UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
| (Mark One) | |
| [ X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the year ended September 30, | |
| OR | |
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SMARTAG INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 000- 53792
| 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) | (Zip Code) |
Registrant’s telephone number, including area code:
(702) 589-2179589-2176
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered |
| None | None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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]
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [x]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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. (Check one):
| 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 by Rule 12b-2 of the Act). Yes [ ] No [x]
As of March 31, 20152018 (last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the voting common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was approximately $14,654.$1,627,430.
As of February 10, 2016,January 14, 2019, there were 31,637,15198,379,238 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
| Table of Contents | ||
| Part I | Page | |
| Item 1 | Business | 3 |
| Item 1A | Risk Factors | |
| Item 1B | Unresolved Staff Comments | |
| Item 2 | Properties | |
| Item 3 | Legal Proceedings | |
| Item 4 | Removed and Reserved | |
| Part II | ||
| Item 5 | Market for Registrant’s Common Equity and Related Stockholder Matters | |
| Item 6 | Selected Financial Data | |
| Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 7A | Quantitative and Qualitative Disclosure about Market Risk | |
| Item 8 | ||
| Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | |
| Item 9A | Controls and Procedures | |
| Part III | ||
| Item 10 | Directors, Executive Officers and Corporate Governance | |
| Item 11 | Executive Compensation | |
| Item 12 | Security Ownership of Certain Beneficial Holders and Management and Related Stockholder Matters | |
| Item 13 | Certain Relationships and Related Transactions, and Director Independence | |
| Item 14 | Principal Accountant Fees and Services | |
| Part IV | ||
| Item 15 | Exhibits, Financial Statement Schedules | |
| Signatures |
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FORWARD LOOKING STATEMENTS
This Form 10-K contains “forward-looking” statements including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-K 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 risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth, our ability to successfully make and integrate acquisitions, new product development and introduction, existing government regulations and changes in, or the failure to comply with, government regulations, adverse publicity, competition, fluctuations and difficulty in forecasting operating results, change in business strategy or development plans, business disruptions, the ability to attract and retain qualified personnel, the ability to protect technology, and the risk of foreign currency exchange rate. Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to announce publicly revisions we make to these forward-looking statements to reflect the effect of events or circumstances that may arise after the date of this report. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
History and Background
Smartag International, Inc., a Nevada corporation (“Smartag,” “Company,” “we,” “us,” or “our”), was formed as Theca 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. On February 109,10, 2009, Art4Love changed its name to Smartag International, Inc. when the Company was taken over and controlled by a Malaysian listed entity named Smartag Solutions Berhad (later known as SMTRACK Berhad) from 2009 until March 2016.
In September 2013,On March 23, 2017, various related parties relieved the Company commenced operations specializingof loans totaling $1,227,457 in traceability and mobile payments. We provide food traceability, RFID solutions, near field communications, track and trace services and micro payment services.
Amongstexchange for the listissuance of accomplishments61,372,850 shares of the Smartag Group of companies include:
Overview
Since 2013, Smartag has been actively involved in traceability for the food and beverage industry. Smartag realized a key potential growth area – healthy beverage products which it can source the raw materials which are of low calories but at the same time healthy and natural. The US market was overwhelmed with sodas, flavored water and energy drinks, but in recent years, the demand has been changing towards a healthier alternative.
In August 2015, Smartag brought in new management led by Mr. Chee Song Yap to lead its efforts in the beverage business by coupling its traceability technology to give reassurance and recall features. Realizing the key benefits of this rising demand, Smartag under its subsidiary, Essential Beverage Corp. (“EBC”) launched a refreshing line energy and functional beverage, Thrivida, that enhances the health of consumers which at the same time enables it to enter the traceable beverage business. http://thrivida.com/
Also, within the span of 24-36 months, it is our intention to market a range of beverage drinks for the United States and Asia PacificThe goal: to create exhilarating beverages that are not only a healthier alternative to other drinks, but a new way for consumers to enjoy vitamin and ingredient enhanced beverages. At the same time, because the need for traceable drinks is increasing in the United States as well as China, Smartag is well positioned to take its core technology to test out in its own line of beverages worldwide.Company’s common stock.
In November 2015, Smartag signed an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in e-commerce trading on e-Bay, Amazon and Alipay platforms. Using the expertise of SSNST, Smartag will establish a minority owned Hong Kong venture to develop anis developing block chain technology used in the business of e-Commerce trading, procurement, collection and distribution platform. When thethrough a new joint venture is completed,company in Hong Kong. On January 1, 2016, the Company entered into a revenue sharing agreement with Vander. The Company charged 5% commission as a collection and processing agent for some of Vander’s Ecommerce platform
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sales. On February 2, 2018, Smartag entered into a Joint Venture & Shareholder’s Agreement with Vander (“JV Agreement”). As a result, the previous agreements with SSNST and Vander was terminated. Under the terms of the JV Agreement, Smartag and Vander formed a new Hong Kong entity called Smartag HK. Smartag HK shall pursue e-Commerce and related Fintech e-Money and e-remittance solutions. Smartag owns 70% and Vander owns 30% of Smartag HK.
On the February 27, 2018, Smartag International, Inc. (“Smartag,” “we” or “Company) entered into joint venture agreement with PT. Supratama Makmur Sejahtera (“PTSMS”) an Indonesian Fintech company to form a Joint Venture Indonesian PMA company in which Smartag shall own 51% equity and PTSMS shall own 49%. The new Indonesian PMA company plans to undertake the Project to provide up to 10,000 boarding schools which are owned by the local Islamic Baitu Maal or BMT co-operatives in their respective villages or districts within Indonesia with sharia financial technology (Fintech) e-Wallet platform. Smartag plans to provide the financing, to develop the Fintech technology for the Islamic Fintech e-Wallet platform.
Overview
The Company plans to focus on new technologies, especially Fintech. The Company plans to add value by combining Fintech with existing established e-Commerce, e-Wallet and remittance players. In particular, the Company will continue with the development of a multi-faceted Indonesian sharia e-Wallet using the Company’s state-of-the-art sharia Fintech features together with its two local Indonesian partners namely,
(1) the Baitu Ma’al (“BMT”) co-operatives (including the Pesantren schools). BMT has a total membership of approximately 30 million members; and
(2) Telkomsel is the largest Indonesian mobile operator with its own TCASH e-Wallet.
By collaborating with these two entities, new business models are expected for Company as the current businesses of the BMT and their micro finance houses will migrate towards the new sharia Fintech platforms whereby not only current domestic funds transfers, utility payments and small micro finance loans will continue but in a more efficient manner and with less expensive rates. Additionally, new and enlarged Fintech businesses of e-Commerce coupled with rural e-logistics distribution will be ableintroduced for BMT members. Telkomsel has the wide reach into the rural interior where telecommunications connectivity is essential for operating the e-Wallet platform.
Wherever feasible the Company plans to offer additional products including Electronic items. LED lighting, Outdoor sports equipment, Beauty productsadd value with block chain traceability to increase the overall efficiency and cosmetics, vehicles accessoriesreduce costs especially for B2B e-Logistics and bicycles.e-Know Your Client or e-KYC technologies to recruit many more members for the e-Wallet. Our mission is to add value using our Fintech platform which includes new e-KYC and e-Logistics track and trace supply chain solutions. Our difference will be that many items found on the supply chain can be traced to the source of origin using block chain solutions. These solutions will not only safeguard the interests of the stakeholders within the supply chain route but will protect the needs of the customers. The customers need to know what is safe and genuine. The suppliers need the payment assurances at the other end of the supply chain.
Regulation
Government regulation impacts key aspects of our business. We are subject to laws and regulations that affect the ecommerce industry in many countries where we operate.
We are subject to laws and regulations affecting our domestic and international operations in a number of areas, including consumer protection, data privacy requirements, intellectual property ownership
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Productsand infringement, prohibited items and stolen goods, resale of event tickets, tax, anti-competition, export requirements, anti-corruption, labor, advertising, digital content, real estate, billing, ecommerce, promotions, quality of services, telecommunications, mobile communications and media, environmental, and health and safety regulations, as well as laws and regulations intended to combat money laundering and the financing of terrorist activities.
TheCompliance with these laws, regulations, and similar requirements may be onerous and expensive, and variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make our products Thrivida Sports Water, Thrivida Enhanced and Thrivida Elite are premium brandsservices less attractive to our customers, delay the introduction of new products or services in one or more regions, or cause us to change or limit our business practices. We have implemented policies and procedures designed to ensure compliance with only the highest quality ingredientsapplicable laws and packaging. The Company is dedicated to providing delicious health-based beverage alternatives. It provides the perfect solution for consumers who are searching for healthier alternatives to soft drinks,regulations, but arethere can be no assurance that our employees, contractors, or agents will not satisfied with the “flat” flavored waters that simply don’t deliver on taste.
ThrividaIt is ideal for multiple retail channels, including: conventional grocery, drug, club-stores, mass,not always clear how laws and convenience retailers. It offersregulations governing matters relevant to our business, such as property ownership, copyrights, trademarks, and other intellectual property issues, parallel imports and distribution controls, taxation, libel and defamation, and obscenity apply to our businesses. Many of these laws were adopted prior to the advent of the Internet, mobile, and related technologies and, as a conveniently packaged, good tasting, healthy beverageresult, do not contemplate or address the unique issues of the Internet and related technologies. Many of these laws, including some of those that isdo reference the Internet are subject to interpretation by the courts on an ongoing basis and the resulting uncertainty in the scope and application of these laws and regulations increases the risk that we will be subject to private claims and governmental actions alleging violations of those laws and regulations.
As our activities, the products and services we offer, and our geographical scope continue to expand, regulatory agencies or courts may claim or hold that we or our users are subject to additional requirements (including licensure) or prohibited from conducting our business in their jurisdiction, either generally or with respect to certain actions. Financial and political events have increased the level of regulatory scrutiny on large companies, and regulatory agencies may view matters or interpret laws and regulations differently than they have in the past and in a manner adverse to our businesses. Our success and increased visibility have driven some existing businesses that perceive us to be welcomed by consumersa threat to their businesses to raise concerns about our business models to policymakers and regulators. These businesses and their trade association groups employ significant resources in their efforts to shape the legal and regulatory regimes in countries where we have significant operations. They may employ these resources in an effort to change the legal and regulatory regimes in ways intended to reduce the effectiveness of all ages.our businesses and the ability of users to use our products and services. These established businesses have raised concerns relating to pricing, parallel imports, professional seller obligations, selective distribution networks, stolen goods, copyrights, trademarks and other intellectual property rights and the liability of the provider of an Internet marketplace for the conduct of its users related to those and other issues. Any changes to the legal or regulatory regimes in a manner that would increase our liability for third-party listings could negatively impact our business.
RangeNumerous U.S. states and foreign jurisdictions, including the State of Thrivida Products
RTD VitaminCalifornia, have regulations regarding “auctions” and Mineral Enhanced “healthy beverages” are driving a powerful shiftthe handling of property by “secondhand dealers” or “pawnbrokers.” Several states and some foreign jurisdictions have attempted to impose such regulations upon us or our users, and others may attempt to do so in the global beverage market. Firstfuture. Attempted enforcement of its typethese laws against some of our users appears to combine unique trace mineralsbe increasing and vitamins with a good tasting flavor profilewe could be required to change the way we or our users do business in ways that givesincrease costs or reduce revenues, such as forcing us a first mover advantage, unmatched brandto prohibit listings of certain items or restrict certain listing formats in some locations. We could also be subject to fines or other penalties, and product quality. The Company is well positioned to take advantageany of multiple fast growing segments of the beverage category and specifically offer a healthier, good tasting alternative to consumers. these outcomes could harm our business.
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Thrivida Sport Water
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Thrivida Sport Water
Thrivida Elite Sport
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Elite Sport specially for schools
12oz for public
Thrivida Essentials
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Essentials Relax, Focus and Energy
Target Consumers for Thrivida
Thrivida Sports Water’s enhanced beverages appeal to a broad cross section of U.S. consumers by providing them with delicious and healthier alternative to conventional beverages like sodas.
Students: Thrivida Elite is a perfect solution for students of all ages. Its low calorie content, and health enhancing ingredients is ideal for young students who are increasingly fighting with weight and illness issues based on unhealthy diets. The energy enhancing drink is ideal for high school and college students who need energy during the day or a pick-me- up while studying.
Young Adults: Young men and women between 21 and 35 years of age often look for innovative food and beverage products to improve their diet, but they want something that tastes good. They want a product that is not only healthy for them but that they enjoy drinking. Young adults lead active lifestyles and want/need beverages that are convenient, delicious and provide functional benefits.
