SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30,
2015
or
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 000- 53792
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Smartag International, Inc.
(Exact name of registrant issuer as specified
in its charter)
Nevada |
|
81-0554149 |
(State or other jurisdiction
of incorporation or
organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
3651 Lindell Road Ste D269
Las Vegas, NV 89103 |
(Address of principal executive offices, including zip code) |
|
Registrant’s phone number, including area code (702) 589-2179 |
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 [x] NO [ ]
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 (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the
registrant was required to submit and post such files).
YES [x] NO [ ]
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. (Check one):
Large Accelerated Filer [ ] Accelerated
Filer [ ] Non-accelerated Filer [ ] Smaller reporting company [x]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
Indicate the number of shares outstanding of each of the
issuer’s classes of common stock, as of the latest practicable date.
Class |
|
Outstanding at July 31, 2015 |
Common Stock, $.001 par value |
|
11,637,151 |
INDEX
|
|
Page No. |
PART I |
FINANCIAL INFORMATION
|
|
ITEM 1. |
FINANCIAL STATEMENTS:
|
|
|
Condensed Balance Sheets as of June 30, 2015 (unaudited) and September 30, 2014 |
3 |
|
Condensed Statements of Operations for the Three
and Nine Months Ended June 30, 2015 and 2014 (unaudited)
|
4 |
|
Condensed Statements of Cash Flows for the Nine Months Ended June 30, 2015 and 2014 (unaudited) |
5
|
|
Notes to Condensed Financial Statements (unaudited)
|
6 |
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
10
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
13 |
ITEM 4T. |
CONTROLS AND PROCEDURES
|
13 |
PART II |
OTHER INFORMATION
|
15 |
ITEM 1 |
LEGAL PROCEEDINGS |
15 |
|
|
|
ITEM 1A |
RISK FACTORS |
15 |
|
|
|
ITEM 2 |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
15 |
|
|
|
ITEM 3 |
DEFAULTS UPON SENIOR SECURITIES |
15 |
|
|
|
ITEM 4 |
(REMOVED AND RESERVED) |
15 |
|
|
|
ITEM 5 |
OTHER INFORMATION |
15 |
|
|
|
ITEM 6 |
EXHIBITS |
15 |
PART I - FINANCIAL INFORMATION
ITEM I — FINANCIAL STATEMENTS
SMARTAG INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
| |
June 30, 2015 | |
September 30, 2014 |
| |
(Unaudited) | |
(Audited) |
ASSETS | |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash | |
$ | 173,882 | | |
$ | 72,388 | |
Accounts receivable, net | |
| 49,972 | | |
| 17,037 | |
Other receivable | |
| 96,500 | | |
| — | |
Inventory | |
| 34,800 | | |
| — | |
Total Current Assets | |
| 355,154 | | |
| 89,425 | |
Investments | |
| 253,237 | | |
| — | |
TOTAL ASSETS | |
$ | 608,391 | | |
$ | 89,425 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts Payable | |
$ | 3,607 | | |
$ | 3,607 | |
Note Payable, Related Party | |
| 200,000 | | |
| 300,000 | |
Secured Revolving Note Payable, Related Party | |
| 192,457 | | |
| 192,457 | |
Total Current Liabilities | |
| 396,064 | | |
| 496,064 | |
Other Payable, Related Party | |
| 730,000 | | |
| — | |
TOTAL LIABILITIES | |
| 1,126,064 | | |
| 496,064 | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT: | |
| | | |
| | |
Preferred stock, 25,000,000 shares authorized, no shares issued and outstanding, no rights or privileges designated | |
| — | | |
| — | |
Common Stock, $.001 par value, 500,000,000 shares authorized, 10,637,151 shares issued and outstanding at June 30, 2015 and September 30, 2014. | |
| 10,637 | | |
| 10,637 | |
Additional Paid-In-Capital | |
| 1,228,361 | | |
| 1,228,361 | |
| |
| | | |
| | |
Accumulated Deficit | |
| (1,756,671 | ) | |
| (1,645,637 | ) |
Total Stockholders’ Deficit | |
| (517,673 | ) | |
| (406,639 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 608,391 | | |
$ | 89,425 | |
| |
| | | |
| | |
The accompanying notes are an integral
part of these condensed financial statements.
