Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended December 31, 2009, for Smartdata Corporation (a development stage company). The registrant is a smaller reporting company and a shell company with no active revenue-generating operations. The primary business activity during the period was maintaining SEC reporting status and seeking a business combination.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2009 | Three Months Ended Dec 31, 2008 |
|---|---|---|
| Revenues | $0 | $0 |
| Net Income (Loss) | $142 | $(19,233) |
| Operating Expenses | $2,211 | $19,233 |
| Total Assets | $0 | $0 |
| Total Liabilities | $26,155 | $26,297 |
| Stockholders' Deficit | $(26,155) | $(26,297) |
| Cash Balance | $0 | $0 |
| Notes Payable (Related Party) | $12,876 | $6,115 |
Note: The net income of $142 for the current quarter is primarily due to a $2,353 gain on the forgiveness of debt, offset by operating expenses.
Material Changes
- Profitability: The company reported a net income of $142 for the quarter ended December 31, 2009, compared to a net loss of $19,233 in the same period in 2008. This reversal was driven by a one-time gain on debt forgiveness rather than operational performance.
- Expenses: General and administrative expenses decreased significantly to $2,211 from $19,233 in the prior year period.
- Debt: Related party notes payable increased by $6,761 during the quarter, reflecting new advances from officers.
- Liquidity: The company maintained a cash balance of $0 throughout the period.
Outlook, Risks, and Subsequent Events
Merger Agreement
On February 23, 2010, the company entered into a Merger Agreement with Sure Storage USA, Inc.. Upon completion, Smartdata Corporation will merge into Sure Storage, which will become the surviving corporation and change its name to "Sure Storage USA, Inc." The transaction includes a 1-for-15 reverse stock split of Smartdata's common stock.
Going Concern
The filing contains a substantial doubt disclosure regarding the company's ability to continue as a going concern. The company has no revenue, has incurred losses since inception, and relies on loans from officers or additional stock sales to fund operations.
Controls and Procedures
Management concluded that disclosure controls and procedures were not effective as of the end of the period. Remediation costs were deemed too high given the company's limited capital.
Risks
- Failure to secure additional financing.
- Failure to complete the proposed merger.
- Significant dilution to existing shareholders upon any business combination.
Investor Verification Checklist
- Verify the status of the merger with Sure Storage USA, Inc. and whether the 85% shareholder approval threshold has been met.
- Confirm the company's current cash position, as the balance sheet reports $0 assets and $0 cash.
- Review the terms of the related-party notes payable ($12,876 outstanding) to understand repayment obligations.
- Assess the impact of the 1-for-15 reverse stock split on share ownership and trading status.
- Investigate the lack of effective internal controls and the potential for undisclosed liabilities.