Filing summary
Issuer and period: The supplied filing is for SmartData Corporation, not CleanSpark, Inc. It is a Form 10-K for the fiscal year ended September 30, 2011, filed January 6, 2012. The filing describes SmartData as a development-stage shell company seeking a business combination; it had been inactive since 1992. The period is not identified as a standalone 2011 fourth quarter.
Financial results and position
- Revenue and profit: No operating revenue in fiscal 2011 or 2010. Fiscal 2011 general and administrative expenses were $34,024, interest expense was $3,783, and net loss was $37,807, versus a net loss of $18,846 in 2010. Basic and diluted loss per share was $0.01 in each year.
- Cash flow: Net cash used in operations was $4,832 in 2011, compared with $10,110 in 2010. Financing provided $5,000 in 2011; cash increased by $168 to $208.
- Liquidity and debt: At September 30, 2011, cash and total assets were $208, current liabilities were $66,137, and stockholders’ deficit was $65,929. Liabilities included $8,320 accounts payable, a $15,000 convertible note, and $42,817 payable to a shareholder. Management expected about $20,000 of expenses over the next 12 months and depended on possible, but uncommitted, advances from its president.
- Margins and other metrics: Operating and profit margins are not meaningful because the company had no revenue. The filing provides no operating business, product, or market performance measures.
Changes and unusual items
- Net loss approximately doubled from 2010, mainly as general and administrative expenses rose from $19,550 to $34,024 and interest expense increased from $1,649 to $3,783. The 2010 comparison included $2,353 of debt-forgiveness gain and $704 of other income; neither recurred in 2011.
- SmartData issued 1,100,000 shares for services in 2011, recorded at $11,000: 100,000 shares to its officer and director and 1,000,000 shares to a consultant. Outstanding shares were 37,076,779 at September 30, 2011.
- The company had $15,000 in non-related-party convertible notes due in 2012, convertible at the holders’ option into a total of 1,500,000 shares. Shareholder advances were also reported as a liability; the notes’ terms and balances should be checked against the financial statements.
Outlook, risks, and controls
- Management had no identified acquisition target, negotiations, or acquisition agreement. It intended to continue searching for a business to acquire and anticipated ongoing losses and no revenue until a business combination.
- The independent auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company’s ability to continue as a going concern. Management planned to rely on officer and director loans, with no assurance those funds would continue or suffice.
- A business combination could require substantial share issuance, dilute existing shareholders, and change control. Other disclosed risks include competition for targets, limited management time, penny-stock resale restrictions and illiquidity, and possible tax and reporting costs.
- Management concluded disclosure controls were effective but internal control over financial reporting was not effective, citing lack of segregation of duties and accounting expertise. No auditor attestation on internal controls was included.
- No pending legal proceedings or off-balance-sheet arrangements were reported. The company paid no dividends and had no employees.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing names SmartData Corporation and gives OTCBB symbol SMTD, not CleanSpark, Inc.
- Verify the filing period and whether any separate fourth-quarter information is available; this report covers the fiscal year ended September 30, 2011.
- Review the going-concern warning, the company’s $208 cash balance, and the uncertain reliance on insider funding.
- Confirm the amounts, holders, conversion terms, and potential dilution from shareholder advances and convertible notes.
- Assess the shell-company acquisition plan, absence of a target, lack of trading liquidity, and disclosed internal-control weaknesses.