Older Adults: Men and women 36 years of age and older are proactively looking for ways to improve their diet for the specific purpose of improving their health and preventing physical and mental ailments. Beverages like Thrivida Enhanced are a smart choice for these consumers as a substitute for soft drinks or coffee. Thrivida offers superior taste to other conventional offerings.
Parents: there is a need for a good tasting, beneficial drink for children and parents will encourage their children to drink Thrivida Elite. It is a convenient way to serve a treat to children while giving them the essential vitamins and minerals for a healthy, growing body.
Marketing
Creating brand awareness is key in gaining increased distribution. EBC will advertise using diverse strategic marketing campaigns based on its product line description. Thrivida Sport Water will focus on sports and entertainment marketing in support of community based organizations, whereas Thrivida Elite Sport 12oz embodies Education based initiatives in support of public school sports, music and arts programs. The Thrivida Essentials Sport 16oz will focus on health & wellness opportunity’s and government or state contracts. The below brand awareness campaigns have been identified for the next three to 6 months of promotion.
We believe radio advertisements have the fastest outreach to consumers and creating brand awareness. The radio advertisement will continue and will be modified to include the other products.
Thrivida will also tap into the growing Social Media platform connecting with sites such as Facebook, Twitter etc. It allow for a dialogue to develop with Thrivida fans so they can follow our event activities, stores we sell in, and promotional programs.
Regulation
The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our product will be subject to: the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the Lanham Act; state consumer protection laws; competition laws; federal, state and local workplace health and safety laws; various federal, state and local environmental protection laws; and various other federal, state and local statutes and regulations.
Legal requirements apply in many jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing, and use of certain non-refillable beverage containers. The precise requirements imposed by these measures vary. Other types of statutes and regulations relating to beverage container deposits, recycling, ecotaxes and/or product stewardship also apply in various jurisdictions in the United States. We anticipate that additional, similar legal requirements may be proposed or enacted in the future at the local, state and federal levels in the United States.
Any third-party bottling facility that we may choose to utilize in the future and any other such operations will be subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater. It will be our policy to comply with any and all such legal requirements. Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse effect on our capital expenditures, net income or competitive position.
Competition
The beverage industry is extremely competitive. The principal areas of competition include pricing, packaging, development of new products and flavors, and marketing campaigns. Our product will be competing directly with a wide range of drinks produced by a relatively large number of manufacturers. Most of these brands have enjoyed broad, well-established national recognition for years, through well-funded ad and other marketing campaigns. In addition, companies manufacturing these products generally have far greater financial, marketing, and distribution resources than we have.
Important factors that will affect our ability to compete successfully include the continued public perception of the benefits of alkaline water, taste and flavor of our product, trade and consumer promotions, the development of new, unique and cutting edge products, attractive and unique packaging, branded product advertising, pricing, and the success of our distribution network.
We will also be competing to secure distributors who will agree to market our product over those of our competitors, provide stable and reliable distribution, and secure adequate shelf space in retail outlets. The extremely competitive pressures within the beverage categories could result in our product never even being introduced beyond what they can market locally themselves.
Our product will compete generally with all liquid refreshments, including bottled water and numerous specialty beverages, such as SoBe, Snapple, Arizona, Vitamin Water, Gatorade, and Powerade. We will compete directly with other alkaline water producers and brands focused on the emerging alkaline beverage market including Eternal, Essentia, Icelandic, Real Water, Aqua Hydrate, Mountain Valley, Qure, Penta, and Alka Power.
Intellectual Property
Where available, we intend to obtain trademark protection in the United States for a number of trademarks for slogans and product designs. We intend to aggressively assert our rights under trade secret, unfair competition, trademark and copyright laws to protect our intellectual property, including product design, product research and concepts and recognized trademarks. These rights are protected through the acquisition of patents and trademark registrations, the maintenance of trade secrets, the development of trade dress, and, where appropriate, litigation against those who are, in our opinion, infringing these rights. The trademark for Thrivida has been approved and is currently active.
While there can be no assurance that registered trademarks will protect our proprietary information, we intend to assert our intellectual property rights against any infringer. Although any assertion of our rights could result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights will be a key component of our sales and operating strategy.
Seasonality
The sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our product and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.
Principal Executive Offices
Our principal executive offices are currently located at 3651 Lindell Road Ste D269, Las Vegas, NV 89103. Our telephone numbers are +1(702) 589-2179.number is +1-(702) 589-2176. We believe our facilities are inadequate to meet our current and near-term needs for the next twelve months and we intend to lease premises within the state of California or Nevada within this period.
Insurance
We do not currently maintain property, business interruption and casualty insurance. We intend to obtain such insurance in accordance with customary industry practices.
Employees
As of September 30, 2015,2018, we had 32 full-time and 1230 part-time consultants.consultants in Indonesia. Since inception, we have never had a work stoppage, and our employees are not represented by labor unions. We consider our relationship with our employees to be positive.
Legal Proceedings
We are not involved in any legal proceedings
Corporate Information.
(1) To the extent required by federal and state law, the Company will deliver an annual report to security holders.
(2) The Company will file reports with the SEC. The Company will be a reporting company and will comply with the requirements of the Exchange Act.
(3) The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.
| ITEM 1.A | RISK FACTORS |
The following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations. Other risks and uncertainties may also affect our results or operations adversely. The following and these other risks could materially and adversely affect our business, operations, results or financial condition.
An investment in the Company is highly speculative in nature and involves an extremely high degree of risk.
We have a history of net losses and will not achieve or maintain profitability.
We have a history of incurring losses from operations. As of September 30, 2015,2018, we had an accumulated deficit of approximately $2,772,190, of which approximately $1,164,967 was incurred prior to the cessation of the previous operating business on December 31, 2006.$3,560,458. We anticipate that our existing cash and cash equivalents will be sufficient to fund our business needs in the near term. Our ability to continue may prove more expensive than we currently anticipate and we may incur significant additional costs and expenses in connection with the launching of our business.
We depend on key personnel to manage our business effectively, and, if we are unable to hire, retain or motivate qualified personnel, our ability to design, develop, market and sell our systems could be harmed.
The loss of the services of any of our key personnel may seriously harm our business, financial condition and results of operations. In addition, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly operations, finance, accounting, sales and marketing personnel, may also seriously harm our business, financial condition and results of operations. Our ability to attract and retain highly skilled personnel will be a critical factor in determining whether we will be successful in the future.
We will continue to incur the expenses of complying with public company reporting requirements.
We have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act which includes the filing with the SEC of periodic reports, proxy statements and other documents relating to our business, financial conditions and other matters, even though compliance with such reporting requirements is economically burdensome.
Our business is difficult to evaluate because we have no recent operating history.
As the Company has minimal operating history, revenue and assets, there is a risk that we will be unable to continue as a going concern. We have no significant assets or financial resources except for the financial support from our holding company
Our consolidated financial statements indicate conditions exist that raise substantial doubt as to whether we will continue as a going concern.
Our audited consolidated financial statements for the year ended September 30, 20152018 indicate conditions exist that raise substantial doubt as to whether we will continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain financing to fund the continued development of products and working capital requirements.
ChangesSubstantial and increasingly intense competition worldwide in the regulatory food safety requirements could adversely affectecommerce may harm our business, financial condition or results of operations.business.
Our operationsThe businesses and markets in which we operate are subjectintensely competitive. We currently and potentially compete with a wide variety of online and offline companies providing goods and services to varying degreesconsumers and merchants. The Internet and mobile networks provide new, rapidly evolving and intensely competitive channels for the sale of regulationall types of goods and services. We compete in two-sided markets, and must attract both buyers and sellers to use our platforms. Consumers who purchase or sell goods and services through us have more and more alternatives, and merchants have more channels to reach consumers. We expect competition to continue to intensify. Online and offline businesses increasingly are competing with each other and our competitors include a number of online and offline retailers with significant resources, large user communities and well-established brands. Moreover, the barriers to entry into these channels can be low, and businesses easily can launch online sites or mobile platforms and applications at nominal cost by using commercially available software or partnering with any of a number of successful ecommerce companies. As we respond to changes in the FDA, other federal, state and local regulatory agencies and legislative bodies and their equivalent counter parts in other countries. Adversecompetitive environment, we may, from time to time, make pricing, service or marketing decisions or new or amended regulations or mandates adopted by any of these regulatory or legislative bodies could negatively impact our operations by, among other things, causing unexpected or changed capital investments, lost revenues, increased costs of doing business, and could limit our ability to engage in certain sales or marketing activities.
Our products and networked platformsacquisitions that may be dependent on other third party software or networks which may contain defects or software errors,controversial with and lead to dissatisfaction among sellers, which could result in damage toreduce activity on our reputation, lost revenue, diverted development resourcesplatform and increased service costs, warranty claims, and litigationharm our profitability.
We warrantface increased competitive pressure online and offline. In particular, the competitive norm for, and the expected level of service from, ecommerce and mobile commerce has significantly increased, due to, among other factors, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. Also, certain platform businesses, such as Alibaba, Apple, Google and Facebook, many of whom are larger than us or have greater capitalization, have a dominant and secure position in other industries or certain significant markets, and offer other goods and services to consumers and merchants that we do not offer. If we are unable to change our products, offerings and services in ways that reflect the changing demands of ecommerce and mobile commerce marketplaces, particularly the higher growth of sales of fixed-price items and higher expected service levels (some of which depend on services provided by sellers on our platforms), or compete effectively with and adapt to changes in larger platform businesses, our business will be free of defect for various periods of time, depending on the product. In addition, certain of our contracts include epidemic failure clauses. If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective.suffer.
We must develop our productsCompetitors with other revenue sources may also be able to devote more resources to marketing and networkedpromotional campaigns, adopt more aggressive pricing policies and devote more resources to website, mobile platforms quicklyand applications and systems development than we can. Other competitors may offer or continue to keep pace withoffer faster and/or free shipping, delivery on Sunday, same-day delivery, favorable return policies or other transaction-related services which improve the rapidly changing market,user experience on their sites and we have a history of frequently introducing new products. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new models or versions are released. In general, our products may not be free from errors or defects after commercial shipments have begun, which could result in damagebe impractical or inefficient for our sellers to our reputation, lost revenue, diverted development resources, increased customer servicematch. Competitors may be able to innovate faster and support costs, warranty claims,more efficiently, and litigation.new technologies may increase the competitive pressures by enabling competitors to offer more efficient or lower-cost services.
Our products are highly technical, and someSome of our software reliescompetitors control other products and services that are important to our success, including credit card interchange, Internet search, and mobile operating systems. Such competitors could manipulate pricing, availability, terms or operation of service related to their products and services in a manner that impacts our competitive offerings. For example, Google, which operates a shopping platform service, has from time to time made changes to its search algorithms that reduced the amount of search traffic directed to us from searches on third party technologies including open source software, so ifGoogle. If we are unable to use or adapt to operational changes in such services, we may face higher costs for such services, face integration or incompatibility issues arise with these technologies, these technologies become unavailabletechnological barriers or our products contain errors, defects or security vulnerabilities, our product and services development may be delayed, our reputationlose customers, which could be harmed andcause our business to suffer.
Consumers who might use our sites to buy goods have a wide variety of alternatives, including traditional department, warehouse, boutique, discount and general merchandise stores (as well as the online and mobile operations of these traditional retailers), online retailers and their related mobile offerings, online and offline classified services and other shopping channels, such as offline and online home shopping networks. In the United States, these include Amazon.com (which recently opened an experimental brick-and-mortar store in New York City and continues to expand into new geographies and lines of business), Google, Wal-Mart, Target, Sears, Macy’s, JC Penney, Costco, Office Depot, Staples, OfficeMax, Sam’s Club, Rakuten, Yahoo! Shopping, MSN, QVC and Home Shopping Network, among others. In addition, consumers have a large number of online and offline channels focused on one or more of the categories of products offered on our site.
Consumers also can turn to many companies that offer a variety of services that provide other channels for buyers to find and buy items from sellers of all sizes, including social media, online aggregation and classifieds platforms, such as craigslist, Oodle.com and a number of international websites operated by Schibsted ASA or Naspers Limited. Consumers also can turn to shopping-comparison sites, such as Google Shopping. In certain markets, our fixed-price listing and traditional auction-style listing formats increasingly are being challenged by other formats, such as classifieds.
