RIDENOW GROUP, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
November 30, 2014
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number
00
0-54219
SMART SERVER, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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46-3951329
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1960 Graeagle Lane
Lincoln, California 95648
(Address of principal executive offices) (Zip Code)
(916) 508-5385
(Registrant's telephone number, including area code)
Copies of Communications to:
Stoecklein Law Group, LLP
401 West A Street
Suite 1150
San Diego, CA 92101
(619) 704-1310 • Fax (619) 704-1325
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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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
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No
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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
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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No
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As of May 31, 2014, the aggregate market value of shares held by non-affiliates of the registrant (computed by reference to the price at which the common equity was last sold) was approximately $50,000.
The number of shares of Common Stock, $0.001 par value, outstanding on March 13, 2015 was 5,500,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
SMART SERVER, INC.
FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 2014
Index to Report on Form 10-K
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PART I
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Page
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Item 1.
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Business
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4
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Item 1A.
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Risk Factors
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9
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Item 1B.
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Unresolved Staff Comments
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19
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Item 2.
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Properties
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19
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Item 3.
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Legal Proceedings
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19
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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19
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Item 6.
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Selected Financial Data
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20
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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20
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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23
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Item 8.
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Financial Statements and Supplementary Data
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23
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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23
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Item 9A.
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Controls and Procedures
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24
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Item 9B.
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Other Information
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25
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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25
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Item 11.
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Executive Compensation
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27
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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28
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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29
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Item 14
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Principal Accounting Fees and Services
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29
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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30
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding:
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our ability to diversify our operations;
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inability to raise additional financing for working capital;
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the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
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our ability to attract key personnel;
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our ability to operate profitably;
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deterioration in general or regional economic conditions;
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adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
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changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
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the inability of management to effectively implement our strategies and business plan;
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inability to achieve future sales levels or other operating results;
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the unavailability of funds for capital expenditures;
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other risks and uncertainties detailed in this report;
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as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report, including without limitation, the following sections: Item 1 “Business,” Item 1A “Risk Factors,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (SEC). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
As used herein, “Smart Server,” “the Company,” “we,” “our,” and similar terms include Smart Server, Inc. and its subsidiaries, unless the context indicates otherwise.
Business Development Summary
Smart Server, Inc., is a development stage company incorporated in the State of Nevada in October of 2013. We were formed to engage in the business of designing and developing a computer application software for mobile phones (smart phones) and tablet computers, such as those based on Apple® and Android® platforms, which is intended to provide customers at participating restaurants, bars and clubs the ability to pay their bill with their smartphone — without even having to ask for the check.
We have designed a website which will be a primary source of information for the general public of the nature of our business. Additionally, we have begun our initial writing, design and programming of our mobile payment solution app. During our initial month of formation we concentrated our energies on analyzing the viability of our business plan, and establishing our business model, including researching the items needed to secure a trademark, filing a trademark application, and developing relationships with mobile app retailers We are using the services of a website and mobile app developer to design our logo and website and develop our mobile application. We do not presently have a market-ready product, and we currently do not have any customers. As such, we have generated no revenues.
We are attempting to build Smart Server into a successful designer of a mobile payment solution app for smart phones and other mobile devices. In order to generate revenues during the next twelve months, we must:
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Maintain our website
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We believe that the internet is a great marketing tool not only for providing information on our company, but also for providing current information on our upcoming app as well as industry related information regarding new technology and device updates. We recently launched our updated website, which is not yet fully operational, but we have initiated the process of developing a more advanced site where we can provide a more detailed section regarding proprietary app designs and features. We have paid approximately $8,150 towards the development of our website and application.
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Develop and implement a product development timeline –
Smart Server will require the implementation of a detailed timeline to ensure the Company produces a marketable mobile application. These keys areas will need to be addressed to assist in the assurance of the Company’s success:
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efficient design and programing writing;
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extensive Beta testing through friends and family network, or eventually through current users;
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timely and useful downloadable updates;
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marketable launch through third party retailer or through the Company’s website.
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Develop and implement a marketing plan –
Smart Server’s planned revenue streams will require an extensive list of contacts to allow for the marketing of our mobile apps. Awareness of the revenue potential Smart Server will be able to deliver through its website and app, will be delivered through the implementation of a number of marketing initiatives including search engine optimization, website completion, hosted video demonstrations, third party service contacts, tradeshow attendance, as well as blogging and other forms of social media which are driven by technology and mobile flexibility. These efforts and the resulting awareness will be key drivers behind the success of our revenue producing operations.
Recent Change in Management
On March 16, 2015, Matthew Lane submitted his letter of resignation from his position as President, CEO, Secretary, Treasurer, and Director of the Company. The resignation was accepted by the Company on March 16, 2015.
On March 16, 2015, in connection with the resignation of Mr. Lane, the Board of Directors appointed Pamela Elliott to serve as the Chief Executive Officer, President, Secretary, Treasurer and Director of the Company.
Industry Background and Trends
Apps are designed to help a user perform specific tasks and are generally downloaded by users from an App store directly onto their smartphone or tablet. Apps are becoming increasingly popular. According to International Dare Corporation (“IDC”) in December 2010, worldwide mobile application downloads are forecast to reach 76.9 billion downloads in 2014, an approximate 700% increase from an estimated 10.9 billion downloads in 2010. While the foregoing industry predictions are based on publicly available third party industry reports, there are wide ranging variations in the predictions regarding the size of the future mobile applications market and undue reliance should not be placed on these statistics.
Business Overview
Smart Server, Inc. has created a business plan built upon designing and selling mobile apps for smart phones and other mobile platforms such as tablets. Smart Server is striving to design and develop applications which will not only improve the efficiency of the restaurant dining experience, as is the case with our initial app, Smart Server, which provides a platform where consumers and restaurant patrons can pay their tabs directly from their smart phones when using a credit or debit card.
Smart Server, Inc., was established in October of 2013. Currently we have temporary offices at 1960 Graeagle Lane, Lincoln, CA 95648. Our sole officer, director and founding stockholder created the business as a result of his experience in the restaurant industry and realized the opportunity for the Smart Server concept.
