CLEANSPARK, INC. - Annual Report: 2010 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X . ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 2010
. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000- 53498
SmartData, Inc.
(Name of small business issuer in its charter)
Nevada | 87-0449945 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
PO BOX 573633, Murray , Utah 84157
(Address of principal executive offices)
Issuer's telephone number: (801) 557-6748
Securities Registered pursuant to Section 12(b) of the Act: None.
Securities Registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $.001 par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes . No X .
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes . No X ..
Note - checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes . No X .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | . | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X . |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes X . No .
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed fiscal quarter:
Our common stock is not listed on any exchange. There was not an active market and no trading volume during fiscal 2009 and there has been no trading volume in 2010, therefore the aggregate market value of the issuer's common stock held by non-affiliates at June 16, 2011 is deemed to be $-0-.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes . No X .
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
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Class | Outstanding as of June 16, 2011 |
Common Stock, $.001 par value | 35,976,781 |
DOCUMENTS INCORPORATED BY REFERENCE
See Item 15.
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FORWARD LOOKING STATEMENTS
In this Annual Report, references to "SMARTDATA, Inc.," the "Company," "we," "us," "our" and words of similar import refer to SmartData, Inc.
This Annual Report contains certain forward-looking statements and for this purpose any statements contained in this Annual Report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the markets in which SmartData, Inc., may participate, competition within the Company's chosen industry, technological advances and failure by us to successfully develop business relationships. We expressly disclaim any intention or obligation to update any forward-looking statement for any reason.
PART I
ITEM 1. BUSINESS
Business Development
SmartData Corporation was incorporated in State of Nevada on October 15, 1987. The original ongoing business of SmartData was the distribution and sale of computer hardware and software. SmartData provided small businesses a framework to measure productivity, and offered additional services such as staff leasing, insurance benefits, and retirement planning. SmartData conducted a 504 public offering in the State of Nevada in December 1987. Smart Data began trading publicly in January 1988. Due to a series of unfortunate events, including the untimely death of the founding CEO, Mr. Paul Gambles, SmartData discontinued active business operations in 1992.
The Company has now focused its efforts on seeking a business opportunity. The Company will attempt to locate and negotiate with a business entity for the merger of that target company into the Company. In certain instances, a target company may wish to become a subsidiary of the Company or may wish to contribute assets to the Company rather than merge. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company will provide a method for a foreign or domestic private company to become a reporting (“public”) company whose securities are qualified for trading in the United States secondary market.
Accordingly, the Company, post bankruptcy, has minimal assets and minimal liabilities and operating activities. Therefore, the Company qualifies as being in the development stage as defined under the provisions of Accounting Codification Standard ("ASC") 915-10.
Description of Business
We are currently seeking and investigating potential assets, property or businesses to acquire. We have had no material business operations since December 28, 2004. Our plan of operation for the next 12 months is to:(i) consider guidelines of industries in which we may have an interest; (ii) adopt a business plan regarding engaging in the business of any selected industry; and (iii) to commence such operations through funding and/or the acquisition of a "going concern" engaged in any industry selected. We are unable to predict the time as to when and if we may actually participate in any specific business endeavor, and will be unable to do so until we determine the particular industries in which we may engage.
We are not currently engaged in any substantive business activity except the search for potential assets, property or businesses to acquire, and we have no current plans to engage in any other activity in the foreseeable future unless and until we complete any such acquisition. In our present form, we may be deemed to be a vehicle to acquire or merge with a business or company. We do not intend to restrict our search for business opportunities to any particular business or industry, and the areas in which we will seek out business opportunities or acquisitions, reorganizations or mergers may include, but will not be limited to, the fields of high technology, manufacturing, natural resources, service, research and development, communications, transportation, insurance, brokerage, finance and all medically related fields, among others. We recognize that the number of suitable potential business ventures that may be available to us may be extremely limited, and may be restricted as to acquisitions, reorganizations and mergers with businesses or entities that desire to avoid what such entities may deem to be the adverse factors related to an initial public offering ("IPO") as a method of going public. The most prevalent of these factors include substantial time requirements, legal and accounting costs, the inability to obtain an underwriter who is willing to publicly offer and sell shares, the lack of or the inability to obtain the required financial statements for such an undertaking, state limitations on the amount of dilution to public investors in comparison to the stockholders of any such entities, along with other conditions or requirements imposed by various federal and state securities laws, rules and regulations and federal and state agencies that implement such laws, rules and regulations.
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Number of Total Employees and Number of Full Time Employees
None.
