SEC Filing Summary
Entity and period: The supplied filing is a Form 10-Q for Stratean Inc. for the quarter ended December 31, 2015, not a filing identified as CleanSpark, Inc. The company describes a business developing and marketing gasifier technology intended to convert waste and other carbon-based materials into synthesis gas.
Financial results and condition
- Revenue: $0 in both Q1 FY2016 and the comparable 2014 quarter. With no revenue, a meaningful gross or operating margin is not available.
- Expenses and loss: Operating expenses were $72,016, down from $186,194. Net loss was $72,016, compared with $191,338; basic loss per share was reported as $0.00 versus $0.01.
- Cash flow: Operating cash outflow was $66,804 (prior period: $106,944); investing outflow was $11,719 (prior: $1,710); financing inflow was $130,000 (prior: $50,000). Cash increased $51,477 to $140,010.
- Liquidity and assets: Current assets were $150,565 and current liabilities $39,688, yielding reported working capital of $110,877. Total assets were $859,631.
- Debt and obligations: Total liabilities were $39,688, including $1,473 due to related parties; the balance sheet reports no long-term debt. The filing lists $6,750 in minimum lease payments for 2016 as of December 31.
- Equity and dilution: The company raised $130,000 in a private placement by issuing 390,000 common shares and 39,000 warrants at $0.33 per share. At December 31, it reported 8,136,600 warrants outstanding, all exercisable, with a stated weighted-average exercise price of $0.10. It also had 400,000 preferred shares outstanding; Series A terms include 45 votes per share and dividends tied to 2% of earnings before interest, taxes and amortization.
Changes, outlook, and risks
- Year-over-year operating expenses and net loss declined substantially, led by lower professional fees ($46,362 versus $117,772) and research and development expense ($1,458 versus $50,000). Depreciation and amortization rose to $7,128 from $640.
- Management said it did not expect significant revenue until the technology was further developed and marketable. The gasifier remained under development; the filing provides no updated quantified sales or earnings guidance and says there had been no significant negotiations with major prospective customers.
- Management stated that available cash was insufficient to fund operations at the current level for the next 12 months and that additional equity or debt financing was needed, with no assurance it would be available. The notes cite cumulative losses of $3,966,294 and substantial doubt about the company’s ability to continue as a going concern.
- Disclosure controls were deemed ineffective due to material weaknesses in segregation of duties/risk assessment and written accounting and reporting procedures. Remediation was planned for FY2016 and depended in part on securing financing.
- Subsequent events include additional private-placement proceeds, a new office lease, and advisory compensation in shares and warrants. The filing’s descriptions of post-quarter financing differ in amount and timing. No pending legal proceedings were reported.
Important facts for investors to verify
- Confirm the issuer identity: the filing names Stratean Inc., despite the request metadata naming CleanSpark, Inc.
- Reconcile post-quarter financing disclosures: the notes describe $70,000 received through February 2, 2016, while the unregistered-sales section describes $20,000 through January 31.
- Verify the current status and independent test results of the gasifier; the filing describes testing milestones and commercialization expectations but does not establish commercial readiness or customer demand.
- Assess near-term financing needs, going-concern risk, and potential dilution from outstanding warrants and preferred-stock voting rights.
- Review progress on internal-control remediation and note that the filing identifies material weaknesses that remained unremediated at quarter-end.