Our Product
Smart Server
is a payment program for Windows, Mac, iOS, Android and Windows Mobile operating systems. This application is database driven using an online Cloud database for active live syncing for the user’s data and accounts. Our application allows consumers to eliminate the inconvenience of having to wait for their server to drop off the tab when dining and instead pay your tab directly from your smart phone with our proprietary technology.
Point of sale (also called POS or checkout) is the place where a retail transaction is completed. It is the point at which a customer makes a payment to the merchant in exchange for goods or services. Smart Server, upon full development of our smartphone application, will integrate with all major hospitality POS systems, including but not limited to Harbourtouch, NCR, POSGuys, AccuPOS, Micros, Focus Restaurant Management Software, and FuturePOS. Our cloud based mobile payment solution will not require any additional hardware and our POS integration system will allow information to flow securely and automatically through the system. Additionally, you won’t have to change or modify your existing merchant processor or interrupt your normal work flow.
Some of the benefits that users will receive from our
Smart Server
application include:
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Saves time – Have you ever waited patiently for a server to return your debit or credit card and it was not returned in a timely manner? What’s the point in waiting for your check when you can close out your tab at any time from your smartphone? This can be frustrating when you are in a hurry to pay your bill or you have places to be. With Smart Server you can avoid this entirely by simply paying your bill from your smartphone or tablet at participating restaurants.
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Reviews – As evident by the popularity of Yelp, “reviews are written by people using Yelp to share their everyday local business experiences, giving voice to consumers and bringing “word of mouth” online. The information these reviews provide is valuable for consumers and businesses alike.” With that being said, we believe an important part of having repeat customers in the restaurant and bar industry is knowing what your customers think about the level of customer service, and the overall experience. To that end, we intend to provide reviews from Smart Server users. Upon implementation, users will be able to review and rate participating restaurants and bars through our app. We believe our reviews will provide valuable feedback to our users, as well as offering an incentive to attract new participating establishments.
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Promotions – We intend to work with participating restaurants and establishments to offer customers who use Smart Server exclusive rewards, promotions, and special offers. When implemented, these discounts will be available directly from your from and automatically redeemable on your bill.
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Bill Splitting – Another feature we plan on adding to our app, is a function where Smart Server users can split a bill whenever there are two or more individuals paying the bill. This feature avoids the necessity of having the server split the bill into two separate checks which can be make paying your bill even more complicated, and thus time consuming. When implemented, we believe this feature will make our app even more convenient because it will save your time.
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Tipping – Yet another feature we intend to make available on our app is the ability to tip your server when paying your bill. Currently, we are researching the viability of adding a mandatory tipping feature to our app, unless the user writes a negative review stating why they decided not to include a tip, whether it was for poor service or the food was unpleasant.
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Lost debit/credit card – Have you ever handed your credit card to a Server to pay your bill and accidentally left your card? With Smart Server you won’t have to worry about this because you never have to pull your card out of your wallet/purse. This reduces the likelihood of losing your card, your card being stolen, or being forced to come back to pick up your card upon realizing that you left it.
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Market and Revenue Generation
In order to generate revenues during the next twelve months, we must:
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Develop and implement a marketing plan – Smart Server’s planned revenue streams will require establishing a web presence and improved visibility within the public and private sectors. Initially, we intend to generate advertising revenue primarily from display, audio and video advertising on our website. We anticipate that such advertising will be included on our website soon after we have a fully operational website which we anticipate will be by the end of the second quarter of 2015. We also intend to build revenue based upon profits realized through our sales through advertising Apps. A major key factor in the Company’s success will be the building of third party relationships within the restaurant industry and mobile technology industry.
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Develop and implement a comprehensive consumer information website – For the foreseeable future, the company’s website (
www.smart-server.biz
) will be a primary asset and a potential key source of revenue generation, as well as company information. Currently, management is formulating its plan on how best to employ its resources to expand and improve the site. We are working to add to the functionality of the site including: listing participating merchants where customers can use Smart Server as a mobile payment method, real time testimonials and reviews from actual customers, feedback from participating merchants on how Smart Server actually impacts their businesses by tracking order history and preferences of users. Additionally, we need to optimize the site for search engine rank, as well as renew the look and feel of the site to coincide with our objectives for the Smart Server. We are also analyzing the viability of adding feature where users are given personalized offers and rewards for being loyal patrons and using Smart Server while they frequent participating merchants. Thus far, we have not yet recognized revenues from the website nor is there any indication that we ever will recognize direct revenues from our website. We do not presently have a fully operational website or a market-ready product, nor do we have any customers; thus have generated no revenues.
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Our operations, to date, have been devoted primarily to startup and development activities, which include the following:
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Formation of the company;
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Development of Company logo;
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Development of our business plan;
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Filing a Trademark application for our logo;
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Launching of our preliminary website; and
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Begin the design and development of our initial mobile application.
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Competition
There are many companies who compete directly with our products. A number of companies who market and a similar concept have recently emerged, including Uber, Tabbedout, Cover, Dash, iwaitless.com. Most of these companies have significantly greater financial and other resources than us and have been developing their products longer than we have been developing ours. Additionally, there are not significant barriers to entry in our industry and new companies may be created that will compete with us and other, more established companies who do not now directly compete with us, may choose to enter our markets and compete with us in the future.
Intellectual Property and Proprietary Rights
Proprietary rights are important to our success and our competitive position. To protect our proprietary rights, we rely on copyright, service marks and trade secret laws, confidentiality procedures and contractual provisions. We currently have one pending trademark registration.
We cannot assure you that any of our proprietary rights with respect to our products or services will be viable or of value in the future since the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States, and effective copyright, trademark and trade secret protection may not be available in those jurisdictions. Our means of protecting our proprietary rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.
In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights, particularly in the software and Internet-related industries. We could become subject to intellectual property infringement claims as the number of our competitors grows and our products and services overlap with competitive offerings. These claims, even if not meritorious, could be expensive to defend and could divert management’s attention from operating our company. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantial award of damages and to develop non-infringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We may be unable to develop non-infringing technology or obtain a license on commercially reasonable terms, if at all.
Government Regulation
Our activities are not currently subject to any particular regulations by governmental agencies other than those routinely imposed on corporate businesses. However, we cannot predict the impact of future regulations on either us or advertisers that may advertise with our Apps.