Additional Information
You may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports or registration statements that we have previously filed electronically with the SEC at its Internet site at www.sec.gov. Please call the SEC at 1-202-551-8090 for further information on this or other Public Reference Rooms. Our SEC reports and registration statements are also available from commercial document retrieval services, such as CCH Washington Service Bureau, whose telephone number is 1-800-955-0219.
ITEM 1A. RISK FACTORS
Not required for smaller reporting companies.
ITEM 2: PROPERTIES
We have no assets, property or business; our principal executive office address and telephone number are the business office address and telephone number of our President, Burkeley Priest, and are currently provided at no cost. Because we have had no business, our activities have been limited to keeping us in good standing in the State of Nevada and timely voluntarily filing our reports with the SEC.
ITEM 3: LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. To the knowledge of our management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.
ITEM 4: (Removed and Reserved.)
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is not listed on any trading exchange. There is currently no established trading market for our shares of common stock. Management does not expect any viable market to develop in our common stock unless and until we complete an acquisition or merger. In any event, no assurance can be given that any market for our common stock will develop or be maintained.
For any market that develops for our common stock, the sale of "restricted securities" (common stock) pursuant to Rule 144 of the SEC by members of management or any other person to whom any such securities may be issued in the future may have a substantial adverse impact on any such public market.
Holders
We currently have approximately 93 shareholders, not including an indeterminate number who may hold shares in "street name."
Dividends
We have not declared any cash dividends with respect to our common stock and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty, and if and until we complete any acquisition, reorganization or merger, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.
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Securities Authorized for Issuance under Equity Compensation Plans
None; not applicable.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On September 10, 2010, 100,000 shares of restricted common stock were issued to Burkeley Priest in exchange for services valued at $1,000.
In the above transaction, the securities were issued to accredited investors pursuant to the exemption from registration provided by Section 4(2) of the Securities Act; the certificates for such securities contain the appropriate legends restricting their transferability absent registration or applicable exemption. The accredited investors received information concerning the Company and had the ability to ask questions about the Company.
Use of Proceeds of Registered Securities
There were no proceeds received during the fiscal year ended September 30, 2010, from the sale of registered securities.
Purchases of Equity Securities by Us and Affiliated Purchasers
None.
ITEM 6: SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
When used in this Annual Report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions, and financial trends that may affect The Company's future plans of operations, business strategy, operating results, and financial position. Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed further below under "Trends and Uncertainties," and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Plan of Operation
Our plan of operation for the next 12 months is to: (i)consider guidelines of industries in which we may have an interest; (ii) adopt a business plan regarding engaging in the business of any selected industry; and (iii) to commence such operations through funding and/or the acquisition of a "going concern" engaged in any industry selected.
During the next 12 months, our only foreseeable cash requirements will relate to maintaining our good standing or the payment of expenses associated with legal fees, accounting fees and reviewing or investigating any potential business venture, which may be advanced by management or principal stockholders as loans to us. Because we have not determined any business or industry in which our operations will be commenced, and we have not identified any prospective venture as of the date of this Annual Report, it is impossible to predict the amount of any such loan. Any such loan will be on terms no less favorable to us than would be available from a commercial lender in an arm's length transaction. No advance or loan from any affiliate will be required to be repaid as a condition to any agreement with future acquisition partners.
When and if a business will commence or an acquisition made is presently unknown and will depend upon various factors, including but not limited to funding and its availability and if and when any potential acquisition may become available to us at terms acceptable to us. The estimated costs associated with reviewing and verifying information about a potential business venture would be mainly for due diligence and the legal process and could cost between $5,000 and $25,000. These funds will either be required to be loaned by management or raised in private offerings; we cannot assure you that it can raise funds, if needed.
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Liquidity and Capital Resources
The Company has cash or cash equivalents on hand as of September 30, 2010 amounting to $40. If additional funds are required, such funds may be advanced by management or stockholders as loans to the Company. During the year ended September 30, 2010, loans were made and expenses were paid by a principal stockholder and other non-related parties in the amount of $30,720. During the same period in 2009, additional loans and expenses by a principal stockholder totaled $ 16,865 . The aggregate amount of $36,835 outstanding as of September 30, 2010, is unsecured and is due on demand. Because the Company has not identified any other acquisition or venture, it is impossible to predict the amount of any such loan.
Results of Operations
Other than maintaining its good corporate standing in the State of Nevada compromising and settling its debts and seeking the acquisition of assets, properties or businesses that may benefit us and our stockholders, we have had no material business operations in the two most recent calendar years.
