Filing summary
Entity and period: The supplied filing is Smart Server, Inc.’s Form 10-K for the fiscal year ended November 30, 2015, not a filing identified as Ridenow Group, Inc. The filing compares fiscal 2015 with fiscal 2014. Smart Server describes itself as a development-stage company developing a smartphone payment application for restaurants, bars, and clubs. It had no market-ready product, customers, or revenue.
Financial performance and position
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $41,552 | $130,645 |
| Net loss | $48,809 | $135,595 |
| Net loss per share | $0.01 | $0.03 |
| Cash used in operating activities | $32,632 | $120,191 |
| Cash at year-end | $1,563 | $6,195 |
At November 30, 2015, total assets were $4,413, total liabilities were $157,085, and stockholders’ deficit was $152,669. Current liabilities were $111,799, including $100,000 of current related-party debt. Related-party notes totaled $133,000, bore 6% interest, and had $12,283 of accrued interest. The filing says certain notes were in default as of filing, but does not clearly identify the full amount in default. No interest or income taxes were paid during either year. A meaningful operating margin is not available because the company had no revenue.
Changes versus prior year
- Net loss narrowed by $86,786, primarily as professional fees fell from $127,266 to $35,623; total operating expenses declined by $89,093.
- Operating cash use decreased by $87,559, but year-end cash fell by $4,632.
- Related-party loans increased from $80,000 to $133,000, and accrued related-party interest rose from $5,026 to $12,283.
- Accumulated deficit grew from $168,860 to $217,669. The balance sheet reports 5,500,000 common shares outstanding at both year-ends.
Outlook, risks, and unusual items
Management aimed to complete an improved website, anticipated to be fully operational by the end of the second quarter of 2016, and to develop and market the mobile app. Potential revenue sources include website and in-app advertising and app sales. These are plans, not firm guidance; the filing provides no revenue forecast. Management states that available cash alone would not fund the next 12 months and that additional capital is needed. The auditor’s report highlights substantial doubt about the company’s ability to continue as a going concern, citing no revenue, recurring losses and negative operating cash flow, and negative working capital.
- Key risks include inability to raise financing, product-development and market-acceptance uncertainty, competition, reliance on a single part-time officer/director, and cybersecurity and intellectual-property risks.
- The company reported $5,000 of common stock sold to an officer/director in November 2015 as a subscription receivable; it says the cash was received in February 2016. The same officer/director beneficially owned 90.9% of shares as of March 11, 2016.
- The company disclosed $133,000 of loans from an entity owned and controlled by an officer/director’s family member. A further $8,000 related-party note was issued after year-end in December 2015.
- The company reported that its shares had not commenced trading on the OTC Pink market as of the report, and that it was designated a shell company. It had not declared or paid dividends.
Most important facts to verify
- Confirm the issuer: the supplied filing is for Smart Server, Inc., whereas the request identifies Ridenow Group, Inc.
- Review the audited financial statements and debt note for note maturities, defaults, related-party terms, and the reconciliation of total debt to current and long-term balance-sheet classifications.
- Verify the reported stock repurchase, rescinded share issuance, November 2015 subscription, and February 2016 receipt of proceeds against corporate records and subsequent filings.
- Assess cash runway, financing availability, and progress toward a functioning website, completed app, merchant integrations, and revenue generation.
- Consider the auditor’s going-concern warning and the company’s limited operating history, concentrated control, and lack of an active trading market.