Skye Bioscience, Inc. - Quarter Report: 2014 April (Form 10-Q)

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

LOAD GUARD LOGISTICS, INC.
(Exact name of registrant as specified in its charter)
Nevada		45-0692882
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6317 SW 16th Street, Miami, FL 33155
(Address of principal executive offices)
(786) 505-4434
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

Large accelerated filer [  ]		Accelerated filer [  ]
Non-accelerated filer [  ]		Smaller reporting company [X]
(Do not check if a smaller reporting company)

			PAGE
PART I – FINANCIAL INFORMATION
	ITEM 1.	FINANCIAL STATEMENTS	3
	ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
	ITEM 4.	CONTROLS AND PROCEDURES	17
PART II – OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS	18
	ITEM 1A.	RISK FACTORS	18
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18
	ITEM 4.	MINE SAFETY DISCLOSURES	18
	ITEM 5.	OTHER INFORMATION	18
	ITEM 6.	EXHIBITS	18
SIGNATURES			19

	Page
Consolidated Balance Sheets	4
Consolidated Statements of Operations	5
Consolidated Statements of Stockholders' Equity	6
Consolidated Statements of Cash Flows	7
Notes to the Consolidated Financial Statements	8

LOAD GUARD LOGISTICS, INC.

CONSOLIDATED BALANCE SHEETS

 

		April 30,				October 31,
		2014				2013
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	49,952			$	52,186
Accounts receivable, less allowance of $0			35,425				25,338
Prepaid expenses			-				15,591
Notes receivable			2,538				13,019
Total current assets			87,915				106,134
Equipment, net of accumulated depreciation of $12,659 and $7,912, respectively			34,813				39,560
Total assets		$	122,728			$	145,694
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	13,992			$	15,079
Notes payable, related parties			35,355				47,238
Total current liabilities			49,347				62,317
Total liabilities			49,347				62,317
Stockholders' equity:
Preferred stock, $0.001 par value,20,000,000 shares authorized;
none issued and outstanding			-				-
Common stock, $0.001 par value, 100,000,000 shares authorized;
3,623,500 shares issued and outstanding			3,623				3,623
Additional paid-in capital			83,077				83,077
Accumulated deficit			(13,319	)			(3,323	)
Total stockholders' equity			73,381				83,377
Total liabilities and stockholders' equity		$	122,728			$	145,694

 

See Notes to the Interim Consolidated Financial Statements.

 

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LOAD GUARD LOGISTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended April 30,								Six Months Ended April 30,
		2014				2013				2014				2013
Operating revenues		$	72,840			$	108,929			$	136,175			$	166,059
Operating expenses:
Fuel and fuel taxes			23,605				43,587				44,129				68,168
Salaries and wages			21,646				28,494				39,873				44,810
Operations and maintenance			16,618				21,601				30,917				31,406
Professional fees			17,318				4,210				20,293				11,746
General and administrative			7,084				7,425				15,727				12,511
Total operating expenses			86,271				105,317				150,939				168,641
Operating income (loss)			(13,431	)			3,612				(14,764	)			(2,582	)
Other income (expense)
Interest expense			(307	)			(649	)			(717	)			(862	)
Interest income			224				162				632				305
Gain on insurance claim			-				-				4,853				6,506
Total other income (expense)			(83	)			(487	)			4,768				5,949
Income (loss) before income taxes			(13,514	)			3,125				(9,996	)			3,367
Provision for income taxes			-				(1,056	)			-				(1,138	)
Net income (loss)		$	(13,514	)		$	2,069			$	(9,996	)		$	2,229
Basic and diluted income (loss) per common share		$	(0.00	)		$	0.00			$	(0.00	)		$	0.00
Weighted-average number of common shares outstanding			3,623,500				3,147,500				3,623,500				3,053,978

 

LOAD GUARD LOGISTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE PERIOD OF OCTOBER 31, 2012 THROUGH APRIL 30, 2014

 