During the year ended September 30, 2010, we had a net loss of $18,846, resulting from operations. During this same period ending September 30, 2009, we had a net loss of $30,779, also resulting from operations. The decrease in net loss is due to the Company's decrease in ongoing expenses related to meeting our SEC reporting obligations. We have recognized no revenues in either of our two most recent calendar or fiscal years. See the Index to Financial Statements, Part II, Item 8, of this Annual Report.
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet arrangements during the fiscal year ended September 30, 2010.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements are included following the signature page of this Form 10-K.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our President and Secretary/Treasurer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on that evaluation, our President and Secretary/Treasurer concluded that our disclosure controls and procedures as of the end of the period covered by the Annual Report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our President and Secretary/Treasurer, as appropriate to allow timely decisions regarding disclosure. However, the Company believes the costs of remediation outweigh the benefits given the limited operations of the company.
Limitation on Effectiveness of Controls
A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
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Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, with the participation of the President, evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on this evaluation, our management, with the participation of the President, concluded that, as of September 30, 2010, our internal control over financial reporting was not effective. The Company's material weaknesses in internal control are due to the lack of segregation of duties and the lack of accounting expertise in the supervision of the financial reporting process. However, the Company believes the costs of remediation outweigh the benefits given the limited operations of the company.
This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to permanent rules of the Security and Exchange Commission that permit the Company to provide only management's report in this Annual Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Identification of Directors and Executive Officers
Our executive officers and directors and their respective ages, positions and biographical information are set forth below.
Name | Age | Position | Director or Officer since |
Burkeley Priest | 37 | President/Secretary/Director | May 2007 |
Background and Business Experience
Burkeley J. Priest, 37 years old, the President and a director of SmartData, Inc., is also the Managing Member of Summit Sports, LLC., A Utah Limited Liability Company which operates an exclusive single line Honda Power House dealership in Park City, Utah with annual sales of 4 million plus. Mr. Priest also was the founder of the Classic Motorcycles, Murray, Utah and Point Power Sports, Draper Utah. Mr. Priest attended the University of Utah from 1991 to 1995 with a focus on Economics.
Significant Employees
We have no employees who are not executive officers, but who are expected to make a significant contribution to the Company's business.
Family Relationships
None.
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Involvement in Other Public Companies
None.
Involvement in Certain Legal Proceedings
During the past five years, no director, officer, promoter or founder or control person of the Company:
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has filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
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was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his/her involvement in any type of business, securities or banking activities; or
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was found by a court of competent jurisdiction in a civil action, by the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated.
Compliance with Section 16(a) of the Exchange Act
The common stock of the Company is registered under the Exchange Act, and therefore, the officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. There were no transactions during the year ended September 30, 2010 that were required to be reported.
Code of Ethics
We adopted a Code of Ethics for our principal executive and financial officers. Our Code of Ethics was filed as Exhibit 14 to our Annual Report for the year ended September 30, 2009. See Part IV, Item 15, of this Annual Report.
Corporate Governance
Nominating Committee
To date, we have not established a Nominating Committee because, due to our lack of material operations and the fact that we presently have only one director and executive officer. As our operations progress, the Board of Directors intends to continue to review the need for and timing of the appointment of a nominating committee.
If we do establish a Nominating Committee, we will disclose this change to our procedures in recommending nominees to our Board of Directors.
Audit Committee
Similarly, to date we have not established an Audit Committee because, due to our lack of material operations and the fact that we presently have only one director and executive officer, we believe that we are able to effectively manage the issues normally considered by an Audit Committee. Following the entry into any business or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
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ITEM 11: EXECUTIVE COMPENSATION
All Compensation
No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to our management during the years ended September 30, 2010, or 2009. Furthermore, no member of our management has been granted any option or stock appreciation rights; accordingly, no tables relating to such items have been included within this Item. Stock awards would be valued using the closing bid price for the period in question as obtained from the National Quotation Bureau, Inc. (the "NQB"). The following table sets forth the aggregate compensation paid by our Company for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
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Name and Principle Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non- Equity Incentive Plan Compen-sation ($) | Nonqual-ified Deferred Compen-sation ($) | All Other Compen- sation ($) | Total Earnings ($) | |
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |
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Burkeley Priest | 9/30/10 | 0 | 0 | 0 | 0 | 0 | 0 | 1,000 | 1,000 | |
| President, CEO, CFOSecretary and Director | 9/30/09 | 0 | 0 | 0 | 0 | 0 | 0 | 100 | 100 |
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| 9/30/08 | 0 | 0 | 0 | 0 | 0 | 0 | 5,100 | 5,100 |
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Employment Agreement
Outstanding Equity Awards at Fiscal Year-End
None.
