The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2014
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND ORGANIZATION
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. On November 29, 2004, we merged with Art4Love, Inc., a Delaware
corporation, into Art4Love, Inc. a Nevada corporation. Art4love, Inc. attempted to sell and lease art to companies and
individuals from artists’ collections worldwide. The Company ceased operations in December 2006. On
February 19, 2009, Art4Love changed its name to Smartag International, Inc. On September 19, 2013, the Company commenced operations
specializing in traceability and mobile payments. We provide food traceability, RFID solutions, near field communications, track
and trace services and micro payment services and the products associated with these.
Licensing Agreement
On September 19, 2013, we entered
into a Licensing and Technology Agreement (“Licensing Agreement”) with, Smartag Solutions Berhad, a Malaysian company
(“SSB”). Under the terms of the Licensing Agreement, SSB licensed to the Company the exclusive rights to use, modify
and further enhance and develop SSB’s Smartrack™ software engine for any project handled or sponsored by the Company
and hereby designates the Company in perpetuity from the date hereof to redistribute, outsource or further enhance the Smartrack™
engine for any projects, whether within North America or even between North America and any other country in the world provided
however that the traceability project is sponsored by the Company. The Company is to pay $200,000 for the license (“Licensing
Fee”). The Licensing Fee shall be made within three months from the date of invoice from SSB to the Company after the completion
and handing over to the Company of the server with the Smartrack™ engine together with the installation and commissioning
of the Company’s new website. Any delay in payment after three months shall incur an interest at market rate and in any event
shall not be delayed beyond end of March 2014. Smartag and SSB has agreed to an extension of time for the completion of the Smartrack™
engine to September 30, 2014, as such SSB will invoice Smartag in due course.
Under the Agreement, SSB also
agrees to develop, install and commission the Smartrack™ in North America at its own costs and place one SSB’s server
in a data center in the United States and subsequently develop and install traceability systems for the retail North American market
as well as link up SSB’s related solutions and services currently in place with all the certification and/or accreditation
as may be required by EPC GS1 Global within two months from the date hereof.
Loan Agreement
On September 19, 2013, we entered
into a Loan Agreement (“Loan Agreement”) with SSB. Under the terms of the agreement, SSB loaned the Company $200,000
(“Loan”). The Loan shall be repaid on or before September 30, 2014 and no interest is accrued on this loan. On May
16, 2014, the SSB increased the Loan to $300,000. Smartag and SSB has agreed to an extension of the loan repayment to September
30, 2015.
Basis of Presentation
— The unaudited condensed interim financial statements have been prepared by us pursuant to the rules and regulations of
the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring
accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective
periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations.
These financial statements should be read in conjunction with the audited financial statements and notes for the year ended September
30, 2013 included in our Annual Report on Form 10-K. The results of the three and nine month periods ended June 30, 2014 are not
necessarily indicative of the results to be expected for the full year ending September 30, 2014.
Going Concern
-
The accompanying
financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation
of the company as a going concern. However, we have an accumulated deficit of $1,604,552 as of June 30, 2014. Our total liabilities
exceeded its total assets as of June 30, 2014. In view of the matters described above, recoverability of a major portion of the
recorded asset amounts shown in the accompanying balance sheet is dependent upon our continued operations, which in turn is dependent
upon our ability to raise additional capital, and obtain financing. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern.
Use of Estimates
—The preparation of financial statements in conformity with generally accepted accounting principles in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
— The Company considers investments with original maturities of 90 days or less to be cash equivalents. As of June 30,
2014 and September 30, 2013, we have no cash equivalents.
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 has occurred or services
rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.
Accounts Receivable –
Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability
based on past credit history with customers and their current financial condition. Balances outstanding after management has used
reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.
There has been no bad debt expense recorded.
Income Taxes
—
The Company records income taxes in accordance with the provisions of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” The standard requires,
among other provisions, an asset and liability approach to recognize deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities. Valuation
allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Net Loss Per Share
—
The Company computes net loss per share in accordance with FASB ASC Topic 260, “Earnings per Share,” Under the provisions
of the standard, basic and diluted net loss per share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of shares of common stock outstanding during the period. Common equivalent shares
related to stock options and warrants have been excluded from the computation of basic and diluted earnings per share because their
effect is anti-dilutive.
Concentration of Credit Risk
— Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The
Company maintains its cash with high credit quality financial institutions; at times, such balances with any one financial institution
may exceed FDIC insured limits.
Financial Instruments
— Our financial instruments consist of cash, accounts receivable, accounts payable, and notes payable. The carrying
values of cash, accounts payable, and notes payable are representative of their fair values due to their short-term maturities.
Marketable Securities
—
The Company classifies its marketable equity securities as available-for-sale and carries them at fair market value, with the unrealized
gains and losses included in the determination of comprehensive income and reported in stockholders’ equity. Losses that
the Company believes are other-than-temporary are realized in the period that the determination is made. As of June 30, 2014, the
Company had no unrealized gains or losses. None of the investments have been hedged in any manner.
Recently Issued Accounting
Pronouncements
—The Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC and they did not or are not believed by management to have a material impact on the
Company's present or future financial statements.
NOTE 2 – INVESTMENT IN MARKETABLE SECURITIES
On August 13, 2013, the Company invested $25,000 in LGI Holdings,
Inc.
NOTE 3 – NOTE PAYABLE – RELATED PARTY
Secured Note
On March 17, 2009, we entered into a
Secured Revolving Promissory Note (the “Secured Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority
stockholder of the Company. Under the terms of the Note, Smartag Solutions Bhd, agreed to advance to the Company, from
time to time and at the request of the Company, amounts up to an aggregate of $200,000 until September 30, 2013. All
advances shall be paid on or before September 30, 2014 and this advance has an interest rate of 0% per annum. As of June 30, 2014,
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.
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”). The Loan shall be repaid on or before September 30, 2014 and this loan has an interest rate of 0% interest
per annum. On May 16, 2014, the SSB increased the Loan to $300,000.
NOTE 4 – STOCKHOLDERS’
DEFICIT
Authorized Stock:
As of June 30, 2014, there were authorized
500,000,000 shares of common stock, par value $0.001 per share and 25,000,000 shares of preferred stock, par value $0.001 per share. Each
common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation
is sought.
There are currently 10,637,151 shares
of common stock issued and outstanding and zero shares of preferred stock issued and outstanding.