Employees
We are a development stage company and as of November 30, 2014 only had one part-time employee, Matthew Lane, who was our sole officer and director. As of March 16, 2015, Pamela Elliott is the Company’s sole part-time employee and sole officer and director.
We plan to use consultants, attorneys, accountants, as necessary and do not plan to engage any additional full-time employees in the near future. We believe the use of non-salaried personnel allows us to expend our capital resources as a variable cost as opposed to a fixed cost of operations. In other words, if we have insufficient revenues or cash available, we are in a better position to only utilize those services required to generate revenues as opposed to having salaried employees. We do not intend to hire any additional employees within the next 12 months. At such time as the Company would deem it appropriate to hire additional staff, a portion of any employee compensation would likely include the right to acquire our stock, which would dilute the ownership interest of holders of existing shares of our common stock.
Available Information
We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited
financial statements, at no charge upon receipt of a written request to us at Smart Server, Inc., 2956 Worden St., San Diego, CA 92110.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
Investors in Smart Server should be particularly aware of the inherent risks associated with our business. As of the date of this filing our management is aware of the following material risks.
We are a development stage company organized in October 2013 and have recently commenced operations, making an evaluation of us extremely difficult. At this stage, even with our good faith efforts, there is nothing on which to base an assumption that we will become profitable or generate any significant amount of revenues.
We were incorporated in October 2013 as a Nevada corporation. As a result of our start-up operations we have; (i) generated no revenues, (ii) accumulated deficit of $168,860 as of November 30, 2014, and (iii) we have incurred losses of $168,860 for the fiscal year ended November 30, 2014. We have been focused on organizational, start-up activities and business plan development since we incorporated. Although we have commenced the development of our website and marketing strategy, there is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including our ability to raise adequate working capital, demand for our product, the level of our competition and our ability to attract and maintain key management and employees. We do not presently have a market-ready product and we currently do not have any customers. As such, we have generated no revenues.
We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can 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. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.”
Even if we no longer qualify as an “emerging growth company”, we may still be subject to reduced reporting requirements so long as we are considered a “Smaller Reporting Company.”
Many of the exemptions available for emerging growth companies are also available to smaller reporting companies like us that have less than $75 million of worldwide common equity held by non-affiliates. So, although we may no longer qualify as an emerging growth company, we may still be subject to reduced reporting requirements.
Shareholders who hold unregistered shares of our common stock are subject to resale restrictions pursuant to Rule 144, due to our status as a “Shell Company.”
Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, because we have nominal assets, we are considered a “shell company” pursuant to Rule 144 and as such, sales of our securities pursuant to Rule 144 are not able to be made until we have ceased to be a “shell company” and we are subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all of our required periodic reports for at least the previous one year period prior to any sale pursuant to Rule 144; and a period of at least twelve months has elapsed from the date “Form 10 information” (i.e., information similar to that which would be found in a Form 10 Registration Statement filing with the SEC) has been filed with the Commission reflecting the Company’s status as a non-“shell company.” Because none of our non-registered securities can be sold pursuant to Rule 144, until one year after filing Form 10 like information with the SEC, any non-registered securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose will have no liquidity until and unless such securities are registered with the Commission and/or until 12 months after we cease to be a “shell company” and have complied with the other requirements of Rule 144, as described above. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Our status as a “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless.
Our auditor’s report reflects the fact that the ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately the achievement of significant operating revenues. If we are unable to continue as a going concern, you will lose your investment.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, stockholders will lose their investment. We will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to investors.
A decline in the popularity of our website will negatively impact our business.
Initially, our primary source of revenues will be from advertising on our website (www. http://smart-server.biz/). These revenues are dependent upon our ability to attract new users on our site, among other things. If we are unable to maintain or extend web traffic to, and use of, our site, our advertising revenues may be adversely affected. Currently, our website is not yet fully operational. We are in the process of developing a more advanced site and intend to launch it during the end of the second quarter of 2015.
Intense competition in the internet social networking industry and in the mobile payment solution industry may adversely affect our revenue and profitability.
We operate in a highly competitive environment and we compete for members, visitors and advertisers with numerous well established internet social networking sites, as well as many smaller and/or newer sites. We will compete for consumers and advertisers with other companies, including internet, television and print media companies. If we are unable to differentiate our products and generate sufficient appeal in the marketplace, our ability to achieve our business plan may be adversely affected.
As compared to us, many of our competitors have significantly longer operating histories and greater brand recognition as well as, greater financial, management, and other resources.
If we are unable to compete effectively in our market, our revenue and profitability may be adversely affected.
Our ability to increase our revenue will depend on our ability to increase market penetration of our social networking and to evolve our mobile payment solution model.
The social networking industry and the mobile payment solution industry are, by their nature, businesses that rely upon the acceptance of its creative product by the marketplace. Much of our ability to increase revenue will depend on:
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expanding the market penetration of our offerings to consumers; and
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the successful evolution of our product mix.
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While we will be constantly evaluating the marketplace and evolving our offerings of content and internet and mobile application features, we may not be able to anticipate shifting tastes of our customer base and the content offered by us may fall out of favor with our consumers. If we are unable to expand the market penetration of our current products or anticipate changes in consumer taste, our revenue could be affected.
Our network is subject to security and stability risks that could harm our business and reputation and expose us to litigation or liability.
Online and mobile commerce and communications depend on the ability to transmit confidential information and licensed intellectual property securely over private and public networks. Any compromise of our ability to transmit such information and data securely or reliably, and any costs associated with preventing or eliminating such problems, could harm our business. Online transmissions are subject to a number of security and stability risks, including:
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our encryption and authentication technology, and access and security procedures, may be compromised, breached or otherwise be insufficient to ensure the security of customer information;
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we could experience unauthorized access, computer viruses, system interference or destruction, “denial of service” attacks and other disruptive problems, whether intentional or accidental, that may inhibit or prevent access to our website or use of our products and services;
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someone could circumvent our security measures and misappropriate our partners’ or our customers’ intellectual property, interrupt our operations, or jeopardize our licensing arrangements, which are contingent on our sustaining appropriate security protections;
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our computer systems could fail and lead to service interruptions;
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we may be unable to scale our infrastructure with increases in customer demand; or
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our network of facilities may be affected by a natural disaster, terrorist attack or other catastrophic events.