Compensation of Directors
There are no standard arrangements pursuant to which our directors are compensated for any services provided as director, including services for committee participation or for special assignments. Our directors received no compensation for service as directors for the year ended September 30, 2010.
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following table sets forth as of June 16, 2011 the number and percentage of the 35,976,781 shares of outstanding common stock which, according to the information supplied to the Company, were beneficially owned by (i) each person who is currently a director of the Company, (ii) each executive officer, (iii) all current directors and executive officers of the Company as a group and (iv) each person who, to the knowledge of the Company, is the beneficial owner of more than 5% of the outstanding common stock. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
Title of | Name and Address of | Amount and Nature of | Percentage |
Class | Beneficial Owner | Beneficial Ownership | of Class |
Common | Burkeley Priest (1) | 14,138,000 | 39.30% |
| P. O. Box 571663 |
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| Murray, UT 84157 |
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Common | Munson Family Limited Partnership (2) | 16,400,000 | 45.59% |
| 3374 Starview Dr |
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| Bend, OR 97701 |
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Total Officers and Directors | 14,138,000 | 39.30% | |
As a Group (1 Person) |
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There are no contracts or other arrangements that could result in a change of control of the Company.
SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. At the present time there are no outstanding options or warrants.
Changes in Control
There are no additional present arrangements or pledges of our securities which may result in a change in control of the Company. However, there are no provisions in our Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control.
Securities Authorized for Issuance under Equity Compensation Plans
None, not applicable.
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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE
Transactions with Related Persons
Except for the following, there were no material transactions, or series of similar transactions, during our last two fiscal years, or any currently proposed transactions, or series of similar transactions, to which our Company or any of our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of our total assets at year-end for the last two completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.
On December 22, 2008, Burkeley Priest converted portions of his convertible notes into 4,493,000 shares of common stock resulting in a reduction of $4,493 in the convertible notes.
On January 5, 2009, Burkeley Priest and Jerry Rice converted portions of their convertible notes into 10,750,000 shares of common stock resulting in a reduction of $10,750 in convertible notes.
From October 1, 2009 through September 30, 2010, the Company received $20,570 in advances from certain officers of the Company under convertible promissory notes. The nature of the advances consist of the officers covering the cost of required corporate expenses. The notes bear no interest and are convertible into shares of the Company’s common stock at a rate of $0. 01 per share. Management evaluated the convertible notes and determined that there is no embedded derivative of the conversion feature of the note. Management evaluated the convertible notes payable and determined that there was no intrinsic value of the conversion option due to the fact that the debt is not convertible at a discount to the market value of the stock. Although the notes bear no interest, the Company imputed interest at a rate of 8% and recognized $1,649 in interest expense with an increase to additional paid in capital for the same amount.
Director Independence
We do not have any independent directors serving on our Board of Directors.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended September 30, 2010 and 2009:
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Fee Category |
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Audit Fees | $ | 12,720 | $ | 25,800 |
Audit-related Fees | $ | 0 | $ | 0 |
Tax Fees | $ | 0 | $ | 0 |
All Other Fees | $ | 0 | $ | 0 |
Total Fees | $ | 12,720 | $ | 25,800 |
Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.
Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."
Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees," and "Tax fees" above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
We have not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.
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PART IV
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Company has adopted a code of ethics that applies to the Company's principal executive officer, principal financial officer, principal accounting officer or controller. The Company will provide, at no cost, a copy of the Code of Ethics to any shareholder of the Company upon receiving a written request sent to the Company's address shown on Page 1 of this report.
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Exhibit # | Description | Location |
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Exhibit 3(i) | Articles of Incorporation | * |
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Exhibit 3(i)(a) | Amendments to the Articles of Incorporation | * |
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Exhibit 3(ii) | Bylaws | * |
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Exhibit 14 | Code of Ethics | Attached |
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Exhibit 31 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
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Exhibit 32 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | Attached |
* These exhibits are incorporated herein by reference to the Company's Form 10 filed with the Securities and Exchange Commission on November 17, 2008.
