Business context and reporting period
The supplied filing is for Smart Server, Inc., not Ridenow Group, Inc.; investors should verify the issuer identity. It is an unaudited Form 10-Q for the quarter ended May 31, 2015, covering the three- and six-month periods ended that date. Smart Server was developing a smartphone payment application for restaurant, bar, and club customers. It reported no customers and no revenue.
Financial results and position
- Revenue: $0 for both the three and six months ended May 31, 2015, and for the comparable 2014 periods.
- Net loss: $11,380 for the quarter, versus $43,722 in 2014; $25,924 for six months, versus $71,720. Basic loss per share was reported as $0.00 for 2015 and $0.01 for 2014, rounded in the filing.
- Operating expenses: $9,637 for the quarter and $22,628 for six months, compared with $42,503 and $69,778, respectively, in 2014. Six-month 2015 expenses included $21,008 of professional fees, $600 of related-party professional fees, $950 of amortization, and $70 of general and administrative costs.
- Cash flow: Six-month operating cash use was $17,358, compared with $63,453 in 2014. Financing provided $18,000, all from related-party borrowing, compared with $115,000 in 2014. Investing cash flow was zero.
- Liquidity: The balance sheet reports cash of $6,937 and current liabilities of $94,199 at May 31, 2015; current assets less current liabilities imply a working-capital deficit of $87,262. However, the cash flow statement and MD&A report ending cash of $6,837, so the filing contains an unresolved $100 cash discrepancy.
- Debt and liabilities: Total liabilities were $135,521, including $85,000 of current related-party debt, $33,000 of long-term related-party notes, and $8,322 of accrued related-party interest. Notes bore interest at 6% annually. Stockholders’ deficit was $124,784.
- Assets and shares: Total assets were $10,737, including a website asset, net, of $3,800. The balance sheet reports 5.5 million common shares outstanding at May 31; the cover reports 5.5 million at July 15, 2015.
Changes, outlook, and risks
Six-month net loss and operating expenses decreased substantially from 2014, primarily because professional fees were lower. Operating cash use also declined, while financing inflows fell from $115,000 to $18,000. No revenue was generated in either comparable period.
Management said it intended to begin generating revenue within 12 months and expected revenue from website and in-app advertising and app sales. It also described plans to complete an improved website and develop the app; the filing said the website launch was intended for the end of the second quarter of 2015. These are expectations, not reported results, and the filing gives no quantified revenue or earnings guidance.
The company disclosed substantial doubt about its ability to continue as a going concern. It stated that available cash would not support operations for the next 12 months without additional funding, and that it was contemplating debt or equity financing but had no financing agreements or arrangements in place or under negotiation. Failure to raise capital could prevent completion of the app and website or force the company to cease operations. Other material risks include having no market-ready product or customers, intense competition, technology and market-acceptance uncertainty, dependence on future partnerships, limited management resources, cybersecurity and intellectual-property risks, and limited stock liquidity. The company identified itself as a shell company and warned of Rule 144 resale restrictions. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting. A $5,000 related-party note was executed on June 4, 2015; the filing reported no other material subsequent events.
Key facts investors should verify
- Confirm the issuer: the filing names Smart Server, Inc., whereas the request identifies Ridenow Group, Inc.
- Reconcile the $100 difference between balance-sheet cash ($6,937) and cash-flow/MD&A cash ($6,837).
- Verify the related-party debt balance, maturity schedule, and the amount due within one year.
- Assess whether the company can obtain financing and fund operations, and whether its product and website were completed or launched.
- Confirm the share-count and equity disclosures: the balance sheet shows 5.5 million shares at May 31 versus 5.0 million at November 30, while the equity note says there were no other share issuances during the six-month period.