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The occurrence of any of these or similar events could damage our business, hurt our ability to distribute products and services and collect revenue, threaten the proprietary or confidential nature of our technology, harm our reputation and expose us to litigation or liability. We may be required to expend significant capital or other resources to protect against the threat of security breaches, hacker attacks or system malfunctions or to alleviate problems caused by such breaches, attacks or failures.
We will be competing with better established companies.
We will not be the first company to attempt to design and sell apps for mobile devices. There are other companies whose contacts and expertise may be more advanced than ours, and whose methods of marketing and resale may be more cost-effective. Further, we will be facing competition from better established companies, which may have better local, regional and national connections, and whose efforts produce larger sales and revenues.
The mobile application industry is subject to rapid technological change and, to compete, we must continually enhance our mobile App.
We must continue to enhance and improve the performance, functionality and reliability of our mobile App. The mobile application industry is characterized by rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies and the emergence of new industry standards and practices that could render our products and services obsolete. If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, we may not be able to increase our revenue and expand our business.
We may face intense competition and expect competition to increase in the future, which could prohibit us from developing a customer base and generating revenue.
The mobile application industry is highly competitive, with low barriers to entry and we expect more companies to enter the sector and a wider range of mobile Apps and related products and services to be introduced. These companies may already have an established market in our industry. Most of these companies have significantly greater financial and other resources than us and have been developing their products and services longer than we have been developing ours.
If our app was found to contain hidden or objectionable content, our reputation and operating results could suffer.
We do not currently have a market-ready app and currently have no customers, but hidden content may be included in our future app by an employee who was not authorized to do so or by an outside developer or supplier without our knowledge. This hidden content may contain profanity and sexually explicit or otherwise objectionable material. Our design, programming process and the constraints on the file size of our services would reduce the possibility of hidden, objectionable content appearing in the apps we publish. Nonetheless, these processes and constraints may not prevent this content from being included in our future app. If our app is found to contain hidden or objectionable content, our customers could refuse to sell it and consumers could refuse to buy it or demand a refund of their money. This could have a materially negative impact on our business, operating results and financial condition. In addition, our reputation could be harmed. If any of these consequences were to occur, our business, operating results and financial condition could be significantly harmed.
We intend to partner with mobile operators to market and distribute our services and thus to generate our revenues. The loss of, a change in or the failure to create any significant mobile operator relationships would cause us to lose access to their subscribers and thus materially reduce our revenues.
We intend to sell our application offerings primarily through direct sales to mobile operators. Our future success is highly dependent upon creating and maintaining successful relationships with mobile operators and establishing strong mobile operator relationships. Our failure to create and maintain relationships, or a significant reduction in revenues from, one or more of these mobile operators would materially reduce our revenues and thus harm our business, operating results and financial condition.
Because a substantial portion of our revenues would be derived from third party mobile operators, if any of our significant mobile operators are unable to fulfill its payment obligations, our financial condition and results of operations would suffer.
If any of our future customers are unable to fulfill their payment obligations to us under their contracted agreements, our revenues and cash flows could decline significantly and our financial condition could be harmed. In addition, recent disruptions in national and international credit markets have led to a scarcity of credit, tighter lending standards and higher interest rates on consumer and business loans. Continued disruptions in credit markets may materially limit consumer credit availability and restrict credit availability of mobile operators, which may also impact their ability to fulfill their payment obligations.
Mobile subscriber tastes are continually changing and are often unpredictable; if we fail to develop apps that achieve market acceptance, our sales could suffer.
Our business will depend on apps that mobile operators will offer and mobile subscribers will buy. We must invest significant resources in research and development, as well as programming, design and marketing. Our success depends, in part, on unpredictable and volatile factors beyond our control including end-user preferences, competing companies and the availability of other apps. If our Company is not responsive to the requirements of our future mobile operator customers, the demands and preferences of mobile subscribers, or they are not brought to market in a timely and effective manner, our business, operating results and financial condition could be harmed. Even if our services are successfully introduced and initially adopted, a subsequent shift in our mobile operator customers could cause a decline in popularity that could materially reduce our revenues and harm our business, operating results and financial condition.
We may not be able to adequately protect our intellectual property, which may facilitate the development of competing services by others.
At this time our only intellectual property is the source code which is being written to run our first application. We will rely on a combination of trade secret and copyright laws, restrictions on disclosure, to protect it and any other intellectual property rights which may develop during the time of and upon completion of our initial source code. Despite our efforts to protect our source code and any other proprietary rights which may develop; third parties may copy or otherwise obtain and use our apps or technology. The laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States. If we fail to adequately protect our intellectual property rights, it will be easier for our competitors to sell competing apps.
Our services may infringe on the intellectual property rights of third parties, which may result in lawsuits and prohibit us from selling our services or subject us to litigation costs and monetary damages.
There is a risk that third parties have filed or will file applications for, or have received or will receive, patents or obtain additional intellectual property rights relating to materials or processes that we use or propose to use. As a result, from time to time, third parties may assert patent or other intellectual property rights to technologies that are used in our services or are otherwise important to us. In addition, third parties may assert claims or initiate litigation against us or our manufacturers, suppliers, customers or partners with respect to existing or future services or other proprietary rights. We generally undertake to indemnify our customers and partners against intellectual property infringement claims asserted against them with respect to the services we sell to, or distribute through, them. Any claims against us or customers or partners that we indemnify against intellectual property claims, with or without merit, may be time-consuming, result in costly litigation or monetary damages and diversion of technical and management personnel, or require us to develop non-infringing technology. If a claim is successful, we may be required to obtain a license from the parties claiming the infringement. If we are unable to obtain a license, we may be unable to market our affected services. Limitations on our ability to market our services and delays and costs associated with monetary damages and redesigns in compliance with an adverse judgment or settlement would harm our business.
Economic conditions and any associated impact on consumer spending could have a material adverse effect on our business, results of operations and financial condition.
We are subject to macroeconomic fluctuations in the United States and worldwide economy, including those that impact discretionary consumer spending. Continued economic uncertainty and reductions in discretionary consumer spending may result in reductions in sales of our mobile personalization services, which would adversely affect our business, results of operations and our financial condition. If these issues persist, or if the economy continues this prolonged period of decelerating growth or recession, our results of operations may be harmed.