** The Exhibit attached to this Form 10-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SMARTDATA, Inc.
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Date: | June 16, 2011 |
| By: | /s/ Burkeley Priest |
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| Principal Executive Officer, Principal Financial Officer |
/s/ Burkeley Priest
Burkeley Priest, Director
12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
SmartData Corporation
We have audited the accompanying balance sheets of SmartData Corporation [a development stage company] as of September 30, 2010 and 2009, and the related statements of operations, stockholders' deficit, and cash flows for the years ended September 30, 2010 and 2009, and for the period from re-entering the development stage [October 1, 1991] through September 30, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SmartData Corporation, as of September 30, 2010 and 2009, and the results of their operations and their cash flows for the years ended September 30, 2010 and 2009, and for the period from re-entering the development stage [October 1, 1991] through September 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has limited financial resources and its operations during the development stage have been unprofitable. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Mantyla McReynolds, LLC
Mantyla McReynolds LLC
Salt Lake City, Utah
June 16, 2011
F-1
SmartData Corporation
[A Development Stage Company]
Balance Sheets
September 30, 2010 and September 30, 2009
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| September 30, |
| September 30, |
Assets |
| 2010 |
| 2009 | |
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| Cash | $ | 40 | $ | - |
| Total Current Assets |
| 40 |
| - |
Total Assets | $ | 40 | $ | - | |
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Liabilities and Stockholders' Deficit |
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Liabilities |
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| Current Liabilities |
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| Accounts Payable | $ | 5,699 | $ | 20,182 |
| Convertible Promissory Note |
| 10,000 |
| - |
| Payable to Shareholder |
| 26,835 |
| 6,115 |
| Total Current Liabilities |
| 42,534 |
| 26,297 |
Total Liabilities |
| 42,534 |
| 26,297 | |
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Stockholders' Deficit |
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Common Stock, .001 par value, |
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50,000,000 shares authorized, and |
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35,976,781 and 35,876,781 shares issued and |
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outstanding at Sept. 30, 2010 and 2009, respectively |
| 35,977 |
| 35,877 | |
Additional paid-in capital |
| 196,335 |
| 193,786 | |
Deficit Accumulated during Development stage |
| (274,806) |
| (255,960) | |
Total Stockholders' Deficit |
| (42,494) |
| (26,297) | |
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Total Liabilities and Stockholders' Deficit | $ | 40 | $ | - | |
The accompanying notes are an integral part of these financial statements.
F-2
SmartData Corporation
[A Development Stage Company]
Statements of Operations
For the Years Ended September 30, 2010 and 2009, and
for the Period from re-entering the development stage [October 1, 1991]
to September 30, 2010
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| 2010 |
| 2009 |
| For the Period from re-entering the development stage [October 1, 1991] to September 30, 2010 |
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Revenues | $ | - | $ | - | $ | - |
Operating Expenses |
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General and Administrative Expenses |
| 19,550 |
| 30,779 |
| 275,510 |
Loss from Operations |
| (19,550) |
| (30,779) |
| (275,510) |
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Other Income/(Expense) |
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Gain on Forgiveness of Debt |
| 2,353 |
| - |
| 2,353 |
Interest Expense |
| (1,649) |
| - |
| (1,649) |
Total Other Income and Expense |
| 704 |
| - |
| 704 |
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Net Loss before income taxes |
| (18,846) |
| (30,779) |
| (274,806) |
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Provision for Income Taxes |
| - |
| - |
| - |
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Net Loss | $ | (18,846) | $ | (30,779) | $ | (274,806) |
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Net Loss per share - Basic and Diluted | $ | (0.01) | $ | (0.01) |
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Weighted Average of |
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Common Shares Outstanding - Basic and Diluted |
| 35,882,260 |
| 31,814,847 |
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The accompanying notes are an integral part of these financial statements.