Consumers and merchants who might use our sites to sell goods also have many alternatives, including general ecommerce sites, such as Amazon and Alibaba, and more specialized sites, such as Etsy. Our international sites also compete for sellers with general and specialized ecommerce sites. Sellers may also choose to sell their goods through other channels, such as classifieds platforms. Consumers and merchants also can create and sell through their own sites, and may choose to purchase online advertising instead of using our services. In some countries, there are online sites that have larger customer bases and greater brand recognition, as well as competitors that may have a better understanding of local culture and commerce. We increasingly may compete with local competitors in developing countries that have unique advantages, such as a greater ability to operate under local regulatory authorities.
Global and regional economic conditions could be adversely affectedharm our business.
Our products, including our software products, are highly technicaloperations and complexperformance depend significantly on global and when deployed, may contain errors, defectsregional economic conditions. Adverse economic conditions and events (including volatility or security vulnerabilities. Some errorsdistress in our products may only be discovered after a product has been installedthe equity and/or debt or credit markets) have in the past negatively impacted regional and used by customers. In addition, we rely on software that we license from third parties, including software that is integrated with internally developed softwareglobal financial markets and used in our products to perform key functions. Errors, viruses or bugs may also be present in software that we license from third parties and incorporate into our products or in third party software that our customers use in conjunction with our software. In addition, our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third party software that our customers use in conjunction with our software could also render our applications inoperable. Any errors, defects or security vulnerabilities in our products or any defects in, or compatibility issues with, any third party software or customers’ network environments discovered after commercial release could result in loss of revenues or delay in revenue recognition, loss of customers, theft of our trade secrets, data or intellectual property and increased service and warranty cost, any of which could adversely affect our business, financial condition and results of operations. Undiscovered vulnerabilities in our products alone or in combination with third party software could expose them to hackers or other unscrupulous third parties who develop and deploy viruses, worms, and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases or use competitive products.
The third party software licenses we rely upon may notwill likely continue to be availabledo so from time to us on commercially reasonable terms, or at all,time in the future. These events and the software may not be appropriately supported, maintained or enhanced by the licensors, resulting in development delays. Some of these software licenses are subject to annual renewals at the discretion of the licensors. In many cases, if we were to breach a provision of these license agreements, the licensor could terminate the agreement immediately. We license technologies and patents underlying some of our software from third parties, and the loss of these licensesconditions could have a materialnegative and adverse effectimpact on companies and customers with which we do business or cause us to write down our business. The lossassets or investments. In addition, financial turmoil affecting the banking system or financial markets could cause additional consolidation of licensesthe financial services industry, or significant financial service institution failures, new or incremental tightening in the credit markets, low liquidity, and extreme volatility in fixed income, credit, currency, and equity markets. Adverse impacts to the companies and customers with which we do business, the banking system, or inability to support, maintain and enhance, any such third party software could result in increased costs, or delays in software releases or updates, until such issues have been resolved. Thisfinancial markets could have a material adverse effect on our business, financial condition, resultsincluding a reduction in the volume and prices of operations, cash flows and future prospects.
We also incorporate open source software into our products. Although we monitor our use of open source closely, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictionstransactions on our ability to market or sell our products or to develop new products. In such event, we could be required to seek licenses from third-parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business.
commerce platforms.
Any factors that reduce cross-border trade or make such trade more difficult could harm our business.
Cross-border trade is an important source of products. Cross-border trade also represents our primary (or in some cases, only) presence in certain important markets, such as China, and various other countries. In addition, our cross-border trade is also subject to, and may be impacted by, foreign exchange rate fluctuations.
The interpretation and application of specific national or regional laws, such as those related to intellectual property rights of authentic products, selective distribution networks, and sellers in other countries listing items on the Internet, and the potential interpretation and application of laws of multiple jurisdictions (e.g., the jurisdiction of the buyer, the seller, and/or the location of the item being sold) are often extremely complicated in the context of cross-border trade. The interpretation and/or application of such laws could impose restrictions on, or increase the costs of, purchasing, selling, shipping, or returning goods across national borders.
The shipping of goods across national borders is often more expensive and complicated than domestic shipping. Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the interaction of national postal systems, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties. Any factors that increase the costs of cross-border trade or restrict, delay, or make cross-border trade more difficult or impractical would lower our revenues and profits and could harm our business.
Laws and regulations could harm our business.
It is not always clear how laws and regulations governing matters relevant to our business, such as property ownership, copyrights, trademarks, and other intellectual property issues, parallel imports and distribution controls, taxation, libel and defamation, and obscenity apply to our businesses. Many of these laws were adopted prior to the advent of the Internet, mobile, and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. Many of these laws, including some of those that do reference the Internet are subject to interpretation by the courts on an ongoing basis and the resulting uncertainty in the scope and application of these laws and regulations increases the risk that we will be subject to private claims and governmental actions alleging violations of those laws and regulations.
As our activities, the products and services we offer, and our geographical scope continue to expand, regulatory agencies or courts may claim or hold that we or our users are subject to additional requirements (including licensure) or prohibited from conducting our business in their jurisdiction, either generally or with respect to certain actions. Financial and political events have increased the level of regulatory scrutiny on large companies, and regulatory agencies may view matters or interpret laws and regulations differently than they have in the past and in a manner adverse to our businesses. Our success and increased visibility have driven some existing businesses that perceive us to be a threat to their businesses to raise concerns about our business models to policymakers and regulators. These businesses and their trade association groups employ significant resources in their efforts to shape the legal and regulatory regimes in countries where we have significant operations. They may employ these resources in an effort to change the legal and regulatory regimes in ways intended to reduce the effectiveness of our businesses and the ability of users to use our products and services. These established businesses have raised concerns relating to pricing, parallel imports, professional seller obligations, selective distribution networks, stolen goods, copyrights,
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trademarks and other intellectual property rights and the liability of the provider of an Internet marketplace for the conduct of its users related to those and other issues. Any changes to the legal or regulatory regimes in a manner that would increase our liability for third-party listings could negatively impact our business.
The volatility of our stock price could adversely affect an investment in our common stock
The market price of our common stock has been, and may continue to be, highly volatile. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:
| • | announcements and rumors of developments related to our business or the industry in which we compete, | |
| • | quarterly fluctuations in our actual or anticipated operating results and order levels, | |
| • | general conditions in the worldwide economy, | |
| • | acquisition announcements, | |
| • | new products or product enhancements by us or our competitors, | |
| • | developments in patents or other intellectual property rights and litigation, | |
| • | developments in our relationships with our customers and suppliers, and | |
| • | any significant acts of terrorism. | |
In addition, in recent years the stock market in general and the markets for shares of “high-tech” companies in particular, have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock, and the market price of our common stock may decline.
Our information systems or those of our outside vendors may be subject to disruption, delays or security incidents that could adversely impact our customers and operations
We rely on our information systems and those of third parties for things such as processing customer orders, delivery of products, providing services and support to our customers, billing and tracking our customers, hosting and managing customer data, and otherwise running our business. Any disruption in our information systems and those of the third parties upon whom we rely could have a significant impact on our business.
A security incident in our own systems or the systems of our third party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data. Unauthorized access to our proprietary business information or customer data may be obtained through break-ins, breach of our secure network by an unauthorized party, employee theft or misuse, breach of the security of the networks of our third party providers, or other misconduct. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers. While our products and services provide and support strong password controls, IP restriction and other security mechanisms, the use of such mechanisms are controlled in many cases by our customers.
We may also experience delays or interruptions caused by a number of factors, including access to the internet, the failure of our network or software systems, or significant variability in visitor traffic on our product websites. It is also possible that hardware or software failures or errors in our systems, or in those of our third party providers, could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. These failures and interruptions could harm our reputation and cause us to lose customers.
Although our systems have been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences, they remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, cyber-attacks, computer viruses, computer denial-of-service attacks, human error, hardware or software defects or malfunctions (including defects or malfunctions of components of our systems that are supplied by third-party service providers), and similar events or disruptions. Some of our systems are not fully redundant, and our disaster recovery planning is not sufficient for all eventualities. Our systems are also subject to break-ins, sabotage, and intentional acts of vandalism. Despite any precautions we may take, the occurrence of a natural disaster, a decision by any of our third-party hosting providers to close a facility we use without adequate notice for financial or other reasons, or other unanticipated problems at our hosting facilities could cause system interruptions and delays, and result in loss of critical data and lengthy interruptions in our services.
Our global operations expose us to risks and challenges associated with conducting business internationally, and our results of operations may be adversely affected by our efforts to comply with U.S. laws which apply to international operations, such as the Foreign Corrupt Practices Act and US export control laws, as well as the laws of other countries.
We operate on a global basis with offices or activities in Asia, the Middle East, and North America. We face several risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, U.S. laws such as export control laws and the FCPA, and similar laws in other countries which also prohibit corrupt payments to governmental officials or certain payments or remunerations to customers. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold or require an export license in connection with sales outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Also, we may be held liable for actions taken by our local partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.
In addition, we operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that U.S. law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties.
In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including:
| • | longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems, |
| • | political and economic instability, |
| • | potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers, |
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| • | difficulties and costs of staffing and managing foreign operations, |
| • | difficulties protecting or procuring intellectual property rights, and |
| • | fluctuations in foreign currency exchange rates. |
These factors or any combination of these factors may adversely affect our revenue or our overall financial performance.
Risks Related to the Beverage Industry
Changes in the non-alcoholic beverage business environment and retail landscape could adversely impact our financial results.
The non-alcoholic beverage business environment is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the non-alcoholic beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If we are unable to successfully adapt to the rapidly changing environment and retail landscape, our share of sales, volume growth and overall financial results could be negatively affected.
Intense competition and increasing competition in the commercial beverage market could hurt our business.
The commercial retail beverage industry, and in particular its non-alcoholic beverage segment, is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.
We compete generally with all liquid refreshments, including bottled water and numerous specialty beverages, such as: SoBe; Snapple; Arizona; Vitamin Water; Gatorade; and Powerade.
We compete indirectly with major international beverage companies including but not limited to: the Coca-Cola Company; PepsiCo, Inc.; Nestlé; Dr Pepper Snapple Group; Groupe Danone; Kraft Foods Group, Inc.; and Unilever. These companies have established market presence in the United States, and offer a variety of beverages that are substitutes to our product. We face potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the sports water market.
As a result of both direct and indirect competition, our ability to successfully distribute, market and sell our product, and to gain sufficient market share in the United States to realize profits may be limited, greatly diminished, or totally diminished, which may lead to partial or total loss of your investments in our company.
Alternative non-commercial beverages or processes could hurt our business.
The availability of non-commercial beverages, such as tap water, and machines capable of producing flavored water at the consumer’s home or at store-fronts could hurt our business, market share, and profitability.
Our growth and profitability depends on the performance of third-parties and our relationship with them.
Our distribution network and its success depend on the performance of third parties. Any non-performance or deficient performance by such parties may undermine our operations, profitability, and result in total loss to your investment. To distribute our product, we use a broker-distributor-retailer network whereby brokers represent our products to distributors and retailers who will in turn sell our product to consumers. The success of this network will depend on the performance of the brokers, distributors and retailers of this network. There is a risk that a broker, distributor, or retailer may refuse to or cease to market or carry our product. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our product in localities that may not be receptive to our product. Furthermore, such third-parties’ financial position or market share may deteriorate, which could adversely affect our distribution, marketing and sale activities. We also need to maintain good commercial relationships with third-party brokers, distributors and retailers so that they will promote and carry our product. Any adverse consequences resulting from the performance of third-parties or our relationship with them could undermine our operations, profitability and may result in total loss of your investment.
The loss of one or more of our major customers or a decline in demand from one or more of these customers could harm our business.
We have a few major customers. There can be no assurance that such customers will continue to order our products in the same level or at all. A reduction or delay in orders from such customers, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect on our business, operating results and financial condition.
Water scarcity and poor quality could negatively impact our production costs and capacity.
Water is the main ingredient in our product. It is also a limited resource, facing unprecedented challenges from overexploitation, increasing pollution, poor management, and climate change. As demand for water continues to increase, as water becomes scarcer, and as the quality of available water deteriorates, we may incur increasing production costs or face capacity constraints that could adversely affect our profitability or net operating revenues in the long run.
Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm our business.
We and our bottlers will use water, various ingredients, packaging materials for bottles such as plastic and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of our or our bottlers’ ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, would increase our operating costs and could reduce our profitability. Increases in the prices of our finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of our product and reduce sales.
An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, or packaging materials and containers that may be caused by a deterioration of our or our bottlers’ relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact our net revenues and profits.
Changes in laws and regulations relating to beverage containers and packaging could increase our costs and reduce demand for our products.