SMARTAG INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
Three Months Ended June 30, | |
Nine Months Ended June 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
REVENUES | |
$ | 36,115 | | |
$ | — | | |
$ | 49,972 | | |
$ | 45,181 | |
COST OF SALES | |
| — | | |
| — | | |
| — | | |
| 43,847 | |
GROSS PROFIT | |
| 36,115 | | |
| — | | |
| 49,972 | | |
| 1,334 | |
OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
General and administrative expenses | |
| 50,473 | | |
| 30,502 | | |
| 161,005 | | |
| 91,467 | |
LOSS FROM OPERATIONS | |
| (14,358 | ) | |
| (30,502 | ) | |
| (111,033 | ) | |
| (90,133 | ) |
Interest expense | |
| — | | |
| — | | |
| — | | |
| — | |
LOSS BEFORE PROVISION FOR INCOME TAXES | |
| (14,358 | ) | |
| (30,502 | ) | |
| (111,033 | ) | |
| (90,133 | ) |
Provision for income taxes | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (14,358 | ) | |
$ | (30,502 | ) | |
$ | (111,033 | ) | |
$ | (90,133 | ) |
NET LOSS PER SHARE OF COMMON STOCK — Basic and diluted | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
WEIGHTED AVERAGE SHARES OUTSTANDING — Basic and diluted | |
| 10,637,151 | | |
| 10,637,151 | | |
| 10,637,151 | | |
| 10,637,151 | |
The accompanying notes are an integral
part of these condensed financial statements.
SMARTAG INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
| |
Nine Months Ended June 30, |
| |
2015 | |
2014 |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (111,033 | ) | |
$ | (90,133 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Other receivable | |
| (96,500 | ) | |
| — | |
Accounts receivable | |
| (32,935 | ) | |
| | |
Inventory | |
| (34,800 | ) | |
| — | |
Other payable - related party | |
| 730,000 | | |
| — | |
Net cash from (used) in operating activities | |
| 454,732 | | |
| (90,133 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Long term investment | |
| (253,237 | ) | |
| — | |
Net cash used in investing activities | |
| (253,237 | ) | |
| — | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from note payable – related party | |
| — | | |
| 100,000 | |
Repayment of note payable – related party | |
| (100,000 | ) | |
| — | |
Net cash used in investing activities | |
| (100,000 | ) | |
| 100,000 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| 101,494 | | |
| 9,867 | |
| |
| | | |
| | |
Cash - beginning balance | |
| 72,388 | | |
| 92,319 | |
| |
| | | |
| | |
Cash - ending balance | |
$ | 173,882 | | |
$ | 102,186 | |
| |
| | | |
| | |
Supplemental disclosure of cash flows information: | |
| | | |
| | |
Interest paid | |
$ | — | | |
$ | — | |
Income taxes paid | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
The accompanying notes are an integral
part of these condensed financial statements.
SMARTAG INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2015
(UNAUDITED)
NOTE 1 – ORGANIZATION
Current Operations and Background
Smartag International, Inc., a Nevada
corporation (“Smartag,” “Company,” “we,” “us,” or “our”), was formed
as The ca Corporation on March 24, 1999 in Colorado. On November 29, 2004, we merged with Art4Love, Inc., a Delaware
corporation, into Art4Love, Inc. a Nevada corporation. Art4love, Inc. attempted to sell and lease art to companies and
individuals from artists’ collections worldwide. The Company ceased operations in December 2006. On
February 19, 2009, Art4Love changed its name to Smartag International, Inc. On September 19, 2013, the Company commenced operations
specializing in traceability and mobile payments. We provide food traceability, RFID solutions, near field communications, track
and trace services and micro payment services and the products associated with these.
Licensing Agreement
On September 19, 2013, we entered
into a Licensing and Technology Agreement (“Licensing Agreement”) with, Smartag Solutions Berhad, a Malaysian company
(“SSB”). Under the terms of the Licensing Agreement, SSB licensed to the Company the exclusive rights to use, modify
and further enhance and develop SSB’s Smartrack™ software engine for any project handled or sponsored by the Company
and hereby designates the Company in perpetuity from the date hereof to redistribute, outsource or further enhance the Smartrack™
engine for any projects, whether within North America or even between North America and any other country in the world provided
however that the traceability project is sponsored by the Company. The Company is to pay $200,000 for the license (“Licensing
Fee”). The Licensing Fee shall be made within three months from the date of invoice from SSB to the Company after the completion
and handing over to the Company of the server with the Smartrack™ engine together with the installation and commissioning
of the Company’s new website. Smartag and SSB has agreed to an extension of time for the completion of the Smartrack™
engine to September 30, 2015, as such SSB will invoice Smartag in due course.