F-3
SmartData Corporation
[A Development Stage Company]
Statements of Stockholders’ Deficit
for the Period from re-entering the development stage [October 1, 1991] through September 30, 2010
| Common Stock |
| Capital in Excess of Par Value |
| Accumulated Deficit |
| Total Stockholders’ Equity (Deficit) | ||
| Shares |
| Amount | ||||||
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Balance October 1, 1991 | 4,213,781 | $ | 4,214 | $ | (4,214) | $ | - | $ | - |
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Net operating losses for the years ended September 30, 1992 through 1999 | - |
| - |
| - |
| - |
| - |
Issuance of common capital stock for cash at $.10 - February 18, 2000 | 1,000,000 |
| 1,000 |
| 99,000 |
| - |
| 100,000 |
Net operating loss for the year ended September 30, 2001 |
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| (6,043) |
| (6,043) |
Balance September 30, 2001 | 5,213,781 |
| 5,214 |
| 94,786 |
| (6,043) |
| 93,957 |
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Issuance of common capital stock for cash at $.10 - September 10, 2002 | 1,000,000 |
| 1,000 |
| 99,000 |
| - |
| 100,000 |
Net operating loss for the year ended September 30, 2002 | - |
| - |
| - |
| (11,957) |
| (11,957) |
Balance September 30, 2002 | 6,213,781 |
| 6,214 |
| 193,786 |
| (18,000) |
| 182,000 |
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Net operating loss for the year ended September 30, 2003 | - |
| - |
| - |
| - |
| - |
Balance September 30, 2003 | 6,213,781 |
| 6,214 |
| 193,786 |
| (18,000) |
| 182,000 |
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Net operating loss for the year ended September 30, 2004 | - |
| - |
| - |
| (182,000) |
| (182,000) |
Balance September 30, 2004 | 6,213,781 |
| 6,214 |
| 193,786 |
| (200,000) |
| - |
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Net operating loss for the year ended September 30, 2005 | - |
| - |
| - |
| - |
| - |
Balance September 30, 2005 | 6,213,781 |
| 6,214 |
| 193,786 |
| (200,000) |
| - |
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Net operating loss for the year ended September 30, 2006 | - |
| - |
| - |
| (938) |
| (938) |
Balance September 30, 2006 | 6,213,781 |
| 6,214 |
| 193,786 |
| (200,938) |
| (938) |
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Issuance of common capital stock for services valued at par - May 5, 2007 | 100,000 |
| 100 |
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| 100 |
Net operating loss for the year ended September 30, 2007 | - |
| - |
| - |
| (2,195) |
| (2,195) |
Balance September 30, 2007 | 6,313,781 |
| 6,314 |
| 193,786 |
| (203,133) |
| (3,033) |
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Issuance of common capital stock for services valued at par - January 18, 2008 | 10,000,000 |
| 10,000 |
| - |
| - |
| 10,000 |
Issuance of common capital stock for services valued at par - June 2, 2008 | 100,000 |
| 100 |
| - |
| - |
| 100 |
Issuance of common capital stock for conversion of debt valued at par - June 2, 2008 | 3,970,000 |
| 3,970 |
| - |
| - |
| 3,970 |
Issuance of common capital stock for services valued at par - August 15, 2008 | 150,000 |
| 150 |
| - |
| - |
| 150 |
Net operating loss for the year ended September 30, 2008 | - |
| - |
| - |
| (22,048) |
| (22,048) |
Balance September 30, 2008 | 20,533,781 |
| 20,534 |
| 193,786 |
| (225,181) |
| (10,861) |
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Issuance of common capital stock for conversion of debt valued at par - December 22, 2008 | 4,493,000 |
| 4,493 |
| - |
| - |
| 4,493 |
Issuance of common capital stock for conversion of debt valued at par - January 5, 2009 | 10,750,000 |
| 10,750 |
| - |
| - |
| 10,750 |
Issuance of common capital stock for services valued at par - June 22, 2009 | 100,000 |
| 100 |
| - |
| - |
| 100 |
Net operating loss for the year ended September 30, 2009 | - |
| - |
| - |
| (30,779) |
| (30,779) |
Balance September 30, 2009 | 35,876,781 |
| 35,877 |
| 193,786 |
| (255,960) |
| (26,297) |
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Net operating loss for the year ended September 30, 2010 | - |
| - |
| - |
| (18,846) |
| (18,846) |
Imputed Interest Expense for the year ended September 30, 2010 | - |
| - |
| 1,649 |
| - |
| 1,649 |
Issuance of common capital stock for services valued at $.01 – September 10, 2010 | 100,000 |
| 100 |
| 900 |
| - |
| 1,000 |
Balance September 30, 2010 | 35,976,781 | $ | 35,977 | $ | 196,335 | $ | (274,806) | $ | (42,494) |
The accompanying notes are an integral part of these financial statements.