Our present limited operations have not yet proven profitable.
To date we have not shown a profit in our operations. We do not presently have a market-ready product, and we currently do not have any customers. We cannot assure that we will achieve or attain profitability in 2014 or at any other time. If we cannot achieve operating profitability, we may not be able to meet our working capital requirements, which will have a material adverse effect on our business operating results and financial condition
Ms. Elliott has no experience in running a public company. The lack of experience in operating a public company could impact our return on investment, if any.
As a result of our reliance on Ms. Elliott, and her lack of experience in operating a public company, our investors are at risk in losing their entire investment. Ms. Elliott intends to hire personnel in the future, when sufficiently capitalized, who would have the experience required to manage our company, such management is not anticipated until the occurrence of future financing. Since our recently completed offering will not sufficiently capitalize our company, future offerings will be necessary to satisfy capital needs. Until such a future offering occurs, and until such management is in place, we are reliant upon Ms. Elliott to make the appropriate management decisions.
Ms. Elliott is involved with other businesses and there can be no assurance that she will continue to provide services to us. Ms. Elliott’s limited time devotion to Smart Server could have the effect on our operations of preventing us from being a successful business operation, which ultimately could cause a loss of your investment.
As compared to many other public companies, we do not have the depth of managerial or technical personnel. Ms. Elliott is currently and may continue to be involved with other businesses.
Ms. Elliott is planning on allocating an additional 15 to 20 hours a week to the affairs of Smart Server; however there can be no assurance that she will continue to provide services to us. Ms. Elliott will devote only a portion of her time to our activities.
We will require additional financing in order to implement our business plan. In the event we are unable to acquire additional financing, we may not be able to implement our business plan resulting in a loss of revenues and ultimately the loss of your investment.
Due to our start-up nature, we will have to incur the costs of website and marketing development, and all other associated fees. To fully implement our business plan we will require additional funding.
We will need to raise additional funds to expand our operations. We plan to raise additional funds through private placements, registered offerings, debt financing or other sources to maintain and expand our operations. Adequate funds for this purpose on terms favorable to us may not be available, and if available, on terms significantly more adverse to us than are manageable. Without new funding, we may be only partially successful or completely unsuccessful in implementing our business plan, and our stockholders will lose part or all of their investment.
There has been a limited public market for our common stock, and we do not know if one will develop that will provide you with adequate liquidity. The trading price for our common stock may be volatile and could be subject to wide fluctuations.
Although our common stock is listed for trading on the Over-the-Counter Pink Sheets (“OTCPK”) under the trading symbol SVTZ, and we intend to apply for the Over-the-Counter Quotation Board (“OTCQB”), we cannot assure you that we will meet OTCQB's listing requirements, and therefore may not be able to meet the standards for such listing. Furthermore, we cannot assure you that an active trading market for our common stock will develop. The liquidity of any market for the shares of our common stock will depend on a number of factors, including:
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the number of stockholders;
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our operating performance and financial condition;
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the market for similar securities;
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the extent of coverage of us by securities or industry analysts; and
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the interest of securities dealers in making a market in the shares of our common stock.
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Historically, the market for equity securities has also been subject to disruptions that have caused substantial volatility in the prices of these securities, which may not have corresponded to the business or financial success of the particular company. We cannot assure you that the market for the shares of our common stock will be free from similar disruptions. Any such disruptions could have an adverse effect on stockholders. In addition, the price of the shares of our common stock could decline significantly if our future operating results fail to meet or exceed the expectations of market analysts and investors.
Even if an active trading market develops, the market price for our common stock may be highly volatile and could be subject to wide fluctuations. Some of the facts that could negatively affect our share price include:
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actual or anticipated variations in our quarterly operating results;
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Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
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Deliver to the customer, and obtain a written receipt for, a disclosure document;
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Disclose certain price information about the stock;
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Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
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Send monthly statements to customers with market and price information about the penny stock; and
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In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
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Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
Our internal controls may be inadequate which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Exchange Act Rule includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of Creative, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
We have one individual performing the functions of all officers, and single director. Our sole officer and director has developed internal control procedures and is responsible for monitoring and ensuring compliance with those procedures. Management has determined that our internal controls are, at this time, adequate and effective. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Investors relying upon this misinformation may make an uninformed investment decision.
Because our common stock could remain under $5.00 per share, it could continue to be deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is currently under $5.00 per share, it is considered a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. If the trading price of the common stock stays below $5.00 per share, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
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Deliver to the customer, and obtain a written receipt for, a disclosure document;
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Disclose certain price information about the stock;
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Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
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Send monthly statements to customers with market and price information about the penny stock; and
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In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
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Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to accept the common stock for deposit into an account or, if accepted for deposit, to sell the common stock and these restrictions may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
None.
We currently maintain an office at 1960 Graeagle Lane, Lincoln, CA 95648. We have no monthly rent, nor do we accrue any expense for monthly rent. We do not believe that we will need to obtain additional office space at any time in the foreseeable future, approximately 12 months, until our business plan is more fully implemented. As a result of our method of operations and business plan, we do not require personnel other than Ms. Elliott to conduct our business. In the future, we anticipate requiring additional office space and additional personnel; however, it is unknown at this time how much space or how many individuals will be required.
We are not a party to any material legal proceedings.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our common stock is traded in the OTC Markets PK (OTCPK), under the symbol “SVTZ). We have been eligible to participate in the OTCPK since July 1, 2014 and from that time until the date of this report our common stock has yet to commence trading.
Holders of Common Stock
As of March 13, 2015, we had approximately 41 stockholders of record of the 5,500,000 total outstanding shares.
Dividends
The payment of dividends is subject to the discretion of our Board of Directors and will depend, among to other things, upon our earnings, our capital requirements, our financial condition, and other relevant factors. We have not paid or declared any dividends upon our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements do not anticipate paying any dividends upon our common stock in the foreseeable future.
We have never declared or paid any cash dividends. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earning in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our board of director, based upon the Board’s assessment of:
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Our financial condition;
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Earnings;
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Need for funds;
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Capital requirements;
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Prior claims of preferred stock to the extent issued and outstanding; and
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Other factors, including any applicable laws.
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Therefore, there can be no assurance that any dividends on the common stock will ever be paid.