																										Total
		Preferred Stock								Common Stock								Additional				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Paid-in Capital				Defitcit				Equity
BALANCE, Ocober 31, 2012			-			$	-				2,527,500			$	2,527			$	35,573			$	459			$	38,559
Common shares issued for cash at $0.04 per share on November 25, 2012			-				-				620,000				620				24,180				-				24,800
Common shares issued for cash at $0.05 per share on October 28, 2013			-				-				476,000				476				23,324				-				23,800
Net loss			-				-				-				-				-				(3,782	)			(3,782	)
BALANCE, October 31, 2013			-				-				3,623,500				3,623				83,077				(3,323	)			83,377
Net loss (unaudited)			-				-				-				-				-				(9,996	)			(9,996	)
BALANCE, April 30, 2014 (unaudited)			-			$	-				3,623,500			$	3,623			$	83,077			$	(13,319	)		$	73,381

 

See Notes to the Interim Consolidated Financial Statements.

 

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LOAD GUARD LOGISTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six Months Ended April 30,
		2014				2013
Cash flows from operating activities:
Net income		$	(9,996	)		$	2,229
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			4,747				4,645
Changes in certain working capital items:
Accounts receivable, net			(10,087	)			(25,172	)
Prepaid expenses			15,591				(3,107	)
Accounts payable and accrued liabilities			(1,087	)			7,455
Net cash used in operating activities			(832	)			(13,950	)
Cash flows from investing activities:
Purchases of equipment			-				(49,116	)
Net cash used in investing activities			-				(49,116	)
Cash flows from financing activities:
Payments received from notes receivable			10,481				9,574
Proceeds from loans			-				32,000
Repayments on loans			(11,883	)			-
Proceeds from issuance of common stock			-				24,800
Net cash provided by financing activities			(1,402	)			66,374
Net increase (decrease) in cash and cash equivalents			(2,234	)			3,308
Cash and cash equivalents, beginning of period			52,186				26,404
Cash and cash equivalents, end of the period		$	49,952			$	29,712
Supplemental cash flow disclosure:
Interest paid		$	717			$	862
Income taxes paid		$	-			$	-
Non-cash transactions
Purchase of equipment in exchange for note payable		$	-			$	25,000

 

See Notes to the Interim Consolidated Financial Statements.

 

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LOAD GUARD LOGISTICS, INC.

(A Development Stage Company)

Notes to the Interim Consolidated Financial Statements

April 30, 2014

(Unaudited)

Load Guard Logistics, Inc. (the "Company") is a Nevada corporation incorporated on March 16, 2011, and is based in Miami, FL.  The company was originally incorporated as Load Guard Transportation, Inc. and changed its name to Load Guard Logistics, Inc. on November 6, 2012.  The Company incorporated a wholly-owned subsidiary, "LGT, Inc." in Florida on March 18, 2011.  The Company's fiscal year end is October 31.

The Company operates as a transportation and delivery services company.  We generate revenues from the actual movement of freight from shippers to consignees as well as serving as a logistics provider by arranging for others to provide the transportation services.

Basis of Consolidation

These financial statements include the accounts of the Company and the wholly-owned subsidiary, LGT, Inc.  All material intercompany balances and transactions have been eliminated.

Basis of Presentation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended April 30, 2014 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the year ended October 31, 2013 filed Form 10-K on January 27, 2014.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.   These reclassifications had no effect on reported income.

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Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of three months or less.  The Company had $49,952 and $52,186 in cash and cash equivalents at April 30, 2014 and October 31, 2013, respectively.

Accounts Receivable

The Company extends credit to its customers in the normal course of business.  The Company performs ongoing credit evaluations and generally does not require collateral.  Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts.  The Company evaluates the adequacy of its allowance for doubtful accounts quarterly.  Accounts outstanding longer than contractual payment terms are considered past due and are reviewed individually for collectability.  The Company maintains reserves for potential credit losses based upon its loss history and specific receivables aging analysis.  Receivable balances are written off when collection is deemed unlikely.  Management's evaluation of outstanding balances determined that an allowance, as of April 30, 2014 and October 31, 2013 was not considered necessary, based on history and its subsequent collections.

