Sport Endurance, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended May 31, 2014; fiscal year ends August 31. The filing identifies the registrant as Sport Endurance, Inc., while the request metadata says SRX Global Inc.; verify the entity and filing match.
Business context
The company describes itself as a development-stage business intending to manufacture and distribute sports energy drinks. Production and distribution had not begun, and it reported no revenue in either 2014 or the comparable 2013 periods.
Financial results and position
| Metric | Three months ended May 31, 2014 | Three months ended May 31, 2013 | Nine months ended May 31, 2014 | Nine months ended May 31, 2013 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $5,923 | $5,970 | $20,865 | $16,110 |
| Interest expense | $5,314 | $983 | $18,597 | $2,852 |
| Net loss | $11,237 | $6,953 | $39,462 | $18,962 |
| Operating cash used | Not presented by quarter | $17,696 | $11,716 |
- Nine-month net loss increased 52%; management attributed the increase primarily to higher interest expense, including $17,718 of amortized debt discount and $879 of imputed interest. Quarterly net loss increased approximately 62%.
- At May 31, 2014, cash was $0; total assets were $5,428, consisting of net equipment. Current liabilities were $44,485, including $21,296 of accounts payable and $23,189 of related-party convertible debt. Working capital deficit was $44,485, compared with $89,361 at August 31, 2013.
- Cash used in operations was funded by $17,696 of financing cash flow during the nine months. The company reported $17,718 of related-party convertible loan proceeds, offset by $22 in bank-overdraft repayments; ending cash remained $0.
- Related-party debt conversions totaling $62,597 were exchanged for 31,298,500 common shares during the period. Common shares outstanding rose from 60,403 at August 31, 2013 to 31,358,903 at May 31, 2014. The reported debt conversions involved the CEO, former CEO, and major shareholder BK Consulting.
Outlook, risks, and other notable matters
- Management expects operating losses over the next 12 months and does not expect anticipated sales revenue to cover working-capital needs. Funding plans include sales, equity or debt financing, third-party financing, or bank financing; success is not assured.
- The filing states that recurring losses, a $370,009 accumulated deficit, negative operating cash flows, no cash, and the working-capital deficit raise substantial doubt about the company’s ability to continue as a going concern. It says the company depends on obtaining additional financing and may have to slow or suspend operations if funding is unavailable.
- The company had no employees other than its unpaid CEO, anticipated no significant near-term research and development or equipment purchases, and reported no material off-balance-sheet arrangements or known material legal proceedings.
- Disclosure controls were deemed ineffective. The filing cites no independent board or audit committee, inadequate segregation of duties, and reliance on a financial consultant; management said improvements depend on obtaining resources.
- No change in risk factors from the prior Form 10-K was reported. The filing provides no specific product-launch timetable or revenue guidance.
Important facts for investors to verify
- Whether this Sport Endurance, Inc. filing corresponds to the SRX Global Inc. named in the request metadata.
- Current financing availability, related-party lender support, and the company’s ability to fund operations with no cash on hand.
- The terms and share-count effects of debt conversions, including related-party transactions and potential dilution.
- Whether the sports-drink business has advanced toward production, distribution, or revenue generation.
- Progress in addressing ineffective disclosure controls and the stated going-concern uncertainty.