Business context and reporting period
The supplied metadata identifies Ridenow Group, Inc., but the filing itself is for Smart Server, Inc. The 10-Q covers the quarter and nine months ended August 31, 2016; the interim financial statements are unaudited. Smart Server describes itself as a shell company with no current operations, no significant assets, and no revenue. Its earlier mobile-payment application development activities have ceased.
On July 13, 2016, Berrard Holdings Limited Partnership acquired 5,475,000 shares, or 99.5% of outstanding common stock. Steven R. Berrard controls the partnership.
Financial results and position
| Metric | Three months ended Aug. 31, 2016 | Three months ended Aug. 31, 2015 | Nine months ended Aug. 31, 2016 | Nine months ended Aug. 31, 2015 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $25,200 | $6,359 | $47,430 | $28,987 |
| Interest expense, related party | $2,681 | $1,972 | $7,216 | $5,268 |
| Net loss | $27,881 | $8,331 | $54,646 | $34,255 |
| Basic loss per share | $0.02 | $0.00 | $0.02 | $0.01 |
There is no revenue or gross margin to report. The filing does not present an operating margin. Professional fees drove much of the expense increase, including work on public filings and the change-of-control transaction.
At August 31, 2016, cash was $5,059, prepaid expenses $5,000, total assets $11,484, total liabilities $211,799, and stockholders’ deficit $200,315. Current liabilities were $12,851, including accounts payable of $12,851; current assets were $10,059. The company had $197,358 of related-party convertible debt and $1,590 of accrued related-party interest. The note bears 6% interest, is due July 13, 2026, and converts at the greater of $0.06 per share or 50% of the next qualified financing price. The filing reports no warrants or options outstanding.
For the nine months, operating cash used was $67,862, investing cash flow was $0, and financing cash provided was $71,358; cash increased by $3,496 to $5,059. Financing included $222,358 of related-party note proceeds, $158,000 of repayments, $5,000 from stock subscriptions, and $2,000 of donated capital. No interest or income taxes were paid.
Material changes versus prior comparable periods
- Operating expenses rose from $6,359 to $25,200 for the quarter and from $28,987 to $47,430 for the nine-month period; net losses also increased.
- Operating cash use increased from $21,942 to $67,862 year over year for the nine months. Financing cash provided rose from $28,000 to $71,358.
- Cash increased from $1,563 at November 30, 2015 to $5,059 at August 31, 2016, while total liabilities rose from $157,082 to $211,799. Related-party debt balances shifted following repayment of prior promissory notes and issuance of convertible financing.
Outlook, risks, contingencies and other notable items
Management states that available capital is insufficient to continue in business for the next 12 months without additional funding. The company expects continued negative operating cash flows and says its ability to continue as a going concern depends on raising more capital and ultimately generating significant operating revenue. The financial statements include no adjustments for the uncertainty. Management anticipates seeking financing through common-stock offerings or additional financing; no specific forecast or quantified guidance is provided.
The related-party convertible loan is owed to an entity controlled by the current officer and director. The filing reports no material legal proceedings and no material off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material quarterly changes in internal control over financial reporting. The company elected the emerging-growth-company extended transition period for new accounting standards.
Important facts for investors to verify
- Resolve the mismatch between the request metadata naming Ridenow Group, Inc. and the filing identifying Smart Server, Inc.
- Verify the company’s present operating status, ownership following the July 2016 control transaction, and any subsequent corporate-name or business changes.
- Confirm the terms, balance, related-party status, and potential dilution from the $197,358 convertible note, including the qualified-financing conversion formula.
- Assess near-term liquidity and the company’s ability to obtain funding, given $5,059 cash and management’s stated need for additional capital.
- Reconcile the filing’s financing cash-flow figures and related-party borrowing and repayment disclosures with the underlying loan records.