SEC Filing Summary: Sport Endurance, Inc. (10-Q)
Business Context and Reporting Period
Company: Sport Endurance, Inc. (formerly Cayenne Construction, Inc.)
Reporting Period: Quarter and six months ended February 28, 2011
Status: Development Stage Company
Business Model: The Company intends to manufacture and distribute sports energy drinks. However, production and distribution have not yet commenced. The Company has no employees other than its non-paid CEO.
Key Financial Metrics
| Metric | Six Months Ended Feb 28, 2011 | Six Months Ended Feb 28, 2010 | As of Feb 28, 2011 |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(18,911) | $(16,361) | N/A |
| Accumulated Deficit | N/A | N/A | $(198,532) |
| Cash and Equivalents | N/A | N/A | $205 |
| Working Capital | N/A | N/A | $(37,064) |
| Total Liabilities | N/A | N/A | $37,269 |
| Related Party Debt | N/A | N/A | $16,585 |
Material Changes vs. Prior Period
- Net Loss Increase: Net loss for the six months ended February 28, 2011, increased by approximately 16% ($2,550) compared to the prior year period. The three-month loss increased by 81%.
- Expense Drivers: General and administrative expenses rose 190% year-over-year (six-month view) primarily due to increased stock servicing costs. Professional fees decreased 19% due to the absence of Form S-1 filing costs incurred in the prior period.
- Interest Expense: Interest expense increased from $0 to $516 for the six-month period due to new loans from related parties.
- Liquidity Deterioration: Working capital deficit worsened significantly from $(1,970) in the prior year to $(37,064) in the current period. Cash on hand is critically low at $205.
Outlook, Risks, and Management Commentary
- Going Concern: Management explicitly states that the Company's recurring losses, accumulated deficit, and working capital deficit raise substantial doubt about its ability to continue as a going concern. Continued operations depend entirely on securing additional equity or debt financing.
- Financing Needs: The Company received $11,140 in unsecured loans from related parties during the six-month period. There is no assurance that related parties will provide further loans or that external financing will be available.
- Operational Status: No revenue is expected in the near term as the company is still in the development stage. No significant R&D or capital expenditures are anticipated immediately.
- Internal Controls: Management disclosed that disclosure controls and procedures are not effective due to a lack of an independent board, audit committee, and segregation of duties. Financial reporting is handled by a consultant.
- Subsequent Events: Following the period end, the Company received two additional unsecured loans of $2,500 each from the CEO in March and April 2011.
Investor Verification Checklist
- Capital Sufficiency: Verify if the Company has secured the additional financing required to meet operating commitments for the next 12 months, given the $205 cash balance.
- Related Party Reliance: Assess the sustainability of operations dependent on loans from the CEO and major shareholders, noting the lack of guarantees for future funding.
- Revenue Timeline: Confirm the timeline for the commencement of production and distribution of sports energy drinks, as no revenue has been generated since inception.
- Control Weaknesses: Evaluate the risk associated with the lack of independent oversight and segregation of duties in financial reporting.
- Debt Obligations: Review the terms of the $16,585 in related party debt, which bears 10% interest and is due on demand.