CLEANSPARK, INC. annual report, FY2012

Business context and reporting period

Filing identity differs from request metadata: the supplied document is SmartData Corporation’s Form 10-K, not a CleanSpark, Inc. filing. It covers the fiscal year ended September 30, 2012; it is not identified as a calendar fourth-quarter report.

SmartData describes itself as a development-stage shell seeking to acquire or merge with an operating business. It had no operating business or revenue, no employees, no specific target, and no acquisition negotiations as of the report. The filing identifies its OTC Bulletin Board symbol as SMDT and checks the shell-company box.

Financial results and liquidity

At September 30, 2012, total assets were $1,822, including $413 cash and $1,409 prepaid expenses. Current and total liabilities were $82,075: $4,757 accounts payable, a $16,000 related-party convertible note, and $61,318 payable to a shareholder. Stockholders’ deficit was $80,253. There was no reported revenue or operating margin; the company reported an operating loss of $14,175.

Cash increased by $205 during FY 2012: operating activities used $795 and financing activities provided $1,000. No interest or income taxes were paid. The company had no line of credit or capital-expenditure commitments. Management estimated approximately $20,000 in expenses for the next 12 months and expected to rely on advances from its president, but those advances were not committed.

Changes versus the prior year

Net loss narrowed by $18,062, as general and administrative expense fell by $19,849; interest expense rose by $1,787. Operating cash outflow improved by $4,037. Total liabilities increased by $15,938, while cash rose from $208 to $413. No revenue was generated in either year. The report says FY 2012 shares outstanding were unchanged from FY 2011.

Outlook, risks, and unusual items

Management planned to continue seeking an acquisition and maintaining SEC reporting. It anticipated continued losses until a business combination and gave no revenue, earnings, or acquisition guidance. Any transaction could require substantial share issuance and dilute existing holders, potentially transferring control to the target’s owners.

The independent auditor stated that limited resources and recurring losses raise substantial doubt about the company’s ability to continue as a going concern. Management’s plan was to rely on loans from current officers and directors; there is no assurance that funding will continue. The filing also identifies acquisition uncertainty, competition for targets, limited management time, potential conflicts of interest, reporting costs, and the risk that no liquid market for the stock will develop. The company reported no pending legal proceedings or off-balance-sheet arrangements.

Related-party financing is material: shareholder advances totaled $61,318, and a separate $16,000 demand note was convertible at the holder’s option into 1.5 million restricted shares. The filing records imputed interest on non-interest-bearing related-party advances. It also reports that the deferred tax asset from net operating loss carryforwards was fully reserved and that a change in control could limit their use.

Important facts to verify

• Confirm the filing belongs to SmartData Corporation, not CleanSpark, Inc., and that the fiscal year ended September 30, 2012 matches the intended period.
• Verify the $61,318 shareholder payable, the separate $16,000 convertible note, their holders and terms, and whether any conversion or repayment occurred after year-end.
• Assess the going-concern warning and whether management or the president provided the expected funding.
• Reconcile share counts: the filing gives 37,076,779 shares in its financial statements and ownership section, but 37,076,799 in another cover-page disclosure.
• Confirm the status of any subsequent acquisition plans and the liquidity and trading status of SMDT; the filing reports no trading volume for most of 2012.