F-4
SmartData Corporation
[A Development Stage Company]
Statements of Cash Flows
For the Years Ended September 30, 2010 and 2009, and
For the Period from re-entering the development stage [October 1, 1991]
to September 30, 2010
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| 2010 |
| 2009 |
| For the Period from re-entering the development stage [October 1, 1991] to September 30, 2010 | |||||||
Cash Flows from Operating Activities |
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| Net Income / (loss) | $ | (18,846) | $ | (30,779) | $ | (274,806) | ||||||
| Gain on Forgiveness of Debt |
| (2,353) |
| - |
| (2,353) | ||||||
| Non-cash interest expense |
| 1,649 |
| - |
| 1,649 | ||||||
| Adjustments to reconcile income (loss) from operations to net cash provided by operating activities: |
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| Shares issued for Services |
| 1,000 |
| 100 |
| 11,450 | ||||||
| Increase/(Decrease) in Accounts Payable |
| (12,130) |
| 13,814 |
| 8,052 | ||||||
| Expenses Paid by Shareholder |
| 20,570 |
| 16,865 |
| 45,898 | ||||||
Net Cash from Operating Activities |
| (10,110) |
| - |
| (210,110) | |||||||
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Cash Flows from Financing Activities |
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| Issuance of Notes Payable |
| 10,150 |
| - |
| 10,150 | ||||||
| Issuance of Common Stock |
| - |
| - |
| 200,000 | ||||||
Net Cash from Financing Activities |
| 10,150 |
| - |
| 210,150 | |||||||
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Net Increase (Decrease) in Cash |
| 40 |
| - |
| 40 | |||||||
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Beginning Cash Balance |
| - |
| - |
| - | |||||||
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Ending Cash Balance | $ | 40 | $ | - |
| 40 | |||||||
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Supplemental Disclosure |
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| Interest Paid | $ | - | $ | - | $ | - | ||||||
| Income Taxes Paid | $ | - | $ | - | $ | - | ||||||
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Non-Cash Transactions |
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| Common Stock Issued for Debt | $ | - | $ | 15,243 | $ | 19,213 | ||||||
The accompanying notes are an integral part of these financial statements.
F-5
SmartData Corporation
Notes to Financial Statements
September 30, 2010
NOTE 1 - ORGANIZATION
SmartData Corporation, (the "Company") was incorporated under the laws of the State of Nevada on October 15, 1987 with authorized common stock of 50,000,000 shares with a par value of $.001.
The Company had been organized for the purpose of engaging in the business of marketing computer hardware and software, and related products, however, after October 1, 1991, due to the loss of its assets and settlement of its liabilities, the operations were abandoned and the Company became inactive.
Prior to October 1, 1991 the Company, including three wholly owned subsidiaries, was engaged in the business outlined above. The operations of the companies were combined into consolidated reporting and therefore the management of the Company elected to complete a recapitalization of the Company on October 1, 1991 by restating the accumulated retained earnings to zero.
The Company is considered to be in the development stage after October 1, 1991 with the retained earnings and the statement of operations to begin on that date.
On January 20, 1998 the Company completed a reverse common stock split of one share for 10 outstanding shares. This report has been prepared showing the after stock split shares from inception.
In 2002, the Company attempted to complete a merger with The Moss Company. The merger never was consummated and the Company recognized a significant operating loss of $182,000 in 2004, which was a result of consulting and development fees related to the failed merger. The shares issued in connection with this rescinded merger are not accounted for in the financial statements because all such shares were cancelled shortly after the merger was rescinded.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using accounting principles generally accepted in the United States.
b. Provision for Taxes
The Company uses the asset and liability method of accounting for income taxes. At September 30, 2010, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of net operating loss carryforwards. As of September 30, 2010, the Company had no deferred taxes arising from temporary differences between income for financial reporting and income for tax purposes.
As of September 30, 2010, the deferred tax asset related to the Company's net operating loss carryforward is fully reserved. Due to the provisions of IRC §382, the Company may have no net operating loss carryforwards available to offset financial statement or tax return taxable income in future periods as a result of a change in control involving 50 percentage points or more of the issued and outstanding securities of the Company.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
d. Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-6
e. Shares Issued for Services
Share based payments are measured at fair value and recognized over the service period. For the years ended September 30, 2010 and 2009, the Company recognized $1,000 and $100, respectively, in expenses relating to the issuance of common shares for services performed on the Company’s behalf.
f. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the weighted average number of shares outstanding. Basic loss per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share is computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period using the treasury stock method. During periods of net losses dilutive shares are not included, due to anti-dilutive results. As of September 30, 2010 and 2009, there were common share equivalents, attributable to convertible debt, of 3,683,500 and 0, respectively.
g. Impact of New Accounting Standards
In December 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-17, which codifies SFAS No. 167, Amendments to FASB Interpretation No. 46(R) issued in June 2009. ASU 2009-17 requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (“VIE”), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. ASU 2009-17 is effective for annual reporting periods beginning after November 15, 2009. We do not expect the adoption of ASU 2009-17 to have a material impact on our financial statements.