Concentration Risk

For the period ending April 30, 2014, the Company recognized revenues from one customer, in the amount of approximately $63,425 or 47% of total revenues.   The same customer accounts for approximately $6,240 or 18% of total receivables.

Equipment

Net Income (Loss) Per Share of Common Stock

The Company follows ASC 260, "Earnings per Share," ("EPS") which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation.  In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

The following table sets forth the computation of basic and diluted earnings per share, for the periods ended April 30, 2014 and 2013:

The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.

 

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Concentrations of Credit Risk

The Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future.  The Company places its cash and cash equivalents with financial institutions of high credit worthiness.  At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits.  The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Financial Instruments

The Company's balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

ASC 820, "Fair Value Measurements and Disclosures," defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words "expects," "anticipates," "intends," "believes" and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the "Description of Business – Risk Factors" section in our Annual Report on Form 10-K, as filed on January 27, 2014.  You should carefully review the risks described in our 10-K and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-Q to the "Company," "Load Guard," "we," "us," or "our" are to Load Guard Logistics, Inc.

We prepare our condensed consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions.  On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our condensed consolidated financial statements.

While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

The following summary of our results of operations, for the three and six month periods ended April 30, 2014 and 2013, should be read in conjunction with our audited consolidated financial statements, for the year ended October 31, 2013, as included in our Form 10-K.

Our financial results for the three and six month periods ended April 30, 2014 and 2013 are summarized as follows:

 

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Revenue

Revenue commenced during October 2012 and is solely from our trucking and brokerage operations through our subsidiary LGT, Inc. We earn direct trucking revenues from our one company owned and operated tractor and trailer and brokerage income from commissions we charge to our independent contractors. We earned revenues of $72,840 for the three months ended April 30, 2014, compared to revenues of $108,929 for the three months ended April 30, 2013.  We earned revenues of $136,175 for the six months ended April 30, 2014, compared to revenues of $166,059 for the six months ended April 30, 2013.

For the six months ended April 30, 2014, we earned $105,874 from direct trucking revenues and $30,301 in brokerage income from our independent contractors, as compared to $152,527 from trucking and $13,532 in brokerage for the six months ended April 30, 2013.  Our revenues from trucking decreased $46,653 or 30% due to a reduction in drivers. During 2013 we had as many as three drivers, whereas for 2014 we had one full time driver and for periods one part-time driver.  Our revenues from brokerage income increased $16,769 or 124% due to adding independent contractors in the current period, as compared to the previous period when we had one independent contractor.

For the three months ended April 30, 2014, we earned $58,407 from direct trucking revenues and $14,433 in brokerage income from our independent contractors, as compared to $102,087 from trucking and $6,842 in brokerage for the three months ended April 30, 2013.  Our revenues from trucking decreased $43,680 or 43% due to a reduction in drivers. During 2013 we had as many as three drivers, whereas for 2014 we had one full time driver for the entire three month period.  Our revenues form brokerage income increased $7,591 or 111% due to adding independent contractors in the current period, as compared to the previous period.

Expenses

Our total operating expenses for the three and six month periods ended April 30, 2014 and 2013 are outlined in the table below:

Expenses for the three and six month periods ended April 30, 2014, decreased as compared to the periods in 2013 as a result of reducing company drivers and shifting the focus more to managing independent contractors.