Recent Sales of Unregistered Securities
During the fourth quarter ending November, 30, 2014, we did not have any sales of unregister securities.
Use of Proceeds from Registered Securities
On January 24, 2014, we filed a Registration Statement with the Securities and Exchange Commission wherein we registered 500,000 shares of our common stock. Our Registration Statement became effective on March 26, 2014. On May 1, 2014, we completed our offering for 500,000 shares of our common stock, resulting in gross proceeds of $50,000. The common stock sold in our initial public offering to 40 investors was issued on April 28, 2014. The $50,000 of proceeds raised in the offering has been used to pay for legal, accounting, EDGAR fees, transfer agent fees, general and administrative, and working capital.
This item is not applicable, as we are considered a smaller reporting company.
The following discussion and analysis should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this filing.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.
Background Overview
Smart Server is a development stage company incorporated in the State of Nevada in October of 2013. We were formed to generate revenue through the creation of our mobile payment solution app for platforms such as Apple® and Android®. In November of 2013 we commenced our planned principal operations. At this time, we have no significant assets.
Since our inception on October 24, 2013 through November 30, 2014, we have not generated any revenues and have incurred a net loss of $168,860. Since November of 2013 our business activity has focused around the development of our corporate entity, business plan, marketing strategy, contact development, website design and the program writing of our mobile payment solution app.
Although we intend to begin generating revenues in the next twelve months, there is a possibility we may continue to incur operating losses. The capital raised in our offering was budgeted to cover the costs associated with the offering including: website operation, graphic design, equipment purchase, working capital, various filing fees and transfer agent fees. We believe that our lack of significant expenses and our ability to begin marketing operations, may generate revenues sufficient to support the limited costs associated with our initial ongoing operations for the next twelve months. There can be no assurance that the actual expenses incurred will not materially exceed our estimates or that cash flows from advertising revenue through our website or in App advertising and the sale of our App through the Apple store or other App marketplaces will be adequate to maintain our business. As a result, our independent auditors have expressed substantial doubt about our ability to continue as a going concern in the independent auditors’ report to the financial statements included in the registration statement.
RESULTS OF OPERATIONS
Operating expenses during the fiscal year ended November 30, 2014 were $130,645, consisting of legal and accounting expenses and general and administrative costs associated with filing of regulatory reports for public reporting companies, and depreciation and amortization.
Liquidity and Capital Resources
As of November 30, 2014, the Company had a total of $6,195 in available cash. If we were to not receive any additional funds, we could not continue in business for the next 12 months with our currently available capital. However, we will not be able to fully implement our improved website or complete the development of our app, which will negatively impact the receipt of any significant revenues.
Cash increased primarily due to the receipt of funds from our initial public offering to offset our near term cash equivalents and additional debt financing. Since inception, we have financed our cash flow requirements through debt financing. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt sales from our mobile app. In addition we have promissory notes with E. Venture Resources, Inc., for a total of $105,000. The terms of the promissory notes provide for an interest rate of 6% per annum with all accrued balances due and payable within 24 months of the date of the promissory note. In the future we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
Even though we intend to begin generating revenues, we can make no assurances and therefore we may incur operating losses in the next twelve months. Our limited operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving business model, advancement of technology and the management of growth. To address these risks, we must, among other things, continue our development of relevant applications, stay abreast of mobile app trends, as well as implement and successfully execute our business and marketing strategy. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
The following table sets forth a summary of our cash flows for the periods indicated:
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Fiscal Year ended November 30,
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Fiscal Year ended
November 30,
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2014
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2013
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Net cash used in operating activities
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$ | (120,191 | ) | $ | (17,914 | ) | |||
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Net cash used in investing activities
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$ | (5,700 | ) | $ | - | ||||
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Net cash provided by financing activities
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$ | 130,000 | $ | 20,000 | |||||
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Net increase/(decrease) in Cash
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$ | 4,109 | $ | 2,086 | |||||
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Cash, beginning
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$ | 2,086 | $ | - | |||||
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Cash, ending
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$
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$ | 6,195 | $ | 2,086 | ||||
Operating Expenses
Net cash used in operating activities was $120,191 for the period ended November 30, 2014, as compared to $17,914 used in operating activities for the fiscal year ended November 30, 2013. The increase in net cash used in operating activities was primarily due to decrease in net loss.
Investing activities
Net cash used in investing activities was $5,700 for the period ended November 30, 2014 as compared to $0 used in investing activities for the fiscal year ended November 30, 2013. The increase is related to the development of the website.
Financing activities
Net cash provided by financing activities for the period ended November 30, 2014 was $130,000, as compared to $20,000 for the fiscal year ended November 30, 2013. The increase of net cash provided by financing activities was mainly attributable to additional loans from a third party and the offering proceeds from the sale of common stock totaling.
Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. As of November 30, 2014 the Company had an accumulated deficit of $168,860. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The Company is currently contemplating an offering of its equity or debt securities to finance continuing operations. There are no agreements or arrangements currently in place or under negotiation to obtain such financing, and there are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in this Quarterly Report and eventually secure other sources of financing and attain profitable operations.
This item in not applicable as we are currently considered a smaller reporting company.
See Index to Financial Statements and Financial Statement Schedules appearing on page 31 through 42 of this Form 10-K.
We have had no disagreements with our independent auditors on accounting or financial disclosures.
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Principal Financial Officer, Pamela Elliott, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on her evaluation, Ms. Elliott concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
None.
The sole member of our Board of Directors serves without compensation until the next annual meeting of stockholders, or until his successor has been elected. The officers serve at the pleasure of the Board of Directors. At present, Pamela Elliott is our sole officer and director. Information as to the director and executive officer is as follows:
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Name
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Age
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Title
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Pamela Elliott
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65
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President, CEO, Secretary, Treasurer and Director
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Duties, Responsibilities and Experience
Pamela R. Elliott
. Age 65, President, CEO, Secretary, Treasurer and a Director of Smart Server, has been licensed by the California Department of Real Estate as a sales agent since 1974. She is active in sales, marketing, and training in the real estate industry. With fourty years of management experience in a variety of businesses, including real estate, retailing, manufacturing, consulting, and publishing, Ms. Elliott brings significant pertinent talent to the team.