Under the Agreement, SSB also
agrees to develop, install and commission the Smartrack™ in North America at its own costs and place one SSB’s server
in a data center in the United States and subsequently develop and install traceability systems for the retail North American market
as well as link up SSB’s related solutions and services currently in place with all the certification and/or accreditation
as may be required by EPC GS1 Global within two months from the date hereof.
Loan Agreement
On September 19, 2013, we entered into
a Loan Agreement (“Loan Agreement”) with SSB. Under the terms of the agreement, SSB loaned the Company $200,000 (“Loan”).
On May 16, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September 30, 2015 and this loan
has an interest rate of 0% interest per annum.
Investment
During the quarter ended March 31, 2015,
the Company entered into a partnership agreement with Essentials Beverage Company (“Essentials”) whereby the Company
agreed to contribute Essentials operational funds in exchange for 65% of the revenues generated by Essentials. As of June 30, 2015,
the Company had funded Essentials $253,237 and was recorded under investment. On July 5, 2015, the Company and Essentials entered
into Securities Purchase Agreement (“SPA”) whereby the Company received 1,010 newly issued common stock of Essentials
in exchange for consideration of $399,709 and one million shares of the Company’s restricted common stock.
NOTE 2 – Basis of Presentation
and Significant of Accounting Policies
Basis of Presentation
—
The unaudited condensed interim financial
statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. The information
furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of
management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures
normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United
States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction
with the audited financial statements and notes for the year ended September 30, 2014 included in our Annual Report on Form 10-K.
The results of the three and nine month periods ended June 30, 2015 are not necessarily indicative of the results to be expected
for the full year ending September 30, 2015.
Going Concern –
The accompanying financial statements
have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the company as
a going concern. However, we have an accumulated deficit of $1,756,671 as of June 30, 2015. In view of the matters described above,
recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon our continued
operations, which in turn is dependent upon our ability to raise additional capital, and obtain financing. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification
of liabilities that might be necessary should we be unable to continue as a going concern.
Use of Estimates
—
The preparation of financial statements
in conformity with generally accepted accounting principles in the United States of America 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.
Cash and Cash Equivalents
—
The Company considers investments with
original maturities of 90 days or less to be cash equivalents.
Accounts Receivable –
Accounts receivable are carried at their
estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history
with customers and their current financial condition. The Company has an allowance for doubtful accounts of $17,037 and $0 as of
June 30, 2015 and September 30, 2014, respectively.
Revenue Recognition –
The Company recognizes revenue in accordance
with ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery of product has met the criteria established in the arrangement or services
rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. This occurs when the products or
services are completed in accordance with the contracts we have with clients. In connection with our products and services arrangements,
when we are paid in advance, these amounts are classified as deferred revenue and amortized over the term of the agreement.
Income Taxes — The
Company records income taxes in accordance with the provisions of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” The standard requires,
among other provisions, an asset and liability approach to recognize deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities. Valuation
allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Net Loss Per Share —
The Company computes net loss per share in accordance with FASB ASC Topic 260, “Earnings per Share,” Under the provisions
of the standard, basic and diluted net loss per share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of shares of common stock outstanding during the period. Common equivalent shares
related to stock options and warrants have been excluded from the computation of basic and diluted earnings per share because their
effect is anti-dilutive.
Concentration of Credit Risk
— Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The
Company maintains its cash with high credit quality financial institutions; at times, such balances with any one financial institution
may exceed FDIC insured limits.
Financial Instruments
— Our financial instruments consist of cash, accounts payable, and notes payable. The carrying values of cash,
accounts payable, and notes payable are representative of their fair values due to their short-term maturities.
Marketable Securities—
The Company classifies its marketable equity securities as available-for-sale and carries them at fair market value, with the unrealized
gains and losses included in the determination of comprehensive income and reported in stockholders’ equity. Losses that
the Company believes are other-than-temporary are realized in the period that the determination is made. As of June 30, 2015, the
Company had $25,000 in unrealized losses. None of the investments have been hedged in any manner.
