Business context and reporting period
The supplied filing is a Form 10-Q for the quarter ended July 31, 2013, filed by Load Guard Logistics, Inc., a development-stage trucking and logistics company. This does not match the requested company, Skye Bioscience, Inc.; verify the issuer before relying on this summary. The company says operations began in October 2012, so the prior-year revenue comparison is not meaningful.
Financial results and condition
| Metric | Three months ended July 31, 2013 | Nine months ended July 31, 2013 |
|---|---|---|
| Revenue | $91,152 | $257,081 |
| Operating income (loss) | $744 | ($1,968) |
| Net income (loss) | ($712) | $1,387 |
| Operating margin | About 0.8% | About (0.8%) |
| Net margin | About (0.8%) | About 0.5% |
| Operating cash flow | Not separately presented | ($6,601) |
Nine-month revenue comprised $223,631 of direct trucking, $25,543 of brokerage income and $7,907 of fuel surcharges. Nine-month results included a $6,506 insurance-claim gain and a $1,684 loss on disposal of equipment. Cash was $37,151 at July 31; working capital was $22,813. Investing cash outflow was $59,975, primarily reflecting equipment purchases and notes receivable; financing cash inflow was $77,323, including $52,523 in related-party notes and $24,800 from stock issuance.
Current liabilities were $64,245, including $52,523 of related-party notes payable, all classified as current. Total assets were $128,991 and shareholders’ equity was $64,746. The company reported 3,147,500 common shares outstanding at July 31 and September 9, 2013.
Material changes versus the prior comparable period
Revenue began after the prior-year comparative periods, which showed no revenue. Nine-month 2013 operating expenses were $259,049 versus $643 in 2012, largely reflecting the commencement of trucking operations. The company moved from $147 of prior-year nine-month net loss to $1,387 of net income, aided by the insurance gain; operating loss widened from $643 to $1,968. Cash increased by $10,747 during the nine months, while working capital declined by $11,210 from October 31, 2012.
Outlook, risks and unusual items
Management described plans to raise funds through an offering or other financing to support expansion, including additional tractors, a trailer and drivers. It warned that financing may not be available, equity financing could dilute shareholders, and the company might be unable to maintain or expand operations without additional capital. The going-concern note states that substantial doubt exists about the company’s ability to continue as a going concern; management’s proposed financing plans are not assured.
The filing gives conflicting liquidity statements: one passage says current cash and operating income are expected to cover the next 12 months, while another says cash on hand is insufficient to cover operating costs for that period. It also reports a verbal, unenforceable indication that officers may advance funds, with no specified amount or binding commitment. Fuel costs were 39% of trucking revenue for the nine months; management cited low revenue per mile and anticipated increased SEC compliance costs. Internal controls were deemed ineffective, with material weaknesses including no functioning audit committee, inadequate segregation of duties and management concentration. No material legal proceedings or off-balance-sheet arrangements were reported.
Important facts to verify
- Confirm the filing belongs to the intended issuer: the document identifies Load Guard Logistics, not Skye Bioscience.
- Resolve the conflicting statements about whether cash can fund the next 12 months and assess financing availability and going-concern risk.
- Check the equipment depreciation figures: the balance sheet reports accumulated depreciation of $8,499, while the equipment note reports $5,538.
- Review the related-party debt terms, repayment schedule and dependence on officer/director financing.
- Assess internal-control remediation and verify the stated auditor change and associated disclosures.