She is co-founder of several companies including Hootman-Elliott Resources, Inc., Del Mar, CA, Market Visions, Santa Rosa, CA, and is President-CEO of Left Coast Consulting Group, Lincoln, CA, a real estate/financial investment consulting firm. Additionally, she co-owns The Natural Healing Way, an online company specializing in natural healing remedies.
Indemnification of Directors and Officers
Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted y Nevada law.
Limitation of Liability of Directors
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws.
We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.
Election of Directors and Officers
Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater-than-ten-percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of this filing they were current in their filings.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:
|
·
|
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
|
|
·
|
Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;
|
|
·
|
Compliance with applicable governmental laws, rules and regulations;
|
|
·
|
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
|
|
·
|
Accountability for adherence to the code.
|
We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Our decision to not adopt such a code of ethics results from our having a small management for the Company. We believe that the limited interaction which occurs having such a small management structure for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation.
Corporate Governance
We currently do not have standing audit, nominating and compensation committees of the board of directors, or committees performing similar functions. Until formal committees are established, our entire board of directors, perform the same functions as an audit, nominating and compensation committee.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past five years:
|
·
|
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
|
|
·
|
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
|
|
·
|
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
|
|
·
|
been found by a court of competent jurisdiction in a civil action or by 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;
|
|
·
|
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, 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 or wire fraud or fraud in connection with any business entity; or
|
|
·
|
been 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 (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member
|
Summary Compensation
Mr. Lane, our former Principal Executive Officer (PEO) has not received any compensation, including plan or non-plan compensation, nor has he earned any compensation as of the date of this filing.
Ms. Elliott, our current Principal Executive Officer (PEO) has not received any compensation, including plan or non-plan compensation, nor has our PEO earned any compensation as of the date of this filing.
Future Compensation
Ms. Elliott has agreed to provide services to us without compensation until such time as either we have earnings from our revenue, if any, or when the first $100,000 is raised in future offerings, if any, at which time we will pay Ms. Elliott a minimum salary of $20,000 per year.
Board Committees
We do not currently have any committees of the Board of Directors, as our Board consists of one member. Additionally, due to the nature of our intended business, the Board of Directors does not foresee a need for any committees in the foreseeable future.
Transfer Agent
The transfer agent for the common stock will be West Coast Stock Transfer, Inc., 721 N. Vulcan Ave., Suite 205, Encinitas, 92024.
The following table sets forth information, to the best of our knowledge, about the beneficial ownership of our common stock on March 13, 2015 relating to the beneficial ownership of our common stock by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers. The percentage of beneficial ownership for the following table is based on 5,500,000 shares of common stock outstanding.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after March 13, 2015 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.
|
Name of Beneficial Owner
|
Number
Of Shares
|
Percent
Beneficially
Owned
|
|
Pamela Elliott, CEO, President, Secretary, Treasurer, & Director
|
0
|
-
|
|
Matthew Lane
|
5,000,000
|
90.9%
|
|
All Directors, Officers and Principle Stockholders as a Group
|
5,000,000
|
90.9%
|
“Beneficial ownership” means the sole or shared power to vote or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the
power to dispose of or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days from the date of this prospectus.
Changes in Control
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Transactions with Related Persons
The Company utilizes office space provided at no cost from Ms. Elliott, an officer and director of the Company. As of November 30, 2014, office services were provided without charge by Mr. Lane, our former sole officer and director. Such costs are immaterial to the financial statements and, accordingly, have not been reflected.
On November 7, 2013, the Company issued Mr. Lane 5,000,000 shares of its $0.001 par value common stock at a price of $0.004 per share for services rendered of $20,000.
During the year ended November 30, 2014 and for the period from inception (October 24, 2013) through the period ended November 30, 2013 the Company paid an individual for consulting services totaling $1,200 and $100, respectively. As of November 30, 2014 and 2013, the Company owed the individual a total of $100 and $100, respectively. In March 2015, the individual was appointed as a member of the board of directors and as an officer of the Company and now the individual is considered a related party.
As of November 30, 2014 and 2013, the Company had loans totaling $80,000 and $20,000 and accrued interest totaling $5,026 and $76 due to an entity. During the year ended November 30, 2014, the interest was $4,950 and $76, respectively. In March 2015, there was a new officer and director appointed and the lender is now considered a related party. The lender is an entity that is owned and controlled by a family member of an officer and director of the Company.
Promoters and Certain Control Persons
We did not have any promoters at any time since our inception in October, 2013.
Audit and Non-Audit Fees
The following table sets forth the fees paid or accrued by us for the audit and other services provided by Seale and Beers, CPAs for the audit of our annual financial statements for the years ended November 30, 2014 and November 30, 2013:
|
Fiscal Year Ended
November 30, 2014
|
Fiscal Year Ended
November 30, 2013
|
||||
|
Audit Fees
(1)
|
$
|
$ 8,000
|
$ -
|
||
|
Audit-Related Fees
|
$
|
-
|
-
|
||
|
Tax Fees
|
$
|
-
|
-
|
||
|
All Other Fees
|
$
|
-
|
-
|
||
|
Total
|
$
|
$ 8,000
|
$ -
|
||
|
(1)
|
Audit Fees: This category represents fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements.
|
(2) AUDIT-RELATED FEES
None.
(3) TAX FEES
None.
(4) ALL OTHER FEES
None.
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
None.
|
(a)
|
We have filed the following documents as part of this Annual Report on Form 10-K:
|
|
1.
|
The financial statements listed in the "Index to Consolidated Financial Statements" on page 31 are filed as part of this report.
|
|
2.
|
Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
|
|
3.
|
Exhibits included or incorporated herein: See index to Exhibits.
|
Exhibit Index
|
Incorporated by reference
|
|||||||
|
Exhibit
Number
|
Exhibit Description
|
Filed
herewith
|
Form
|
Period
ending
|
Exhibit
|
Filing date
|
|
|
31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
|
X
|
|||||
|
32.1
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
|
X
|
|||||
|
101.INS**
|
XBRL Instance Document
|
X
|
|||||
|
101.SCG**
|
XBRL Taxonomy Extension Schema
|
X
|
|||||
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase
|
X
|
|||||
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
X
|
|||||
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase
|
X
|
|||||
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase
|
X
|
|||||
|
**
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
||||||
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SMART SERVER, INC
.