Recently Issued Accounting Pronouncements
The Company reviewed all recent
accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and they did not
or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 3 – Other Receivable and Investments
During the nine months ending June 30,
2015, the Company advanced Legendary Liquids LLC. $96,500 which is being classified as other receivable. The amount due is unsecured
and interest free. The purpose of the investment was to partner with beverage company to provide product tracking.
During
the quarter ended March 31, 2015, the Company entered into a partnership agreement with Essentials Beverage Company (“Essentials”)
whereby the Company agreed to contribute Essentials operational funds in exchange for 65% of the revenues generated by Essentials.
As of June 30, 2015, the Company had funded Essentials $253,237 and was recorded under investment and receivables owed from Essentials
was $49,972.
NOTE 4 – Other Payable - Related Party
During the nine months ended June
30, 2015, the Company received $730,000 advances from a party who is controlled by one of our directors which the terms were
still being negotiated and currently were recorded under long term other payable.
NOTE 5 – Note Payable –
Related Party
Secured Note
On March 17, 2009, we entered into a
Secured Revolving Promissory Note (the “Secured Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority
stockholder of the Company. Under the terms of the Note, Smartag Solutions Bhd, agreed to advance to the Company, from
time to time and at the request of the Company, amounts up to an aggregate of $200,000 until September 30, 2013. All
advances shall be paid on or before September 30, 2015 and this advance has an interest rate of 0% per annum. As of June 30, 2015,
Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness of
Smartag and is secured by substantially all of the assets of Smartag. The Secured Note shall be repaid on or before September 30,
2015.
Loan Agreement
On September 19, 2013, we entered
into a Loan Agreement (“Loan Agreement”) with SSB. Under the terms of the agreement, SSB loaned the Company $200,000
(“Loan”). On May 16, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September
30, 2015 and this loan has an interest rate of 0% interest per annum. During the three months ended March 31, 2015, the Company
repaid $100,000 of the Loan.
NOTE 6 – Stockholder’s Deficit
Authorized Stock:
As of June 30, 2015, there were authorized
500,000,000 shares of common stock, par value $0.001 per share and 25,000,000 shares of preferred stock, par value $0.001 per share. Each
common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation
is sought.
There are currently 10,637,151 shares
of common stock issued and outstanding and zero shares of preferred stock issued and outstanding.
Note 7 – Subsequent Event
On July 5, 2015, the Company and Essentials
entered into Securities Purchase Agreement (“SPA”) whereby the Company received 1,010 newly issued common stock of
Essentials in exchange for consideration of $399,709 and one million shares of the Company’s restricted common stock.
In accordance with FASB ASC 805, the Company shall disclose pro-forma financial information, however, the Company has not yet
completed its initial accounting for business combination due to different accounting standard was adopted by Essentials while
at the same time acquisition audits of Essentials’s financial statements for the years ended December 31, 2014 and 2013
have not been completed. The Company is not able to present pro-forma financial information at this point.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this
Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, 2014
and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion
and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere
in this Form 10-Q.
The following discussion contains
certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future
performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking
statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We
strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September
30, 2014 in the section entitled “Risk Factors” for a description of certain risks that could, among other things,
cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking
statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited
Financial Statements and notes thereto that appear elsewhere in this report.
Overview
Smartag International,
Inc. specializes in traceability and mobile payments. We provide food traceability, RFID solutions, near field communications,
track and trace services and micro payment services.
Amongst
the list of accomplishments of the Smartag Group of companies include:
- Smartag provides innovative
solutions and services to various industries in the private and government sectors through Internet and Mobility applications technologies
to deliver our products and services to homes and businesses.
- Smartag has been selected by
government sponsored Multimedia Development Corporation (MDEC) in Malaysia, the mandated organization to visualize, and drive Digital
Malaysia to establish a Trusted Mobile Digital Wallet System based on Near Field Communication for Mobile Phones.