We and our bottlers intend to offer our product in nonrefillable, recyclable containers in the United States. Legal requirements have been enacted in various jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing and use of certain nonrefillable beverage containers. Other proposals relating to beverage container deposits, recycling, ecotax and/or product stewardship have been introduced in various jurisdictions in the United States and overseas, and we anticipate that similar legislation or regulations may be proposed in the future at local, state and federal levels in the United States. Consumers’ increased concerns and changing attitudes about solid waste streams and environmental responsibility and the related publicity could result in the adoption of such legislation or regulations. If these types of requirements are adopted and implemented on a large scale in the geographical regions in which we operate or intend to operate, they could affect our costs or require changes in our distribution model, which could reduce our net operating revenues or profitability.
Significant additional labeling or warning requirements or limitations on the availability of our product may inhibit sales of affected products.
Various jurisdictions may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our product relating to the content or perceived adverse health consequences of our product. If these types of requirements become applicable to our product under current or future environmental or health laws or regulations, they may inhibit sales of our product.
Unfavorable general economic conditions in the United States could negatively impact our financial performance.
Unfavorable general economic conditions, such as a recession or economic slowdown, in the United States could negatively affect the affordability of, and consumer demand for, our product in the United States. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies. Consumers may also cease purchasing bottled water and consume tap water. Lower consumer demand for our product in the United States could reduce our profitability.
Adverse weather conditions could reduce the demand for our products.
The sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our product and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.
Changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.
The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our product will be subject to: the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the Lanham Act; state consumer protection laws; competition laws; federal, state, and local workplace health and safety laws, such as the Occupational Safety and Health Act; various federal, state and local environmental protection laws; and various other federal, state, and local statutes and regulations. Legal requirements also apply in many jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing, and use of certain non-refillable beverage containers. The precise requirements imposed by these measures vary. Other types of statutes and regulations relating to beverage container deposits, recycling, ecotaxes and/or product stewardship also apply in various jurisdictions in the United States. We anticipate that additional, similar legal requirements may be proposed or enacted in the future at the local, state and federal levels in the United States. Changes to such laws and regulations could increase our costs or reduce our net operating revenues.
In addition, failure to comply with environmental, health or safety requirements and other applicable laws or regulations could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes, or a cessation of operations at our or our bottlers’ facilities, as well as damage to our image and reputation, all of which could harm our profitability.
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Risks Related to Our Stock
Because our common stock is considered a "penny stock" any investment in our common stock is considered to be a high-risk investment and is subject to restrictions on marketability.
Our common stock is currently traded on the OTC Markets and OTC Bulletin Board and is considered a "penny stock." The OTC Markets and OTC Bulletin Board are generally regarded as a less efficient trading market than the NASDAQ Capital Market.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.
Since our common stock is subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus your ability to sell our common stock in the secondary market. There is no assurance our common stock will be quoted on NASDAQ or the NYSE or listed on any exchange, even if eligible.
We have additional securities available for issuance, including preferred stock, which if issued could adversely affect the rights of the holders of our common stock.
Our articles of incorporation authorize the issuance of 500,000,000 shares of common stock and 25,000,000 shares of preferred stock. The common stock and the preferred stock can be issued by, and the terms of the preferred stock, including dividend rights, voting rights, liquidation preference and conversion rights can generally be determined by, our board of directors without stockholder approval. Any issuance of preferred stock could adversely affect the rights of the holders of common stock by, among other things, establishing preferential dividends, liquidation rights or voting powers. Accordingly, our stockholders will be dependent upon the judgment of our management in connection with the future issuance and sale of shares of our common stock and preferred stock, in the event that buyers can be found, therefore. Any future issuances of common stock or preferred stock would further dilute the percentage ownership of our Company held by the public stockholders.
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We cannot assure you that our common stock will be listed on NASDAQ or any other securities exchange.
We may seek the listing of our common stock on NASDAQ or the American Stock Exchange. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. Until our common stock is listed on the NASDAQ or another stock exchange, we expect that our common stock would be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the “pink sheets,”Markets where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, we would be subject to an SEC rule that, if it failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity.
Authorization of preferred stock.
Our Certificate of Incorporation authorizes the issuance of up to 25,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of its authorized preferred stock, there can be no assurance that the Company will not do so in the future.
We are an emerging growth company within the meaning of the Securities Act, and as a consequence of taking advantage of certain exemptions from reporting requirements that are available to emerging growth companies, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.
We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act. Pursuant to Section 107 of the Jumpstart Our Business Startups Act, we may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, meaning that we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have chosen to take advantage of the extended transition period for complying with new or revised accounting standards applicable to public companies to delay adoption of such standards until such standards are made applicable to private companies. Accordingly, our consolidated financial statements may not be comparable to the consolidated financial statements of public companies that comply with such new or revised accounting standards.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. PROPERTIES
The Company utilizes rented offices at 3651 Lindell Road Ste D269, Las Vegas, NV 89103.
ITEM 3. LEGAL PROCEEDINGS
We have no outstanding, material legal proceedings.
ITEM 4. REMOVED AND RESERVED
PART II
| ITEM 5 | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCAHSES OF EQUITY SECURITIES |
(a) Market Information.
The Company’s common stock is currently quoted on the OTC Markets and OTC Bulletin Board under the symbol “SMRN”. Prior to February 9, 2009, the Company’s stock was quoted on the OTC Markets under the symbol “ALVN”. The following table sets forth the high and low per share sales prices for our common stock for each of the quarters as reported by the OTC Markets.
| Quarter Ended | High | Low | ||||||||
| December 31, 2013 | $ | 1.00 | $ | 1.00 | ||||||
| March 31, 2014 | 1.00 | 0.02 | ||||||||
| June 30, 2014 | 0.02 | 0.02 | ||||||||
| September 30, 2014 | $ | 0.02 | $ | 0.02 | ||||||
| December 31, 2014 | 0.02 | 0.02 | ||||||||
| March 31, 2015 | 0.02 | 0.02 | ||||||||
| June 30, 2015 | 0.02 | 0.02 | ||||||||
| September 30, 2015 | $ | 1.00 | $ | 0.02 | ||||||
| Quarter Ended | High | Low | ||||||||
| December 31, 2016 | $ | 0.02 | $ | 0.02 | ||||||
| March 31, 2017 | 0.02 | 0.02 | ||||||||
| June 30, 2017 | 0.02 | 0.02 | ||||||||
| September 30, 2017 | $ | 0.02 | $ | 0.02 | ||||||
| December 31, 2017 | $ | 0.02 | $ | 0.02 | ||||||
| March 31, 2018 | 2.42 | 0.02 | ||||||||
| June 30, 2018 | 0.51 | 0.20 | ||||||||
| September 30, 2018 | $ | 0.30 | $ | 0.20 | ||||||
The closing price of our common stock as reported on the OTC Markets on February 10, 2016,January 12, 2019, was $0.0006.$0.90.
(b) Holders
As of February 10, 2016,January 12, 2019, there were approximately 4964 holders of record of our common stock.
(c) Dividends.
The Registrant has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Registrant's business.
(d) Securities Authorized for Issuance under Equity Compensation Plans .
None.
(e) Recent Sale of Unregistered Securities.
NoneOn December 29, 2017, we issued 5,000,000 of the Company’s common stock for $100,000 in cash.
In the quarter ending June 30, 2018, we issued 169,367 shares of the Company’s common stock for $50,810 in cash.
In the quarter ending September 30, 2018, we issued 199,870 shares of the Company’s common stock for $60,001 in cash.
| -17- |
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
| ITEM 7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiaries for the fiscal years ended September 30, 20152018 and 2014.2017. The discussion and analysis that follows should be read together with the section entitled “Forward Looking Statements” and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K.
Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.
Overview
Smartag International, Inc. specializesplans to focus on leveraging existing established players in the e-Commerce business overseas to bring their expertise to North America and add value with traceability technologies to increase the overall efficiency and mobile payments. We provide food traceability, RFID solutions, near field communications, trackreduce logistics costs. Our tracking supply chain and trace services and micro payment services.logistics system are in currently in place. Our next focus is to increase the volume of e-Commerce transactions.
Since 2013,In November 2015, Smartag signed an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in e-commerce trading on e-Bay, Amazon and Alipay platforms. SSNST has been actively involved in traceability for manufacturing plants and in the foodbusiness of e-Commerce for the past 5 years and beverage industry.have consistently been one of the top suppliers of a range of products including electronic items and toys on eBay and Amazon. As a result of this agreement, Smartag realized a key potential growth area – healthy beveragewill be able to use its inherent technology and logistics presence in the United States to offer additional products such as LED lighting, outdoor sports equipment, beauty products and cosmetics, vehicles accessories and bicycles on the well establish e-Commerce platforms. The agreement with Hong Kong Vander Trade Limited, also controlled by Bobby Tang Siu Ki and Yang Ye Cai, shall enable Smartag to enter into the e-Commerce business which it can sourceeventually shall combine the raw materials which areusage of low calories butits own track & trace solutions to increase efficiency of the supply chain for online purchases whilst at the same time healthy and natural. The US market was overwhelmed with sodas, flavored water and energy drinks, but in recent years, the demand has been changing towards a healthier alternative.enable SSNST to further increase its range of products.
In August 2015,On February 2, 2018, Smartag brought inentered into a Joint Venture & Shareholder’s Agreement with Vander (“JV Agreement”). As a result, the previous agreements with SSNST and Vander was terminated. Under the terms of the JV Agreement, Smartag and Vander formed a new management led by Mr. Chee Song Yap to lead its efforts in the beverage business by coupling its traceability technology to give reassuranceHong Kong entity called Smartag HK. Smartag HK shall pursue e-Commerce and recall features. Realizing the key benefitsrelated Fintech e-Money and e-remittance solutions. Smartag owns 70% and Vander owns 30% of this rising demand, Smartag under its subsidiary, Essential Beverage Corp. (“EBC”) launched a refreshing line energy and functional beverage, Thrivida, that enhances the health of consumers which at the same time enables it to enter the traceable beverage business. http://thrivida.com/HK.
| -19- |
Also,
On the February 27, 2018, Smartag International, Inc. (“Smartag,” “we” or “Company) entered into joint venture agreement with PT. Supratama Makmur Sejahtera (“PTSMS”) an Indonesian Fintech company to form a Joint Venture Indonesian PMA company in which Smartag shall own 51% equity and PTSMS shall own 49%. The new Indonesian PMA company plans to undertake the Project to provide up to 10,000 boarding schools which are owned by the local Islamic Baitu Maal or BMT co-operatives in their respective villages or districts within Indonesia with sharia financial technology (Fintech) e-Wallet platform. Smartag plans to provide the span of 24-36 months, it is our intentionfinancing, to market a range of beverage drinksdevelop the Fintech technology for the United States and Asia Pacific. The goal: to create exhilarating beverages that are not only a healthier alternative to other drinks, but a new way for consumers to enjoy vitamin and ingredient enhanced beverages. At the same time, because the need for traceable drinks is increasing in the United States as well as China, Smartag is well positioned to take its core technology to test out in its own line of beverages worldwide. Islamic Fintech e-Wallet platform.
Results of Operations
Comparison of the fiscal year ended September 30, 20152018 to the fiscal year ended September 30, 20142017
Revenues
For the years ended September 30, 20152018 and 2014,2017, the Company recorded revenue of $95,766$0 and $62,218,$124,769, respectively. The increasedecrease was due to our collection and processing agent services related to Vander’s sales in 2017 as compared to no services performed in 2018. There were no services in 2018 due to a restructuring of business operations. The sales were reported as net revenue which was 5% of the commencementtotal revenue of operations in selling beverage bottles.payments processed.
Cost of Sales
Cost of sales was $39,534$0 and $60,468$0 for the years ended September 30, 20152018 and 2014,2017, respectively. Cost of Sales in 2016 was zero as we accounted for revenue on a net basis.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $1,227,605$440,970 and $107,968$88,908 for the years ended September 30, 20152018 and 2014,2017, respectively. The increase of $1,119,637$352,062 was due primarily to an increase in stock based compensation of $483,000, consulting fees of $154,345, and expenses in starting beverage operations of $399,709.to our executive officer.
Interest income/(expense) and other, net
We recorded an unrealized lossother expense of 25,000 on an investment$16,035 for the year ended September 30, 2014.2017 related to an imputed interest charge of $16,035. There was no other expense in 2018.