In October 2009, the FASB issued ASU 2009-13, which amends ASC Topic 605, Revenue Recognition. Under this standard, management is no longer required to obtain vendor-specific objective evidence or third party evidence of fair value for each deliverable in an arrangement with multiple elements, and where evidence is not available we may now estimate the proportion of the selling price attributable to each deliverable. ASU 2009-13 is effective for annual reporting periods beginning after June 15, 2010. We do not expect the adoption of ASU 2009-13 to have a material impact on our financial statements.
In January 2010, the FASB issued ASU 2010-6, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair- value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. We do not expect the adoption of ASU 2010-6 to have a material impact on our financial statements.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has limited financial resources and its operations during the development stage have been unprofitable. These factors raise substantial doubt about its ability to continue as a going concern. Management plans to rely on loans from its current officers and directors to fund its ongoing obligations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
On December 22, 2008, Burkeley Priest converted portions of his convertible notes into 4,493,000 shares of common stock resulting in a reduction of $4,493 in the convertible notes.
On January 5, 2009, Burkeley Priest and Jerry Rice converted portions of their convertibles notes into 10,750,000 shares of common stock resulting in a reduction of $10,750 in convertible notes.
On June 22, 2009, 100,000 shares of SmartData, Inc.’s common stock were issued to Burkeley Priest as consideration for his services as the sole officer and director of the Company for the one year period beginning May 8, 2009. The Company recorded an expense of $100 for this transaction.
On September 10, 2010, 100,000 shares of SmartData, Inc.’s common stock were issued to Burkeley Priest as consideration for his services as the sole officer and director of the Company for the past year period beginning October 1, 2009. The Company recorded an expense of $1,000 for this transaction.
F-7
NOTE 5 - INCOME TAXES
No provision has been made in the financial statements for income taxes because the Company has accumulated losses from operations since inception. Any deferred tax benefit arising from the operating loss carried forward is offset entirely by a valuation allowance since it is not currently estimable when and if the Company will have taxable income to take advantage of the losses. The valuation allowance has increased by $3,769 from $51,192, as of September 30, 2009.
Deferred Tax Asset |
| Balance |
| Tax |
| Rate |
Federal loss carryforward (expires through 2029) | $ | 274,806 | $ | 41,221 |
| 15% |
State loss carryforward (expires through 2024) | $ | 274,806 | $ | 13,740 |
| 5% |
Valuation allowance |
| - | $ | (54,961) |
| - |
Deferred tax asset |
| - | $ | - |
| - |
Reported income tax expense is reconciled to the amount computed on the basis of income before income taxes at the statutory rate as follows:
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| For the years ended September 30, | ||
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| 2010 |
| 2009 |
Statutory Benefit (Expense) |
| (20%) |
| (20%) |
Increase in Valuation Allowance |
| 20% |
| 20% |
Reported provision for Income Taxes |
| - |
| - |
We have no liabilities for unrecognized tax benefits and, as such, we have recorded no additional interest or penalties.
Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended September 30, 2010 and 2009, we did not recognize any interest or penalties in our Statement of Operations, nor did we have any interest or penalties accrued in our Balance Sheet at September 30, 2010 and 2009 relating to unrecognized benefits.
The tax years 2004-2009 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.
NOTE 6 – PAYABLE TO SHAREHOLDER
On December 22, 2008, Burkeley Priest converted portions of his convertible notes into 4,493,000 shares of common stock resulting in a reduction of $4,493 in the convertible notes.
On January 5, 2009, Burkeley Priest and Jerry Rice converted portions of their convertible notes into 10,750,000 shares of common stock resulting in a reduction of $10,750 in convertible notes.
From October 1, 2009 through September 30, 2010, the Company received $20,570 in advances from certain officers of the Company under convertible promissory notes. The nature of the advances consist of the officers covering the cost of required corporate expenses. The notes bear no interest and are convertible into shares of the Company’s common stock at a rate of $0. 01 per share. Management evaluated the convertible notes and determined that there is no embedded derivative of the conversion feature of the note. Management evaluated the convertible notes payable and determined that there was no intrinsic value of the conversion option due to the fact that the debt is not convertible at a discount to the market value of the stock. Although the notes bear no interest, the Company imputed interest at a rate of 8% and recognized $1,649 in interest expense with an increase to additional paid in capital for the same amount.
NOTE 7 – NON-RELATED PARTY CONVERTIBLE PROMISSORY NOTES
On September 10, 2010, the Company borrowed $10,000 under the terms of a convertible note due September 10, 2011. At the holder’s option, t he convertible note converts into 1,000,000 shares of restricted common shares of the Company. The note is due and payable on September 10, 2011 and bears no interest.
F-8