- Fully developed Smartrack™
EPCIS (Electronic Product Code Information Services), which culminated in the company receiving the ‘Best of e-Logistics
Merit Award’ for Smartrack™ at the MSC Malaysia APICTA Awards 2010, and Merit Winner under the category of e-Logistics
and Supply Chain Management at the Asia Pacific ICT Alliance Awards 2010. Smartrack™ is also the first in Asia Pacific, and
the second in the world to pass all nine (9) conformance test branches conducted by MET Laboratories Inc. on behalf of GS1 International
whereupon Smartrack™ was subsequently awarded with the EPC Global Software Certification Mark. This allows us to link up
multiple supply chain logistics company systems together safely into one traceability system using RFID and Bar Codes.
- Developed comprehensive Food
Traceability solution from Farm to table, using GPS, Internet and mobility technologies. The solution is suitable for products
like Palm Oil, Frozen meat, high value herbs and health care products.
Results of Operations
Comparison of the three months
ended June 30, 2015 and 2014
Revenues
For the three months ended June 30,
2015 and 2014, the Company recorded revenue of $36,115 and $0 of respectively. The increase was due to our agreement with Essentials.
Cost of Sales
Cost of sales was $0 for the three months
ended June 30, 2015 and 2014. The decrease in cost of sales was due performance being handled by a third party.
Selling, General and Administrative
Expenses
Selling, general and administrative
expenses were $50,473 and $30,502 for the three months ended June 30, 2015 and 2014, respectively. The increase of $19,970 was
due primarily to the bad debt expense of $17,037.
Comparison of the nine months
ended June 30, 2015 and 2014
Revenues
For the nine months ended June 30, 2015
and 2014, the Company recorded revenue of $49,972 and $45,181 of respectively. The increase was due to our agreement with Essentials.
Cost of Sales
Cost of sales was $0 and $43,847 for
the nine months ended June 30, 2015 and 2014, respectively. The decrease in cost of sales was due performance being handled by
a third party.
Selling, General and Administrative
Expenses
Selling, general and administrative
expenses were $161,005 and $91,467 for the nine months ended June 30, 2015 and 2014, respectively. The increase of $69,539 was
due primarily to the increase in expenses from professional fees of $39,831, bad debt of $17,037, travel of 18,177 and investor
relations of $10,000 offset by a decrease in rent of $16,384.
Liquidity and Capital Resources
The following is a summary of the Company's
cash flows provided by (used in) operating, investing, and financing activities for the nine months ended June 30, 2015 and 2014:
| |
Nine Months Ended June 30, |
| |
2015 | |
2014 |
Operating Activities | |
$ | 454,732 | | |
$ | (90,133 | ) |
Investing Activities | |
| (253,237 | ) | |
| — | |
Financing Activities | |
| (100,000 | ) | |
| 100,000 | |
Net Effect on Cash | |
$ | 101,494 | | |
$ | 9,867 | |
In the nine months ending June 30, 2015,
the Company incurred a net loss of $111,033, an increase in inventory of $34,800, accounts receivable of $32,935 and an increase
of other receivable amounting $96,500. This was offset by an increase in other payable of $730,000. For the three months
ended June 30, 2014, the Company incurred a net loss of $90,133.
The Company repaid $100,000 of its note
payable from a related party. The Company received advances of $730,000 from a related party in the nine months ending June 30,
2015 to cover its operating costs.
Going Concern Uncertainties
We have sufficient working capital currently
and may secure additional working capital through loans or sales of common stock. Nevertheless our auditor has issued a "going
concern" qualification as part of his opinion in the Audit Report for the year ended September 30, 2014, and our unaudited
financial statements for the quarter ended June 30, 2015 include a "going concern" footnote contingent on us to be able
to raise working capital to grow our operations.
Commitments and Contractual Obligations
On March 17, 2009, we entered into a
Revolving Promissory Note (the “Secured Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority stockholder
of the Company. Under the terms of the Note, Smartag Solutions Bhd., agreed to advance to the Company, from time to
time and at the request of the Company, amounts up to an aggregate of $200,000 until September 30, 2015. All advances
shall be paid on or before September 30, 2015 and interest shall accrue from the date of any advances on any principal amount withdrawn,
and on accrued and unpaid interest thereon, at the rate of zero percent (0%) per annum, compounded annually. As of June 30, 2015,
Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness of
Smartag and is secured by substantially all of the assets of Smartag.
