SEC Filing Summary
Entity note: The request identifies SRX Global Inc., but the supplied 10-K is for Sport Endurance, Inc. (ticker SENZ). The filing covers the fiscal year ended August 31, 2015; it does not provide standalone fourth-quarter results.
Business Context and Reporting Period
Sport Endurance intended to market and sell liquid soft-gel capsules, initially in the Salt Lake City area. As of the filing, it had not manufactured or distributed the product, had no customers, and had generated no revenue. Management described the company as an early-stage business without an operating track record.
Financial Results and Liquidity
| Metric | FY ended Aug. 31, 2015 | FY ended Aug. 31, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $24,654 | $27,275 |
| Operating loss | $24,654 | $27,275 |
| Interest expense | $25,015 | $23,962 |
| Net loss | $49,669 | $51,237 |
| Net cash used in operating activities | $22,875 | $22,621 |
- Gross margin and other operating margins are not meaningful because the company recorded no revenue.
- At August 31, 2015, cash was $0, current assets were $0, and current liabilities were $59,865, resulting in a $59,865 working-capital deficit. Total assets were $2,190, consisting of net equipment.
- Current liabilities included $21,322 in accounts payable and $38,543 in related-party convertible debt, which was unsecured, due on demand, and convertible at the holder’s option at $0.002 per share.
- Accumulated deficit was $431,453. Operating cash use was matched by $22,875 in proceeds from related-party convertible loans; cash remained at zero.
Changes Versus Prior Year
- Net loss narrowed by $1,568, to $49,669. Lower operating expenses, including reduced depreciation, were partly offset by higher interest expense.
- Current liabilities and the working-capital deficit increased from $37,401 to $59,865. Related-party convertible debt rose from $15,668 to $38,543.
- There were no revenues in either year. No common shares were issued during FY2015, although substantial share issuances and debt conversions occurred after year-end.
Outlook, Risks, and Unusual Items
- The auditor’s report raised substantial doubt about the company’s ability to continue as a going concern. Management said it needed additional capital and anticipated operating losses over the next 12 months. It proposed funding operations through sales, equity, third-party financing, or bank financing, but said expected sales would not cover working-capital needs.
- Management estimated that at least $75,000 would be needed to begin sales and fund planned activities. No assured financing source was identified; failure to raise funds could require curtailing or ceasing operations.
- Key risks include no operating history or customers, inability to fund production and marketing, competition from larger businesses, potential dilution, and reliance on related-party financing. The company had no employees other than its unpaid CEO and had not applied for trademark protection for its brand or slogan.
- After year-end, the company disclosed additional related-party financing and equity transactions: a $1,700 convertible loan; conversions of $29,501 and $10,742 of debt into shares; and cash share issuances for $14,500 and $5,372. These transactions are relevant to liquidity and dilution.
- Management reported material weaknesses in internal control over financial reporting, including deficiencies in the control environment and disclosure controls. The company had no independent directors, audit committee, or audit committee financial expert; the auditor did not attest to internal controls.
- The filing reported no known legal proceedings believed likely to have a material adverse effect and no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Confirm the issuer: the supplied filing is for Sport Endurance, Inc., not SRX Global Inc.
- Reconcile the share count: the balance sheet reports 37,581,903 common shares outstanding at August 31, 2015, while the filing reports 77,575,303 as of November 13, 2015, following post-year-end transactions.
- Verify the current status and terms of related-party debt, subsequent conversions and share sales, and the company’s available cash and financing commitments.
- Determine whether the company ever commenced production or generated revenue, and whether the stated funding and sales plans were achieved.
- Review remediation of the disclosed material weaknesses and the effect of any further financing or share issuance on existing shareholders.