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 years ended September 30, 20152018 and 2014:2017:
| Years Ended September 30, | Years Ended September 30, | |||||||||||||||
| 2015 | 2014 | 2018 | 2017 | |||||||||||||
| Operating Activities | $ | (484,135 | ) | $ | (119,931 | ) | $ | (228,324 | ) | $ | 59,822 | |||||
| Investing Activities | (215,877 | ) | — | (18,395 | ) | — | ||||||||||
| Financing Activities | 710,000 | 100,000 | 219,827 | — | ||||||||||||
| Net Effect on Cash | $ | 9,988 | $ | (19,931 | ) | $ | (26,892 | ) | $ | 59,822 | ||||||
| -20- |
In the current year ending September 30, 2015,2017, the Company incurred anet income of $19,825.
In the year ending September 30, 2018, the Company incurred net loss of $1,171,373 offset by stock compensation of $483,000 and an increase in accounts payable of $187,201. For the year ended September 30, 2014, the Company incurred a net loss of $131,218 offset by$438,988, an increase in related party notes payablepayables of $100,000. $10,902 offset by $199,762 of stock compensation.
The Company received proceedssuffered recurring losses from related partiesoperations and has an accumulated deficit of $810,000$3,560,458 at September 30, 2018. Currently, we have not generated consistent revenues as of September 30, 2018, had a cash balance of $87,461. The Company is seeking various forms of financing. To the extent additional funding is not achieved this will delay our business plans and the Company may not continue to cover its operational losses.operate. We do not have sufficient cash resources for the next 6 months, in order to meet our business goals, we will need to seek additional funding or enter into strategic partnerships.
Going Concern Uncertainties
As of the date of this annual report, there is doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations and loan commitments. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.
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, 2016 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 September 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.
During the year ended September 30, 2015, the Company received $810,000 advances from related parties which the terms were still being negotiated and currently were recorded under other payable. $730,000 was from a related entity to a former director and $80,000 was received from Chee Song Yap. Subsequent to September 30, 2015, the two parties entered into 0% interest notes which are to be repaid by September 30, 2016.
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, 2016 and this loan has an interest rate of 0% interest per annum. The Company repaid $100,000 of the Loan in the year ended September 30, 2015.None
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 consolidated 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 consolidated 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 consolidated 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:
| -21- |
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. The Company currently receives its revenue from 5% commissions on payment processing for Vander, a related party. The Company evaluates the Emerging Issue Task Force (EITF) number 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent,” which sets forth a number of guidelines for the correct treatment of revenue. We currently treat the related party revenue on a net basis.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Smartag International, Inc.
September 30, 20152018
TABLE OF CONTENTS
| PAGE | ||||
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
| | ||||
| Notes to | ||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and
To: The Board of Directors and Stockholders of
Smartag International, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheetsheets of Smartag International, Inc. (the “Company”) as of September 30, 20152018 and 2014 and2017, the related consolidated statementstatements of operations , stockholders’ deficit, and consolidated cash flows for the yearyears then ended, September 30, 2015 and 2014. These financial statements are the responsibility ofrelated notes (collectively referred to as the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States)“financial statements”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Smartag International, Inc.the Company as of September 30, 20152018 and 20142017, and the results of its operations stockholders’ deficit, and its cash flows for the years then ended, September 30, 2015 and 2014 in conformity with U.S.accounting principles generally accepted accounting principles.in the United States.
Going Concern Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and is dependent upon the continued sale of its securities, or obtaining debt financing for funds to meet its cash requirements. These factors raisethat raises substantial doubt about the Company’sits ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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. Our audits included performing procedures to assess the risks of material misstatement, whether due to error fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ TAAD LLP
Walnut,
We have served as the Company’s auditor since 2014
Diamond Bar, California
February 10, 2016January 14, 2019
Smartag International, Inc.
CONSOLIDATED BALANCE SHEETS
| September 30, 2015 | September 30, 2014 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 82,376 | $ | 72,388 | ||||
| Accounts receivable, net | — | 17,037 | ||||||
| Total Current Assets | 82,376 | 89,425 | ||||||
| Goodwill | 260,975 | — | ||||||
| TOTAL ASSETS | $ | 343,351 | $ | 89,425 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 190,808 | $ | 3,607 | ||||
| Other payable, related party | 810,000 | — | ||||||
| Note payable, related party | 200,000 | 300,000 | ||||||
| Secured revolving note payable, related party | 192,457 | 192,457 | ||||||
| Total Current Liabilities | 1,393,265 | 496,064 | ||||||
| TOTAL LIABILITIES | 1,393,265 | 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, 31,637,151 and 10,637,151 shares issued and outstanding, respectively. | 31,637 | 10,637 | ||||||
| Additional Paid-In-Capital | 1,713,361 | 1,228,361 | ||||||
| Accumulated Deficit | (2,772,190 | ) | (1,645,637 | ) | ||||
| Total Smartag International, Inc. Stockholders’ Deficit | (1,027,192 | ) | (406,639 | ) | ||||
| Non-controlling interest | (22,722 | ) | — | |||||
| Total Stockholders’ Deficit | (1,049,914 | ) | (406,639 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 343,351 | $ | 89,425 | ||||
| September 30, 2018 | September 30, 2017 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 87,461 | $ | 114,353 | ||||
| Total Current Assets | 87,461 | 114,353 | ||||||
| TOTAL ASSETS | $ | 87,461 | $ | 114,353 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities, net, related party | $ | 30,963 | $ | 20,061 | ||||
| Total Current Liabilities | 30,963 | 20,061 | ||||||
| TOTAL LIABILITIES | 30,963 | 20,061 | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| 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, 98,179,368 and 93,010,001 shares issued and outstanding, respectively. | 98,178 | 93,010 | ||||||
| Additional Paid-In-Capital | 3,435,249 | 3,122,751 | ||||||
| Subscription payable | 60,001 | — | ||||||
| Accumulated Deficit | (3,560,458 | ) | (3,121,469 | ) | ||||
| Total Smartag International Inc. Stockholders’ Equity | 32,970 | 94,292 | ||||||
| Non-controlling interest | 23,528 | — | ||||||
| Total Stockholders' Equity | 56,498 | 94,292 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 87,461 | $ | 114,353 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
Smartag International, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 20152018 AND 20142017
September 30, 2015 | September 30, 2014 | |||||||
| REVENUES | $ | 45,795 | $ | 62,218 | ||||
| REVENUES – related party | 49,971 | — | ||||||
| COST OF SALES | 39,534 | 60,468 | ||||||
| GROSS PROFIT | 56,232 | 1,750 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses | 1,227,605 | 107,968 | ||||||
| Total operating expenses | 1,227,605 | 107,968 | ||||||
| LOSS FROM OPERATIONS | (1,171,373 | ) | (106,218 | ) | ||||
| Interest income/(expense) and other, net | — | (25,000 | ) | |||||
| NET INCOME/(LOSS) | $ | (1,171,373 | ) | $ | (131,218 | ) | ||
| Net loss applicable to non-controlling interest | 44,820 | — | ||||||
| NET INCOME/(LOSS) APPLICABLE TO SMARTAG INTERNATIONAL, INC. | $ | (1,126,553 | ) | $ | (131,218 | ) | ||
| NET INCOME/(LOSS) PER SHARE OF COMMON STOCK—Basic and diluted | $ | (0.09 | ) | $ | (0.01 | ) | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted | 13,053,589 | 10,637,151 | ||||||
| Years Ended | ||||||||
| September 30, | ||||||||
| 2018 | 2017 | |||||||
| REVENUES - RELATED PARTY | $ | — | $ | 124,769 | ||||
| COST OF SALES | — | — | ||||||
| GROSS PROFIT | — | 124,769 | ||||||
| OPERATING EXPENSES: | ||||||||
| General and administrative expenses | (440,970 | ) | (88,908 | ) | ||||
| NET INCOME / (LOSS) FROM OPERATIONS | (440,970 | ) | 35,861 | |||||
| Interest Expense | — | (16,036 | ) | |||||
| NET INCOME / (LOSS) | $ | (440,970 | ) | $ | 19,825 | |||
| Net loss applicable to non-controlling interest | (1,983 | ) | — | |||||
| NET INCOME/(LOSS) APPLICABLE TO SMARTAG INTERNATIONAL, INC. | $ | (438,987 | ) | $ | 19,825 | |||
| NET INCOME / (LOSS) PER SHARE OF COMMON STOCK — Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING — Basic and diluted | 96,861,440 | 63,752,807 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
Smartag International, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 20152018 AND 20142017
| Additional Paid in Capital | Non-Controlling Interest in Subsidiary | Accumulated Deficit | Shareholders' Deficit | |||||||||||||||
| Shares | Amount | |||||||||||||||||
| Balance as of September 30, 2013 | 10,637,151 | $ | 10,637 | $ | 1,228,361 | $ | — | $ | (1,514,419) | $ | (275,421) | |||||||
| Net loss | — | — | — | — | (131,218) | (131,218) | ||||||||||||
| Balance as of September 30, 2014 | 10,637,151 | $ | 10,637 | $ | 1,228,361 | $ | — | $ | (1,645,637) | $ | (406,639) | |||||||
| Purchase of Essentials Beverage Corporation | - | 23,000 | 22,098 | — | 45,098 | |||||||||||||
| Common stock issued for services | 21,000,000 | 21,000 | 462,000 | — | — | 483,000 | ||||||||||||
| Loss in Minority Interest in Subsidiary | (44,820) | — | (44,820) | |||||||||||||||
| Net loss | — | — | — | — | (1,126,553) | (1,126,553) | ||||||||||||
| Balance as of September 30, 2015 | 31,637,151 | $ | 31,637 | $ | 1,713,361 | $ | (22,722) | $ | (2,772,190) | $ | (1,049,914) | |||||||
| Common Stock | Additional Paid in Capital | Non-Controlling Interest in Subsidsidiary | Subscription Payable | Accumulated Deficit | Shareholders' Equity / (Deficit) | ||||||||||||||||
| Shares | Amount | ||||||||||||||||||||
| Balance as of September 30, 2016 | 31,637,151 | $ | 31,637 | $ | 1,940,632 | $ | — | $ | — | $ | -3,141,295 | $ | -1,169,025 | ||||||||
| Common stock issued for debt - related party | 61,372,850 | 61,373 | 1,166,084 | — | — | — | 1,227,457 | ||||||||||||||
| Imputed interest expense on related party debt | — | — | 16,035 | — | — | — | 16,035 | ||||||||||||||
| Net income | — | — | — | — | — | 19,825 | 19,825 | ||||||||||||||
| Balance as of September 30, 2017 | 93,010,001 | $ | 93,010 | $ | 3,122,751 | $ | — | $ | — | $ | -3,121,470 | $ | 94,292 | ||||||||
| Common stock issued for cash | 5,169,367 | 5,168 | 145,643 | — | 60,001 | — | 210,811 | ||||||||||||||
| Options issued to related party | — | — | 199,762 | — | — | — | 199,762 | ||||||||||||||
| Contribution from related party | — | — | 9,016 | — | — | — | 9,016 | ||||||||||||||
| Purchase of Vander HK | — | — | -41,923 | 25,510 | — | — | -16,412 | ||||||||||||||
| Loss in Minority Interest in Subsidiary | — | — | — | -1,982 | — | — | -1,982 | ||||||||||||||
| Net loss | — | — | — | — | — | -438,987 | -438,987 | ||||||||||||||
| Balance as of September 30, 2018 | 98,179,368 | $ | 98,178 | $ | 3,435,249 | $ | 23,528 | $ | 60,001 | $ | -3,560,458 | $ | 56,498 | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
Smartag International, Inc.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SeptemberSEPTEMBER 30, 2015 and 20142018 AND 2017
| September 30, 2015 | September 30, 2014 | September 30, 2018 | September 30, 2017 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (1,171,373 | ) | $ | (131,218 | ) | ||||||||||
| Net income (loss) | $ | (438,987 | ) | $ | 19,826 | |||||||||||
| Stock based compensation | 483,000 | — | 199,761 | — | ||||||||||||
| Unrealized loss on investment | — | 25,000 | ||||||||||||||
| Imputed interest expense | — | 16,035 | ||||||||||||||
| Changes in current assets and liabilities: | ||||||||||||||||
| Accounts receivable | 17,037 | (17,037 | ) | |||||||||||||
| Accounts payable | 187,201 | 3,324 | ||||||||||||||
| Net cash used in operating activities | (484,135 | ) | (119,931 | ) | ||||||||||||
| Accounts payable and accrued liabilities – related party | 10,902 | 23,961 | ||||||||||||||
| Net cash provided by (used in) operating activities | (228,324 | ) | 59,822 | |||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Investment in Essentials Beverage Corporation | (215,877 | ) | — | |||||||||||||
| Net cash used by investing activities | (215,877 | ) | — | |||||||||||||
| Investment in Smartag HK | (18,395 | ) | — | |||||||||||||
| Net cash provided by investing activities | (18,395 | ) | — | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Advances from related parties | 810,000 | — | ||||||||||||||
| Repayment of note payable - related party | (100,000 | ) | — | |||||||||||||
| Proceeds from note payable – related party | — | 100,000 | ||||||||||||||
| Contribution from related party | 9,016 | — | ||||||||||||||
| Proceeds from the sale of common stock | 210,811 | — | ||||||||||||||
| Net cash provided by financing activities | 710,000 | 100,000 | 219,827 | — | ||||||||||||
| Net increase (decrease) in cash | 9,988 | (19,931 | ) | (26,892 | ) | 59,822 | ||||||||||
| Cash - beginning of period | 72,388 | 92,319 | 114,353 | 54,531 | ||||||||||||
| Cash - end of period | $ | 82,376 | $ | 72,388 | $ | 87,461 | $ | 114,353 | ||||||||
| Supplemental disclosure of cash flows information: | ||||||||||||||||
| Interest paid | $ | — | $ | — | $ | — | $ | — | ||||||||
| Income taxes paid | $ | — | $ | — | $ | — | $ | — | ||||||||
| Shares issued for settlement of note payable – related party | $ | — | $ | 1,035,000 | ||||||||||||
| Shares issued for settlement of secured note payable – related party | $ | — | $ | 192,457 | ||||||||||||
| Forgiveness of related party receivable | $ | 41,923 | $ | — | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
Smartag International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2018 AND 2017
NOTE 1 Nature of business
Current Operations and Background
Smartag International, Inc., a Nevada corporation (“Smartag,” “Company,” “we,” “us,” or “our”), was formed as Theca Corporation on March 24, 1999 in Colorado. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. On November 29, 2004, we merged with Art4Love, Inc., a Delaware corporation, into Art4Love, Inc. a Nevada corporation. On February 109, 2009, Art4Love changed its name to Smartag International, Inc.
