Filing summary
Entity discrepancy: The request identifies Ridenow Group, Inc., but the supplied Form 10-Q is for Smart Server, Inc. The filing covers the quarter and nine months ended August 31, 2015; the interim financial statements are unaudited.
Business context and financial results
Smart Server describes itself as a development-stage company seeking to develop a mobile payment application for restaurants, bars, and clubs. It reported no revenue for the three- or nine-month periods and stated that it had no market-ready product or customers.
| Metric | Three months ended Aug. 31, 2015 | Nine months ended Aug. 31, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $6,359 | $28,987 | $55,410 / $125,188 |
| Net loss | $8,331 | $34,255 | $56,923 / $128,643 |
| Operating cash flow | Not separately reported | $(21,942) | $(116,710) |
| Investing cash flow | Not separately reported | $0 | $(5,700) |
| Financing cash flow | Not separately reported | $28,000 | $130,000 |
Operating expenses and net losses fell year over year, mainly because of lower professional fees and legal work. No gross margin was reported because there was no revenue. Nine-month interest expense on related-party debt was $5,268.
Balance sheet, liquidity, and debt
At August 31, 2015, cash was $12,253, total assets $15,578, current liabilities $110,399, total liabilities $153,693, and stockholders’ deficit $138,115. Related-party notes payable totaled $133,000, including $100,000 classified as current and $33,000 as long-term; related-party accrued interest was $10,294. The notes bear 6% annual interest. The filing says available cash would not sustain operations for the next 12 months without additional funding.
Cash increased by $6,058 during the nine months, supported by $33,000 of related-party note proceeds, partly offset by $5,000 paid to repurchase shares. No interest or income taxes were paid.
Outlook, risks, and unusual items
Management hoped to begin generating revenue within 12 months and planned to develop the app and improve the website, but provided no quantified forecast. It said the website was not fully operational and intended to launch an improved version near the end of Q4 2015. Management warned that continued losses were possible and that further financing was needed; it disclosed no financing agreements or arrangements in place or under negotiation.
The filing identifies substantial doubt about the company’s ability to continue as a going concern, citing no operating revenue, recurring losses, limited cash, and dependence on raising capital and eventually achieving significant revenue. Risks discussed include product-development and market-acceptance uncertainty, competition, technology changes, security and intellectual-property concerns, dependence on potential mobile-operator relationships, limited management resources, and restricted liquidity for shares because the company is identified as a shell company and its stock as a penny stock. The company reported no material legal proceedings or material off-balance-sheet arrangements.
During the quarter, the company repurchased and cancelled 5,000,000 shares from a former officer/director for $5,000. It also reported issuing 5,000,000 shares to an officer/director for services and agreeing to rescind that issuance; the rescission was documented on October 20, 2015, after quarter-end. Shareholders approved authority to designate preferred-stock rights and preferences on October 16, 2015.
Important facts to verify
- Whether this filing is relevant to Ridenow Group, Inc.; the registrant named throughout the filing is Smart Server, Inc.
- The accumulated-deficit amount: the balance sheet reports $203,155, while MD&A cites $203,115.
- The status and timing of the 5,000,000-share issuance and subsequent rescission, and the resulting share count; the filing reports 500,000 shares outstanding on October 20, 2015.
- Related-party debt maturities, accrued interest, and the company’s ability to obtain enough funding to continue operations.
- Whether the planned app and website became operational and generated revenue after the reporting period.