trucking revenue decline to fewer drivers. Brokerage revenue increased as the company added independent contractors.
- For the six months, direct trucking revenue was $105,874 versus $152,527 a year earlier; brokerage revenue was $30,301 versus $13,532.
- Operating expenses fell year over year, but the company moved from quarterly operating profit to a loss and recorded a six-month net loss. Professional fees rose to $20,293 for six months, mainly due to costs associated with a Depository Trust Corporation application and ongoing reporting needs.
- The filing does not present a gross-margin figure. Management reported fuel costs at 42% of trucking revenue for the six-month period, versus 45% in the prior period; wages and operations and maintenance costs as a share of trucking revenue increased.
Cash flow, balance sheet, and liquidity
- At April 30, 2014, cash was $49,952, down from $52,186 at October 31, 2013. Current assets were $87,915 and current liabilities were $49,347, giving working capital of $38,568, down from $43,817.
- Six-month operating cash use was $832, compared with $13,950 in the prior-year period. Investing cash flow was zero, versus $49,116 used previously. Financing cash flow was a net use of $1,402, versus $66,374 provided in the prior-year period. Ending cash was $49,952.
- All reported liabilities were current. Related-party notes payable totaled $35,355, down from $47,238; the notes were owed to officers/directors, including $23,400 on a non-interest-bearing note and $11,955 on an 8% note. No long-term debt was reported.
- Management said cash and operating income should cover the next 12 months, but the going-concern note states that available funding may be insufficient, identifies substantial doubt about continued operations, and says additional financing may be needed. Planned financing included public or private offerings and loans from officers or directors; their stated support was not a written commitment.
Outlook, risks, and other notable disclosures
- No numerical revenue or earnings guidance was provided. Management said it did not plan research and development or material equipment purchases over the next 12 months.
- One customer generated approximately $63,425, or 47% of revenue for the period, and represented about 18% of receivables, creating customer-concentration risk.
- Management identified material weaknesses in internal controls: no functioning audit committee, no majority of outside directors, inadequate segregation of duties, and management dominated by two individuals without adequate compensating controls. Management said these did not affect reported results but could contribute to future misstatements.
- The filing reported no commitments or contingencies and no material pending legal proceedings. Management cautioned that forward-looking statements are subject to risks and actual results may differ.
Important facts for investors to verify
- Confirm the issuer: the provided filing identifies Load Guard Logistics, Inc., not Skye Bioscience, Inc.
- Confirm the period: the report is for the quarter ended April 30, 2014, with six-month comparative results—not a calendar-quarter report.
- Assess the going-concern warning against the stated expectation of 12-month liquidity, available cash, and the lack of a binding commitment for insider funding.
- Review the causes and remediation status of the disclosed material weaknesses and the company’s reliance on a major customer and related-party financing.
- Verify the related-party note balances, maturities, and repayment terms, particularly given that all reported notes payable were current.