Since 2013,In November 2015, Smartag has been activelysigned an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in traceability for manufacturing plantse-commerce trading on e-Bay, Amazon and Alipay platforms. Using the expertise of SSNST, Smartag is developing block chain technology used in the foodbusiness of e-Commerce trading, procurement, collection and beverage industry. Smartag realizeddistribution through a key potential growth area – healthy beverage products which it can source the raw materials which are of low calories but at the same time healthy and natural. The US market was overwhelmed with sodas, flavored water and energy drinks, butnew joint venture company in recent years, the demand has been changing towards a healthier alternative.Hong Kong.
In July 2015,On January 1, 2016, the Company entered into a revenue sharing agreement with Vander. The Company charged 5% commission as a collection and processing agent for some of Vander’s Ecommerce platform sales.
On February 2, 2018, Smartag entered into a Securities PurchaseJoint Venture & Shareholder’s Agreement (the “Purchase Agreement”) with Essential Beverage Corporation,Vander (“JV Agreement”). As a Nevada corporation, pursuant to whichresult, the Company purchased a 51% interest in EBC for a total consideration of $399,709previous agreements with SSNST and one million sharesVander was terminated. Under the terms of the Company’s restricted common stock valued at $23,000.JV Agreement, Smartag and Vander formed a new Hong Kong entity called Smartag HK. Smartag HK shall pursue e-Commerce and related Fintech e-Money and e-remittance solutions. Smartag owns 70% and Vander owns 30% of Smartag HK.
In August 2015,On the February 27, 2018, Smartag broughtInternational, Inc. (“Smartag,” “we” or “Company) entered into joint venture agreement with PT. Supratama Makmur Sejahtera (“PTSMS”) an Indonesian Fintech company to form a Joint Venture Indonesian PMA company in which Smartag shall own 51% equity and PTSMS shall own 49%. The new management ledIndonesian PMA company plans to undertake the Project to provide up to 10,000 boarding schools which are owned by Mr. Chee Song Yapthe local Islamic Baitu Maal or BMT co-operatives in their respective villages or districts within Indonesia with sharia financial technology (Fintech) e-Wallet platform. Smartag plans to lead its efforts inprovide the beverage business by coupling its traceabilityfinancing, to develop the Fintech technology to give reassurance and recall features. Realizingfor the key benefits of this rising demand, Smartag under its subsidiary, Essential Beverage Corp. (“EBC”) launched a refreshing line energy and functional beverage, Thrivida, that enhances the health of consumers which at the same time enables it to enter the traceable beverage business.Islamic Fintech e-Wallet platform.
NOTE 2 – Basis of Presentation and Significant of Accounting Policies
Basisof Presentationand Principles of Consolidation — The audited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Smartag International, Inc. and its subsidiary, Essential Beverage Corporation. All significant intercompany transactions and balances were eliminated in consolidation.
Going Concern -The accompanying consolidated 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 $2,772,190$3,560,458 as of September 30, 2015.2018. Our total liabilities exceeded its total assets as of September 30, 2015.2018. 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 consolidated 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.
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Use of Estimates — The preparation of consolidated 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 consolidated 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 no allowance for doubtful accounts as of September 30, 2015 and September 30, 2014.
Factoring of Receivable - The Company use a factor for working capital and credit administration purposes. Under the factoring agreement, the factor purchases a portion of the trade accounts receivable and assumes all credit risk with respect to such accounts. The Company includes the amount in accounts receivable. The amounts advanced are included in current liabilities.
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. The Company currently receives its revenue from 5% commissions on payment processing for Vander, a related party. The Company evaluates the Emerging Issue Task Force (EITF) number 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent,” which sets forth a number of guidelines for the correct treatment of revenue. We currently treat the related party revenue on a net basis.
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.
Goodwill— The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.
Stock-Based Compensation — The Company records transactions under share based payment arrangements in accordance with the provisions of the FASB ASC Topic 718, “Share Based Payment Arrangements”. The standard requires recognition of the cost of employee services received in exchange for an award of equity instruments in the consolidated financial statements over the period the employee is required to perform the services in exchange for the award. The standard also requires measurement of the cost of employee services received in exchange for an award. The Company is using the modified prospective method allowed under this standard. Accordingly, upon adoption, prior period amounts have not been restated. Under this application, the Company recorded the cumulative effect of compensation expense for the unvested portion of previously granted awards that remain outstanding at the date of adoption and recorded compensation expense for all awards granted after the date of adoption.
The standard provides that income tax effects of share-based payments are recognized in the consolidated financial statements for those awards that will normally result in tax deduction under existing law. Under current U.S. federal tax law, the Company would receive a compensation expense deduction related to non-qualified stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation cost for non-qualified stock options creates a deductible temporary difference which results in a deferred tax asset and a corresponding deferred tax benefit in the income statement. The Company does not recognize a tax benefit for compensation expense related to incentive stock options unless the underlying shares are disposed in a disqualifying disposition.
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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 September 30, 2015, the Company had $25,000 in unrealized losses. None of the investments have been hedged in any manner.
Recently Issued Accounting Pronouncements
In November 2015, the FASB issued an ASU amending the accounting for income taxes and requiring all deferred tax assets and liabilities to be classified as non-current on the consolidated balance sheet. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The ASU may be adopted either prospectively or retrospectively. We have adopted guidance and believe it has not had a material impact on the Company’s financial statements.
In January 2016, the FASB issued a new standard to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent among the amendments is the requirement for changes in the fair value of our equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income (“OCI”). The new standard will be effective for us beginning July 1, 2018. The application of the amendments will result in a cumulative-effect adjustment to our consolidated balance sheets as of the effective date. We are currently evaluating the impact of this standard on our financial statements.
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The new standard will be effective for us beginning July 1, 2019, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements.
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In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company reviewed allis currently evaluating the impact of this new standard on its financial statements.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard will be effective for us beginning July 1, 2020, with early adoption permitted beginning July 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of this standard on our financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. The new standard contains several amendments that will simplify the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company is currently evaluating the impact of this new standard on its statements.
Other 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'sour present or future consolidated financial statements.
NOTE 3 – Business Combinations
Stock Purchase Agreement - EBC–Related Party
During the year ended September 30, 2015, the Company advanced Legendary Liquids LLC, a related party and predecessor of EBC, $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 had accounts receivables owed from Essentials amounted to $49,972.
On July 5, 2015, the Company entered into a Purchase Agreement with EBC, pursuant to which the Company purchased a 51% interest in EBC for a total previous consideration due from EBC of $399,709 and one million shares of the Company’s restricted common stock valued at $23,000. At the time of the transaction, the Company deemed the previous consideration of $360,975 as not collectible. The Company recorded goodwill associated with the transaction of $260,975.
The Company has estimated that the fair value of the assets p at the date of the purchase in accordance with Accounting Standards Codification 805, “Business Combinations”, as follows:
| Assets | $ | 4,958 | ||
| Intangible assets | — | |||
| Goodwill | 260,975 | |||
| fair value of liabilities assumed | (266,835 | ) | ||
| Non controlling interest | (22,098 | ) | ||
| Purchase price | $ | 23,000 |
The intangible assets relate to customer lists and will be amortized over three years.
The pro forma information below present statement of operations data as if the acquisition of EBC took place on October 1, 2013.
| September 30, 2015 | September 30, 2014 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| REVENUES | $ | 92,282 | $ | 62,218 | ||||
| COST OF SALES | 148,348 | 60,468 | ||||||
| GROSS PROFIT | (56,066 | ) | 1,750 | |||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses | 1,574,696 | 166,843 | ||||||
| Total operating expenses | 1,574,696 | 166,843 | ||||||
| LOSS FROM OPERATIONS | (1,630,762 | ) | (165,093 | ) | ||||
| Interest income/(expense) and other, net | — | (25,000 | ) | |||||
| NET INCOME/(LOSS) | $ | (1,630,762 | ) | $ | (190,093 | ) | ||
| Net loss applicable to non-controlling interest | 44,820 | |||||||
| NET INCOME/(LOSS) APPLICABLE TO SMARTAG INTERNATIONAL, INC. | $ | (1,585,942 | ) | $ | (190,093 | ) | ||
| NET INCOME/(LOSS) PER SHARE OF COMMON STOCK—Basic and diluted | $ | (0.12 | ) | $ | (0.02 | ) | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted | 13,053,589 | 10,637,151 | ||||||
NOTE 4 – Other Payable - Related Party
During the year ended September 30, 2015, the Company received $810,000 advances from related parties which the terms were still being negotiated and currently were recorded under other payable.related. $730,000 was from a related entity to a former director and $80,000 was received from Chee Song Yap. Subsequent to September 30, 2015,Yap, a former director of the Company. The two parties entered into 0% interest notes which are to be repaid by September 30, 2016.2017. On March 23, 2017, the Company issued 40,500,000 shares of common stock in exchange for the cancelation of this notes. The Company valued the fair market value of the shares at $0.02 per share on the date of issuance which was the stock price on the date of issuance.
NOTE 5 – Note Payable – Related Party
The Company received $75,000 from Lock Sen Yow under a 0% interest notes which are to be repaid by September 30, 2017.On March 23, 2017, the Company issued 3,750,000 shares of common stock in exchange for the cancelation of this note. The Company valued the fair market value of the shares at $0.02 per share on the date of issuance which was the stock price on the date of issuance.
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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, 2014. All advances shall be paid on or before September 30, 20152017 and this advance has an interest rate of 0% per annum. On August 19, 2016, Smartag Solutions Bhd transferred the balance of the Secured Note to Lock Sen Yow as severance employment package from Smartag Solutions Bhd. As of September 30, 2015, Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness2017, the balance was $0. On March 23, 2017, the Company issued 9,622,850 shares of Smartag and is secured by substantially allcommon stock in exchange for the cancelation of the assets of Smartag. The Secured Note shall be repaid on or before September 30, 2016.this note.
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,August 15, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September 30, 20162017 and this loan has an interest rate of 0% interest per annum. During the threenine months ended March 31,June 30, 2015, the Company repaid $100,000 of the Loan. During the year ended September 30, 2016, the Company repaid $50,000 of the Loan. On August 19, 2016, Smartag Solutions Bhd transferred the balance of the Loan to Lock Sen Yow. On March 23, 2017, the Company issued 7,500,000 shares of common stock in exchange for the cancelation of this note.
The total amount owed as of June 30, 2018 was $0. During the quarter ended June 30, 2018 and 2017, we recorded imputed interest of $0 and $7,763, respectively, from all the aforementioned related party debt.
