Filing summary
Entity and period: The supplied filing is for SmartData Corporation, not CleanSpark, Inc. It is an unaudited Form 10-Q for the quarter ended December 31, 2013. The filing describes SmartData as a development-stage company and marks it as a shell company. The reported quarter is not necessarily representative of full-year results.
Financial results and position
| Metric | Three months ended Dec. 31, 2013 | Comparable 2012 period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expenses | $8,287 | $8,176 in the financial statements; MD&A instead says $8,716 |
| Interest expense | $1,928 | $1,568 |
| Net loss | $10,215 | $9,744 |
| Net cash from operating activities | $237 | $70 |
At December 31, 2013, cash and total assets were each $507, versus $270 at September 30, 2013. Current and total liabilities were $114,092, including $15,774 of accounts payable, a $15,500 convertible promissory note, and $82,818 payable to a shareholder. Stockholders’ deficit was $113,585. The filing reports no interest or income taxes paid during the quarter. No operating margin is meaningful because the company had no revenue or operations.
Operating cash flow was positive despite the net loss, principally reflecting increases in accounts payable and related-party debt. No cash was raised from financing during the quarter. The related-party notes are described as non-interest-bearing and payable on demand; the company records imputed interest at 8%.
Changes, outlook, and risks
Compared with the prior-year quarter, net loss increased by $471 and interest expense increased by $360. Revenue remained zero. Cash rose by $237 from quarter-end September, while liabilities increased by $8,524. The filing reports 950,687 common shares outstanding and no unregistered equity sales during the quarter.
Management’s stated plan was to evaluate industries, select a business plan, and pursue operations through funding or acquiring an existing business. No target or industry had been identified as of the filing. Management anticipated continued losses and no revenue until a business combination; it cautioned that losses could continue afterward. It expected compliance and acquisition-search costs to be funded through management or principal-stockholder loans or investment, but those parties are not obligated to provide funding and adequacy is not assured.
The company disclosed substantial doubt about its ability to continue as a going concern because it has accumulated losses and no revenue-generating activities. Management said it was seeking business opportunities and might raise funds through loans or stock sales; there is no assurance of financing or profitable operations. The financial statements include no adjustments for the outcome of these uncertainties.
Management concluded disclosure controls and procedures were not effective at period-end, citing limited access to capital as a constraint on remediation. No material changes in internal control over financial reporting were reported. The filing says no legal proceedings were threatened or pending.
Important facts to verify
- Confirm the intended issuer: the provided filing identifies SmartData Corporation, not CleanSpark, Inc.
- Resolve the conflicting 2012 general and administrative expense figures: $8,176 in the statements versus $8,716 in MD&A.
- Verify the filing date: the signature block states February 12, 2013, which predates the quarter ended December 31, 2013.
- Assess the company’s ability to fund operations and meet demand-payable related-party obligations, given only $507 in cash and management’s lack of a funding commitment.
- Review the status of any proposed business combination and remediation of ineffective disclosure controls.