On September 19, 2013, we entered into
a Loan Agreement (“Loan Agreement”) with SSB. Under the terms of the agreement, SSB loaned the Company $200,000 (“Loan”).
On May 16, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September 30, 2015 and this loan
has an interest rate of 0% interest per annum. The Company repaid $100,000 of the Loan in the nine months ended June 30, 2015.
Off-Balance Sheet Arrangements
We have not entered into any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would
be considered material to investors.
Recently Issued Accounting Pronouncements
Refer to the notes to the financial
statements for a complete description of recent accounting standards which we have not yet been required to implement and may be
applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.
Critical Accounting Policies
Our financial statements were prepared
in conformity with U.S. generally accepted accounting principles. As such, management is required to make certain estimates, judgments
and assumptions that they believe are reasonable based upon the information available. These estimates and assumptions
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income
and expense during the periods presented. The significant accounting policies which management believes are the most critical to
aid in fully understanding and evaluating our reported financial results include the following:
Revenue Recognition -
The Company recognizes revenue in accordance
with ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery of product has met the criteria established in the arrangement or services
rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. This occurs when the products or
services are completed in accordance with the contracts we have with clients. In connection with our products and services arrangements,
when we are paid in advance, these amounts are classified as deferred revenue and amortized over the term of the agreement.
Item 3 Quantitative and Qualitative
Disclosures About Market Risk.
As a "smaller reporting company"
as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item
Item 4 Controls and Procedures.
Evaluation of Disclosure
Controls and Procedures: We conducted an evaluation under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. The term "disclosure controls and procedures", as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of June 30, 2015, that our disclosure
controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be
noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.
Management's Report on
Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The
internal controls for the Company are provided by executive management's review and approval of all transactions. Our
internal control over financial reporting also includes those policies and procedures that:
- pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and
expenditures are being made only in accordance with the authorization of our management; and
- provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness
of the Company's internal control over financial reporting as of June 30, 2015. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the
operational effectiveness of these controls.
Based on this assessment, management
has concluded that as of June 30, 2015, our internal control over financial reporting was effective to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.
This quarterly 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 temporary rules
of the Securities 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 were no changes in our internal control over financial reporting during the quarter ending
June 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
PART II -- OTHER INFORMATION
Item 1. Legal
Proceedings.
To the best knowledge of our sole officer
and director, the Company is not a party to any legal proceeding or litigation.
Item 1A. Risk
Factors.
As a "smaller reporting company"
as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. See the Company's
Annual Report on Form 10-K for the period ending September 30, 2014 which identifies and discloses certain risks and uncertainties
including, without limitation, those "Risk Factors" included in Item 1A of the Annual Report.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults
Upon Senior Securities.
None.
Item 5. Other
Information.
None.
ITEM 6. |
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Exhibits |
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31 |
Certification of President pursuant to Exchange Act Rule 13a-14 and 15d-14. |
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32 |
Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURES
Pursuant to the requirements 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.
SMARTAG INTERNATIONAL, INC.
Date: July 31, 2015
/ s/ Lock Sen Yow
Lock Sen Yow
Title: Chief Executive Officer, President and Chief
Financial Officer
EXHIBIT 31
SMARTAG INTERNATIONAL, INC.
Certification of Chief Executive Officer
and Chief Financial Officer Pursuant to
Securities Exchange Act Rules 13a-14
and 15d-14
I, Lock Sen Yow, certify that:
1. I have reviewed this quarterly report
on Form 10-Q of Smartag International, Inc.;
2. Based on my knowledge, this
quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial
statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other
certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. |
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
|
Date: July 31, 2015 |
/s/ Lock Sen Yow |
|
Name: Lock Sen Yow |
|
Title: Chief Executive Officer, President and Chief Financial Officer |
EXHIBIT 32
SMARTAG INTERNATIONAL, INC.
CERTIFICATION
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION
1350, CHAPTER 63 OF TITLE 18,
UNITED STATES CODE)
Pursuant to section 906
of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), the
undersigned officer of Smartag International, Inc. (the “Company”), does hereby certify with respect to the Quarterly
Report of the Company on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), to the best of the undersigned’s knowledge that:
(1) The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: July 31, 2015 |
/s/ Lock Sen Yow |
|
Name: Lock Sen Yow |
|
Title: Chief Executive Officer, President and Chief Financial Officer |
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