Employment Agreement
Effective April 1, 2018, we entered into an Employment Agreement (the “Employment Agreement”) with Lock Sen Yow, the Company’s CEO. Under the Employment Agreement, Mr. Yow will receive a base salary of $200,000 per year and a guaranteed bonus of $40,000 per year. Mr. Yow shall receive 10,000,000 options to purchase the Company’s common at an exercise price of $0.30 per share (“Employee Options”). Employee Options shall vest quarterly over a five-year period. To the extent, the Employee Agreement is terminated, Employee has 90 days from termination to exercise the options or they will expire. The term of the options shall be 5 years. Employee Options were valued at $1,997,620 which was calculated using the Black Scholes model to attain the fair market value. Mr. Yow will be eligible for an incentive bonus based on his performance. Additionally, Mr. Yow will receive a car allowance of $500 per month and an office allowance of $2,000 per month per location. The term of the contract is from April 1, 2018 to September 30, 2022. As of September 30, 2018, $15,200 is owed to Mr. Yow.
Formation of Smartag HK
On February 2, 2018, Smartag entered into a Joint Venture & Shareholder’s Agreement with Vander a related party. As a result, the previous agreements with SSNST and Vander was terminated. Under the terms of the JV Agreement, Smartag and Vander formed a new Hong Kong entity called Smartag HK. Smartag HK shall pursue e-Commerce and related Fintech e-Money and e-remittance solutions. Smartag owns 70% and Vander owns 30% of Smartag HK. Smartag forgave Vander’s liability of $41,923 and Vander contributed US$25,510.
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NOTE 64 – Income Taxes
We have incurred operating losses of $2,772,190,$3,560,458, which, if not utilized, will begin to expire in 2019. Future tax benefits, which may arise as a result of these losses, have not been recognized in these consolidated financial statements, and have been offset by a valuation allowance. There are additional limitations due to our change in control. Therefore, we believe we will be unable to utilize these loss carryforwards.
The effective income tax rate for the years ended September 30, 20152018 and 20142017 consisted of the following:
| September 30, | September 30, | |||||||||||||||
| 2015 | 2014 | 2018 | 2017 | |||||||||||||
| Federal statutory income tax rate | 34.00 | % | 34.00 | % | 34.00 | % | 34.00 | % | ||||||||
| State income taxes | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
| Change in valuation allowance | (34.00 | )% | (34.00 | )% | (34.00 | )% | (34.00 | )% | ||||||||
| Net effective income tax rate | — | — | — | — | ||||||||||||
Current year added tax asset from net loss for the years ended September 30, 20152018 and 20142017 are as follows:
| September 30, | ||||||||
| 2015 | 2014 | |||||||
| Net operating loss | $ | 1,171,373 | $ | 131,218 | ||||
| Statutory tax rate (combined federal and state) | 34 | % | 34 | % | ||||
| Non-capital tax loss | 398,267 | 44,614 | ||||||
| Valuation allowance | (398,267 | ) | (44,614 | ) | ||||
| $ | — | $ | — | |||||
| September 30, | ||||||||
| 2018 | 2017 | |||||||
| Net operating loss | $ | (3,560,458 | ) | $ | (3,121,469 | ) | ||
| Statutory tax rate (combined federal and state) | 34 | % | 34 | % | ||||
| Non-capital tax (income) loss | (1,210,555 | ) | (1,061,300 | ) | ||||
| Valuation allowance | 1,210,555 | 1,061,300 | ||||||
| $ | — | $ | — | |||||
The potential future tax benefits of these losses have not been recognized in these consolidated financial statements due to uncertainty of their realization. When the future utilization of some portion of the carryforwards is determined not to be “more likely than not,” a valuation allowance is provided to reduce the recorded tax benefits from such assets.
The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2015. The Company has not filed its tax returns for the years ending September 30, 2012, 2013, 2014, and 2015.2018.
NOTE 75 – Stockholder’s Equity / Deficit
As of September 30, 2015,2018, 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.
On July 5, 2015,March 23, 2017, various related parties relieved the Company authorizedof loans totaling $1,227,457 in exchange for the issuance of 1,000,00061,372,850 shares to EBC in partial consideration of 51% of EBC. The Company placed a value of $23,000 for these shares. These shares have not yet been issued.the Company’s common stock.
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On August 19, 2015,December 29, 2017, we issued 5,000,000 of the CompanyCompany’s common stock for $100,000 in cash.
In the quarter ending June 30, 2018, we issued 13,500,000169,367 shares of restrictedthe Company’s common stock to its director, Chee Song Yap, and recorded stock compensation expense of $310,500. Additionally, on August 19, 2015,for $50,810 in cash.
In the Company issued 7,500,000quarter ending September 30, 2018, 199,870 shares of restrictedthe Company’s common stock was subscribed for. The Company received $60,001 in cash. These shares were issued subsequent to unrelated parties for services and recorded stock compensation expense of $172,500.
September 30, 2018.
There are currently 31,637,15198,179,368 shares of common stock issued and outstanding and zero shares of preferred stock issued and outstanding.
NOTE 8 – Concentration of Credit Risk
We maintain our cash balances in various financial institutions that from time to time exceed amounts insured by the Federal Deposit Insurance Corporation up to $250,000, per financial institution. Asoutstanding as of September 30, 2015 and 2014, our deposits did not exceed insured amounts. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on cash.
NOTE 9 – Concentration of Sales
For the year ended September 30, 2015, our revenues resulted from three customers. The three customers accounted for 52%, 24%, and 24% of our total revenue.
NOTE 10 – Subsequent Events
In November 2015, Smartag signed an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in e-commerce trading on e-Bay, Amazon and Alipay platforms. Using the expertise of SSNST, Smartag will develop the business of e-Commerce trading, procurement, collection and distribution through a new joint venture company in Hong Kong.2018.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.
ITEM 9A. 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 SEC`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 September 30, 2015,2018, that our disclosure controls and procedures are effective at a reasonable assurance level and are designed to provide reasonable assurance that the controls and procedures will meet their 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 consolidated 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:
| (1) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of |
| (3) | 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 |
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 September 30, 2015.2018. 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 September 30, 2015,2018, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
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 temporary rules of the SEC 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 the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B OTHER INFORMATION
None.
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below are the present directors and executive officers of the Company. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
Director
| Name | Age | Office Held |
| Lock Sen Yow | Chief Executive Officer, Chief Financial Officer, Secretary and Director | |
| Director |
Biographies
Set forth below are brief accounts of the business experience during the past five years of each director, executive officer and significant employee of the Company.
Lock Sen Yow
Lock Sen Yow, age 59,60, was elected as the Company’s director, President, Chief Financial Officer and Secretary, to serve in such capacities until his successors are duly elected and qualified. Mr. Yow holds a Bachelors of Science in Electrical Engineering from Manchester University, a Law Degree from Buckingham University, and a Masters in Finance from RMIT University. His first job was as a petrophysical engineer in Schlumberger Technical Services Inc., whereupon he spent six years in Egypt and Abu Dhabi before being posted to India and the Far East including Philippines, Taiwan, Australia and Indonesia. Amongst his last postings in Schlumberger was as Country Manager of Schlumberger Philippines in 1986. Thereafter, he embarked upon a law degree in the United Kingdom whereupon he was admitted as a Barrister from Gray’s Inn, in 1989. Lock Sen practiced as a legal practitioner in Malaysia and Singapore, whereupon in 1995, he was made partner in Ms. Khattar Wong & Partners, one of the largest legal firms in Singapore. Subsequently, he ventured into fund management and corporate finance with Prime Partners Singapore and was director of corporate finance at BNP Prime Peregrine, then the corporate finance arm of Banque Nationale de Paris in Malaysia. In the meantime, he also obtained a Masters in Finance from RMIT University in Melbourne. In 2000, after relocating back to Malaysia, his took up a position as director and head of research and analysis at the Malaysian Communications and Multimedia Commission (MCMC) whereby his multidisciplinary skills lead him to become the ICT planner for the Framework for Industry Development (FID) 2000-2004 as well as the National Broadband Plan 2004-2009. He remained at MCMC in various positions and oversaw many ICT projects and national strategic master plans including the National RFID Roadmap and the Digital Lifestyle Malaysia Initiative. Currently, he is the Chief Executive Officer of Smartag Solutions Berhad, a publicly listed company on the Bursa Malaysia. He took up this position as of February 108,10, 2013.
Chee Song YapSiew Hock Lau
Chee Song Yap, age 57,Siew Hock Lau (age 62) - S.H. Lau, has more than 10 years of experiencebeen involved in several technological startups in the salesSilicon Valley, CA for the last 25 years, serving in various capacities from CEO, VP Sales & Marketing to VP of Business Development. He had been highly successful in launching several new high-tech products into the global marketplace. Regularly represents company as presenter and marketinginvited speaker at several international scientific conferences and workshops. Scored a successful exit with Fraser & Neave Sdn. Bhd. Thethe last company, Xradia Inc, in 2013, when the company was acquired by Carl Zeiss, AG. (Xradia Inc. manufactures ultra-high resolution X-ray CT scanners for research and industries). He is currently the largest beverage bottling, distributionCEO of New Biotic, a clinical stage biotech startup specializing in therapeutics derived from human microbiome to treat neurological and marketing companypsychiatric disorders. Additionally, he is active in Malaysia. Besides its own house brands,Angel investing, being a member of Shasta Angels. A business consultant, life coach and mentor, he also sits in the companyadvisory board of Providence International, a nonprofit, devoted to developing job creating business partnerships to restore sustainable livelihood and scalable businesses to at risk people and families around the world. S.H. holds the Coca Cola and 7Up franchises. Mr. Yap began his career as Sales Manager managing Direct and Pre-selling Route Sales force to ensure regular availability of stocksa B.Sc degree in all retail stores, stocks rotation, products are well merchandised, brand signages, POS materials are displayed and sales promotions. Other tasks included motivating staff performance, managing labor union, ensuring efficient distribution cost. Mr. Yap pioneered the building of the fountain beverage and vending division and led the company to establish the fountain package to dominate the on premise beverage segment such as food service outlets, employee feed canteens, bars and restaurants. Mr. Yap supported the entry of McDonald’s and the international fast food chain stores growth into the Malaysia market.
For the past 10 years Mr. Yap, has owned and managed Peakvision Sdn Bhd which has three optical retail practice. Mr. Yap is responsible for overall sales growth and profitability. He has pursuedBiochemistry, a strategy to tap the growing outdoor adventure, sports and travel market for better vision and eyes protection and developed a supplier base for specialty eyewares and lensesteaching degree and an in-store prescription and dispensing capacity to provide a one-stop optical solution store to protect eyes from injury in sports, extreme outdoor adventure and occupational hazards.MBA.
Mr. Yap has a Bachelor of Economics from the University of Malaya, Malaysia and an MBA from Charles Sturt University, Australia.
Family Relationships.
None.
Involvement in Certain Legal Proceedings
No executive officer or director has been involved in the last ten years in any of the following:
| ● | Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| ● | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; | |
| ● | Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or | |
| ● | Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Board Committees and Audit Committee Financial Expert
We do not currently have a standing audit, nominating or compensation committee of the board of directors, or any committee performing similar functions. Our board of directors performs the functions of audit, nominating and compensation committees. As of the date of this prospectus, no member of our board of directors qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.
Director Nominations
As of September 30, 2015,2018, we did not affect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. We have not established formal procedures by which security holders may recommend nominees to the Company’s board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Exchange Act requires the Company's directors and officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company's securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on the Company's review of the copies of the forms received by it during the period ended September 30, 20152018 and representations that no other reports were required, the Company believes, except for the below, that no persons who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company's common stock failed to comply with all Section 16(a) filing requirements during such fiscal year. Mr. Yow has not filed Section 16(a) forms related to 57,372,850 shares received from the Company. Mr. Yap has not filed Section 16(a) forms related to 13,500,00017,500,000 shares received from the Company. SSNST has not filed Section 16(a) forms related to 10,000,000 shares it has purchased.
Code of Ethics
We do not currently have a code of ethics.