Six Months

Our fuel costs represented 42% and 45% of trucking revenues for the six months ended April 30, 2014 and 2013, respectively. Fuel for the periods was high, as a percentage of revenue, mainly as a result of our trucking revenues being low on a per mileage basis, due to the competitive tender system of dealing with freight brokers.  Fuel is our highest direct trucking expense. Wages of $39,873 and 44,810, or 38% and 29% of trucking revenue for six months ended April 30, 2014 and 2013, respectively, represents the wages paid for company drivers and fees paid to an officer and director of the company, who is also is a driver. During 2014, we operated only one company tractor and trailer, and primary driver is also an officer of the company, therefore wages were higher during 2014 as compared to 2013 as we had up to three drivers during the previous period.  Operations and maintenance costs of $30,917 and 31,406, or 29% and 21% of trucking revenue for the six months ended April 30, 2014 and 2013, respectively, represents cost related to parts and maintenance of our tractors and trailers as well as general operational expenses, such as for insurance, tolls, and scales. Maintenance costs, as a percentage of revenues, are expected to be consistent in future periods. Professional fees increased $8,547 or 72% for the six months ended April 30, 2014 as compared to $11,746 for 2013, primarily due to the cost of filing our Depository Trust Corporation (DTC) application, after having obtained our trading symbol.  We expect continued professional fees, mainly from legal and accounting, due to ongoing SEC reporting requirements.  Our general and administrative fees are for general office expenses and other operating costs not directly related to our trucking business.   General and administrative fees increased $3,216 for the six months ended April 30, 2014, from the comparative period ended April 30, 2013.

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Three Months

Our fuel costs represented 40% and 43% of trucking revenues for the three months ended April 30, 2014 and 2013, respectively. Wages of $21,646 and $28,494, which represent 37% and 28% of trucking revenue for the three months ended April 30, 2014 and 2013, respectively.  Operations and maintenance costs of $16,618 and 21,601, or 28% and 21% of trucking revenue for the three months ended April 30, 2014 and 2013, respectively. Professional fees increased $13,108 or 311% for the three months ended April 30, 2014 as compared to $4,210 for 2013, primarily due to the cost of filing our Depository Trust Corporation (DTC) application, after having obtained our trading symbol.  General and administrative fees decreased $341 for the three months ended April 30, 2014 from the comparative period ended April 30, 2013.

General

As of April 30, 2014, the Company had $49,952 in cash and cash equivalents.  The Company expects current cash and operating income to be sufficient to meet its financial needs for continuing operations over the next twelve months.  To meet our need for cash we raised money from our recent Offering.  We sold 476,000 shares for total proceeds of $23,800, prior to closing the Offering on November 1, 2013.  Additionally, our officers and directors have loaned us funds for the purchase of property and equipment.  As of April 30, 2014, Francisco Mendez, our corporate Secretary, is owed $23,400 for the sale of his tractor to the Company.  This loan is non-interest bearing.  Yosbani Mendez, our President, loaned the Company $32,000 for the purchase of a tractor and trailer.  The loan carries an interest rate of 8%.  As of April 30, 2014, $11,955 is outstanding on this loan.

Liquidity and Financial Condition

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There is limited historical financial information about us on which to base an evaluation of our performance.  We were previously a development stage company and have generated minimal revenues from operations.  We cannot guarantee we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise in a highly competitive industry, including limited capital resources, and possible cost overruns due to the price and cost increases in supplies and services.

The Company believes it has enough cash on hand or will be able to generate enough income from operations to pay operating costs for the next twelve months.  However, should there be any unforeseen circumstances, the officers and directors have generally indicated a willingness to provide services and financial contributions if necessary.

We have no plans to undertake any product research and development during the next twelve months.  There are also no plans or expectations to acquire or sell any plant or plant equipment in the next year of operations.

Liquidity

We have no known demands or commitments and are not aware of any events or uncertainties as of April 30, 2014 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.

Capital Resources

We had no material commitments for capital expenditures as of April 30, 2014 and October 31, 2013.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a "smaller reporting company", we are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

As of April 30, 2014, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management dominated by two individuals without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of April 30, 2014.

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended April 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

As a "smaller reporting company", we are not required to provide the information required by this Item.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not issue unregistered equity securities during the quarter ended April 30, 2014.

None.

Not applicable.

None.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.