ITEM 11. EXECUTIVE COMPENSATION
The following table and related footnotes show the compensation paid during the fiscal years ended March 31, 2018 and 2017 and to the Company's executive officers.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Lock Sen Yow (1) | 2018 | — | — | — | 199,762 | (2) | — | 199,762 | ||||||||||||||||||||
| Chief Executive Officer | 2017 | — | — | — | — | (2) | — | — | ||||||||||||||||||||
| (1) | Mr. Yow accrued his compensation. |
| (2) | In April 2018, we granted 10,000,000 options to purchase shares of our common stock at $0.30 per share. These options vest over a five-year period. |
Narrative Disclosure to Summary Compensation Table
Effective April 1, 2018, we entered into an Employment Agreement (the “Employment Agreement”) with Lock Sen Yow, the Company’s current officersCEO. Under the Employment Agreement, Mr. Yow will receive a base salary of $200,000 per year and directors have not received any cash remuneration since inception.a guaranteed bonus of $40,000 per year. Mr. Yow shall receive 10,000,000 options to purchase the Company’s common at an exercise price of $0.30 per share (“Employee Options”). Employee Options shall vest quarterly over a five-year period. To the extent, the Employee Agreement is terminated, Employee has 90 days from termination to exercise the options or they will expire. The officers will not receive any remuneration upon completionterm of the offering untiloptions shall be 5 years. Mr. Yow will be eligible for an incentive bonus based on his performance. Additionally, Mr. Yow will receive a car allowance of $500 per month and an office allowance of $2,000 per month per location. The term of the consummation of an acquisition. No remuneration of any nature has been paid for or on account of services rendered by a director in such capacity. contract is from April 1, 2018 to September 30, 2022.
Outstanding Equity Awards at Fiscal Year-End March 31, 2018
The officers and directors do not intendfollowing table provides information with respect to devote more than a few hours a week to our affairs.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adoptedand restricted stock awards held by the Company for the benefiteach of its employees.our executive officers as of March 31, 2018.
| Option Awards | ||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
| Lock Sen Yow | 4/1/2018 | 10,000,000 | 0 | 0.30 | 3/31/2023 | |||||||||||
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Compensation Committee Report
Our board of directors has reviewed and discussed the Compensation Discussion and Analysis in this report with management. Based on its review and discussion with management, the board of directors recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the fiscal year ended September 30, 2015.2018. The material in this report is not deemed filed with the SEC and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this Report on Form 10-K and irrespective of any general incorporation language in such filing.
Submitted by the board of directors:
| Lock Sen Yow |
| ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth, as of February 10, 2016,January 14, 2019, the number of shares of Common Stock owned of record and beneficially by executive officers, directors and persons who hold 5% or more of the outstanding Common Stock of the Company.
| Name and Address | Amount and Nature of Beneficial Ownership | Percentage of Class Common Stock(1) | ||
SMTrack Bhd.(2) Cyberjaya Head Office 4808-1-26 CBD Perdana 2 Persiaran Perdana, 63000 Cyberjaya Selangor Malaysia | 10,000,000 | 30.64% | ||
| Executive Officers and Directors | ||||
| Lock Sen Yow | 10,000,000 | 30.64% | ||
| Chee Song Yap | 13,500,000 | 41.36% | ||
| All Officers and Directors as a group (2) | 23,500,000 | 72.00% |
| Name and Address | Amount and Nature of Beneficial Ownership | Percentage of Class Common Stock(1) | ||
| Shenzhen Shen Nan Shun Technology Co. Ltd | 10,000,000 | 10.16% | ||
| Chee Song Yap | 17,500,000 | 17.79% | ||
| Executive Officers and Directors | ||||
| Lock Sen Yow | 57,372,850 | 58.32% | ||
| Siew Hock Lau | 5,000,000 | 5.08% | ||
| All Officers and Directors as a group (2) | 62,372,850 | 63.4% |
| (1) | The percent of Common Stock owned is calculated using the sum of (A) the number of shares of Common Stock owned, and (B) the number of warrants and options of the beneficial owner that are exercisable within 60 days, as the numerator, and the sum of (Y) the total number of shares of Common Stock outstanding |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the year ended September 30, 2015, the Company received $810,000 advances from related parties which the terms were still being negotiated and currently were recorded under other payable.related. $730,000 was from a related entity to a former director and $80,000 was received from Chee Song Yap. Subsequent to September 30, 2015,Yap, a former director of the Company. The two parties entered into 0% interest notes which are to be repaid by September 30, 2016.2017. On March 23, 2017, the Company issued 40,500,000 shares of common stock in exchange for the cancelation of this notes. The Company valued the fair market value of the shares at $0.02 per share on the date of issuance which was the stock price on the date of issuance.
The Company received $75,000 from Lock Sen Yow under a 0% interest notes which are to be repaid by September 30, 2017.On March 23, 2017, the Company issued 3,750,000 shares of common stock in exchange for the cancelation of this note. The Company valued the fair market value of the shares at $0.02 per share on the date of issuance which was the stock price on the date of issuance.
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.,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, 2014. All advances shall be paid on or before September 30, 20162017 and this advance has an 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%)0% per annum, compounded annually.annum. On August 19, 2016, Smartag Solutions Bhd transferred the balance of the Secured Note to Lock Sen Yow as severance employment package from Smartag Solutions Bhd. As of September 30, 2016, Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness2017, the balance was $0. On March 23, 2017, the Company issued 9,622,850 shares of Smartag and are secured by substantially allcommon stock in exchange for the cancelation of the assets of Smartag.this note.
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,August 15, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September 30, 20162017 and this loan has an 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%)0% interest per annum, compounded annually.annum. During the threenine months ended March 31,June 30, 2015, the Company repaid $100,000 of the Loan. During the year ended September 30, 2016, the Company repaid $50,000 of the Loan. On August 19, 2016, Smartag Solutions Bhd transferred the balance of the Loan to Lock Sen Yow. On March 23, 2017, the Company issued 7,500,000 shares of common stock in exchange for the cancelation of this note.
The total amount owed as of June 30, 2018 was $0. During the quarter ended June 30, 2018 and 2017, we recorded imputed interest of $0 and $7,763, respectively, from all the aforementioned related party debt.
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Employment Agreement
Effective April 1, 2018, we entered into an Employment Agreement (the “Employment Agreement”) with Lock Sen Yow, the Company’s CEO. Under the Employment Agreement, Mr. Yow will receive a base salary of $200,000 per year and a guaranteed bonus of $40,000 per year. Mr. Yow shall receive 10,000,000 options to purchase the Company’s common at an exercise price of $0.30 per share (“Employee Options”). Employee Options shall vest quarterly over a five-year period. To the extent, the Employee Agreement is terminated, Employee has 90 days from termination to exercise the options or they will expire. The term of the options shall be 5 years. Mr. Yow will be eligible for an incentive bonus based on his performance. Additionally, Mr. Yow will receive a car allowance of $500 per month and an office allowance of $2,000 per month per location. The term of the contract is from April 1, 2018 to September 30, 2022.
Formation of Smartag HK
On February 2, 2018, Smartag entered into a Joint Venture & Shareholder’s Agreement with Vander a related party. As a result, the previous agreements with SSNST and Vander was terminated. Under the terms of the JV Agreement, Smartag and Vander formed a new Hong Kong entity called Smartag HK. Smartag HK shall pursue e-Commerce and related Fintech e-Money and e-remittance solutions. Smartag owns 70% and Vander owns 30% of Smartag HK. Smartag forgave Vander’s liability of $41,923 and Vander contributed US$25,510.
Corporate Governance and Director Independence.
The Company has not:
| • | established its own definition for determining whether its directors and nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current director would not be deemed to be “independent” under any applicable definition given that he is an officer of the Company; nor | |
| • | established any committees of the board of directors. |
Given the nature of the Company’s business, its limited stockholder base and the current composition of management, the board of directors does not believe that the Company requires any corporate governance committees at this time.
As of the date hereof, the entire board serves as the Company’s audit committee.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Public Accountants
On December 18, 2013, we dismissed Weaver Martin & Samyn, LLC (“Weaver”) as its independent registered public accounting firm. The decision was approved by our Board of Directors.
The reports of Weaver on our consolidated financial statements for the fiscal years ended September 30, 2013 and 2012 did not contain an adverse opinion or disclaimer of opinion and were not modified as to uncertainty, audit scope, or accounting principles, except the report did contain an explanatory paragraph related to our ability to continue as a going concern. During the fiscal years ended September, 2013 and 2012, and the subsequent period through the date of this report, there were (i) no disagreements with Weaver on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Weaver would have caused Weaver to make reference to the subject matter of the disagreements in connection with its report, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On December 18, 2013, we engaged TAAD, LLP (“TAAD”) our new independent registered public accounting firm. The appointment of TAAD was approved by our Board of Directors. During the fiscal years ended September 30, 20152018 and 2014,2017, we did not consult with TAAD on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company's consolidated financial statements, and TAAD did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
Audit Fees
During the years ended September 30, 20152018 and 2014,2017, the Company paid TAAD approximately $19,800$18,200 and $0, respectively for auditing services they performed throughout those years.
During the years ended September 30, 2015 and 2014, the Company paid Weaver approximately $1,500 and $9,000,$26,000, respectively for auditing services they performed throughout those years.
Tax Fees
During the years ended September 30, 20152018 and 2014,2017, our principal accountant did not render services to us for tax compliance, tax advice or tax planning.
All Other Fees
During the years ended September 30, 20152018 and 2014,2017, there were no fees billed for products and services provided by the principal accountant other than those set forth above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.
1.Audit services include audit work performed of consolidated financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
2.Audit-Related services are for assurance and related services that are reasonably related to the audit or review of our consolidated financial statements.
3.Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the consolidated financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.
4.Other Fees are those associated with products or services not captured in the other categories.
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as a part of this Report: |
| 1. | Financial Statements. The following |
Report of Independent Registered Public Accounting Firm.
Balance Sheets as of September 30, 20152018 and 2014.2017.
Statements of Operations for the years ended September 30, 20152018 and 2014.2017.
Statements of Stockholders’ Deficit for the years ended September 30, 20152018 and 2014.2017.
Statements of Cash Flows for the years ended September 30, 20152018 and 2014.2017.
Notes to consolidated financial statements.
| 2. | Financial Statement Schedule(s): |
All schedules are omitted for the reason that the information is included in the consolidated financial statements or the notes thereto or that they are not required or are not applicable.
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| 3. | Exhibits: |
| Number | Description | |
| 3.1 | Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 of Company's Form 10 filed on November 16, 2009) | |
| 3.2 | Bylaws of Smartag International, Inc. (incorporated herein by reference to Exhibit 3.1 of Company's Form 8-K dated September 30, | |
| 10.1 | Secured Revolving Promissory Note between Smartag International Inc. and Smartag Solutions Bhd. Dated March 17, 2009. (incorporated herein by reference to Exhibit 10.3 of Company's Form 10 filed on November 16, 2009) | |
| 10.2 | Security Agreement between Smartag International Inc. and Smartag Solutions Bhd. Dated March 17, 2009. (incorporated herein by reference to Exhibit 10.4 of Company's Form 10 filed on November 16, 2009) | |
| 10.3 | Licensing and Technology Agreement between Smartag International Inc. and Smartag Solutions Bhd. Dated September 19, 2013 (incorporated herein by reference to Exhibit 10.4 of Company's Form 8-K filed on September 23, 2013) | |
| 10.4 | Loan Agreement between Smartag International Inc. and Smartag Solutions Bhd. Dated September 19, 2013 (incorporated herein by reference to Exhibit 10.5 of Company's Form 8-K filed on September 23, 2013) | |
| 10.5 | Securities Purchase Agreement dated July 5, 2015, by and among Smartag International, Inc. and Essential Beverage Corp. (incorporated herein by reference to Exhibit 2.1 of Company's Form 8-K filed on July 31, 2015) | |
| 10.6 | Joint Venture Agreement between Smartag International, Inc., Bobby Tang Siu Ki and Yang Ye Cai dated November 2, 2015. | |
| 10.7 | Joint Venture Agreement between Smartag International, Inc. and Hong Kong Vander Trade Ltd, dated February 2, 2018. (incorporated herein by reference to Exhibit 10.1 of Company's Form 8-K filed on February 7, 2018) | |
| 10.8 | Joint Venture Agreement between Smartag International, Inc. and PT Supratama Makmur Sejahtera, dated February 27, 2018. (incorporated herein by reference to Exhibit 10.1 of Company's Form 8-K filed on February 28, 2018) | |
| 10.9 | Employment Agreement between Smartag International, Inc. and Lock Sen Yow dated April 1, 2018 (incorporated herein by reference to Exhibit 99.1 of Company's Form 8-K filed on April 2, 2018) | |
| 31 | Certification of the Company's Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant's Annual Report on Form 10-K for the year ended September 30, | |
| 32 | Certification of the Company's Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
| SMARTAG INTERNATIONAL, INC. | |
| By: /s/ Lock Sen Yow | |
| Name: Lock Sen Yow | |
| Title: President and Chief Financial Officer |
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Lock Sen Yow his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
| Signature | Title | Date | ||||
/ s/ Lock Sen Yow Lock Sen Yow | Chairman of the Board, CEO, President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director | January 14, 2019 | ||||
/ s/
| Director | January 14, 2019 | ||||