By:
/S/ Pamela Elliott
Pamela Elliott, President
Date: March 17, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
|
/S/ Pamela Elliott
|
Chairman of the Board of Directors,
|
March 17, 2015
|
|
Pamela Elliott
|
Chief Executive Officer (Principal Executive Officer)
|
|
|
and Principal Financial Officer
|
||
SMART SERVER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED NOVEMBER 30, 2014 AND 2013
|
PAGES
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
33
|
|
BALANCE SHEETS
|
34
|
|
STATEMENTS OF OPERATIONS
|
35
|
|
STATEMENT OF STOCKHOLDERS' DEFICIT
|
36
|
|
STATEMENTS OF CASH FLOWS
|
37
|
|
NOTES TO FINANCIAL STATEMENTS
|
38
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Smart Server, Inc.
We have audited the accompanying balance sheets of Smart Server, Inc. as of November 30, 2014, and 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 2014 and 2013. Smart Server’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smart Server, Inc. as of November 30, 2014 and 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has no revenues, has negative working capital at November 30, 2014 has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Seale and Beers, CPAs
Las Vegas, Nevada
March 16, 2015
|
SMART SERVER, INC.
|
||||||||
|
|
||||||||
|
(audited)
|
||||||||
|
November 30,
|
November 30,
|
|||||||
|
2014
|
2013
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$ | 6,195 | $ | 2,086 | ||||
|
Prepaid expenses
|
- | 5,000 | ||||||
|
Total current assets
|
6,195 | 7,086 | ||||||
|
Website, net
|
4,750 | - | ||||||
|
Total assets
|
$ | 10,945 | $ | 7,086 | ||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 4,679 | $ | 175 | ||||
|
Accounts payable – related party
|
100 | 100 | ||||||
|
Current portion of long term debt – related party
|
20,000 | - | ||||||
|
Total current liabilities
|
24,779 | 275 | ||||||
|
Long term liabilities:
|
||||||||
|
Accrued interest payable – related party
|
5,026 | 76 | ||||||
|
Note payable – related party
|
80,000 | 20,000 | ||||||
|
Total long term liabilities
|
85,026 | 20,076 | ||||||
|
Total liabilities
|
109,805 | 20,351 | ||||||
|
Stockholders' deficit:
|
||||||||
|
Preferred stock, $0.001 par value, 10,000,000 shares
|
||||||||
|
authorized, no and no shares issued and outstanding
|
||||||||
|
as of November 30, 2014 and 2013, respectively
|
- | - | ||||||
|
Common stock, $0.001 par value, 100,000,000 shares
|
||||||||
|
authorized, 5,500,000 and 5,000,000 shares issued and outstanding
|
||||||||
|
as of November 30, 2014 and 2013, respectively
|
5,500 | 5,000 | ||||||
|
Additional paid in capital
|
64,500 | 15,000 | ||||||
|
Accumulated deficit
|
(168,860 | ) | (33,265 | ) | ||||
|
Total stockholders' deficit
|
(98,860 | ) | (13,265 | ) | ||||
|
Total liabilities and stockholders' deficit
|
$ | 10,945 | $ | 7,086 | ||||
See Accompanying Notes to Financial Statements.
|
SMART SERVER, INC.
|
||||||||
|
|
||||||||
|
(audited)
|
||||||||
|
Inception
|
||||||||
|
For the year
|
(October 24, 2013)
|
|||||||
|
ended
|
to
|
|||||||
|
November 30,
|
November 30,
|
|||||||
|
2014
|
2013
|
|||||||
|
Revenue
|
$ | - | $ | - | ||||
|
Operating expenses:
|
||||||||
|
General and administrative
|
1,229 | 1,489 | ||||||
|
Professional fees
|
127,266 | 10,000 | ||||||
|
Consulting fees – related party
|
1,200 | 100 | ||||||
|
Executive compensation - related party
|
- | 20,000 | ||||||
|
Research and development
|
- | 1,600 | ||||||
|
Depreciation and amortization
|
950 | - | ||||||
|
Total operating expenses
|
130,645 | 33,189 | ||||||
|
Other expense:
|
||||||||
|
Interest expense – related party
|
(4,950 | ) | (76 | ) | ||||
|
Total other expense
|
(4,950 | ) | (76 | ) | ||||
|
Net loss
|
$ | (135,595 | ) | $ | (33,265 | ) | ||
|
Weighted average number of common
|
||||||||
|
shares outstanding - basic
|
5,293,151 | 3,157,895 | ||||||
|
Net loss per share - basic
|
$ | (0.03 | ) | $ | (0.01 | ) | ||
See Accompanying Notes to Financial Statements.
|
SMART SERVER, INC.
|
||||||||||||||||||||||||||||
|
STATEMENT OF STOCKHOLDERS' DEFICIT
|
||||||||||||||||||||||||||||
|
(audited)
|
||||||||||||||||||||||||||||
|
Additional
|
||||||||||||||||||||||||||||
|
Paid
|
Total
|
|||||||||||||||||||||||||||
|
Preferred Shares
|
Common Shares
|
In
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||||||||
|
Inception, (October 24, 2013)
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
|
November 7, 2013
|
||||||||||||||||||||||||||||
|
Issuance of common stock for services
|
- | - | 5,000,000 | 5,000 | 15,000.00 | - | 20,000 | |||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | (33,265 | ) | (33,265 | ) | |||||||||||||||||||
|
Balance, November 30, 2013
|
- | $ | - | 5,000,000 | $ | 5,000 | $ | 15,000 | $ | (33,265 | ) | $ | (13,265 | ) | ||||||||||||||
|
May 1, 2014
|
||||||||||||||||||||||||||||
|
Issuance of common stock for cash
|
- | - | 500,000 | 500 | 49,500 | - | 50,000 | |||||||||||||||||||||
|
Net loss
|
- | - | - | - | - | (135,595 | ) | (135,595 | ) | |||||||||||||||||||
|
Balance, November 30, 2014
|
- | $ | - | 5,500,000 | $ | 5,500 | $ | 64,500 | $ | (168,860 | ) | $ | (98,860 | ) | ||||||||||||||
See Accompanying Notes to Financial Statements.
|
SMART SERVER, INC.
|
||||||||
|
|
||||||||
|
(audited)
|
||||||||
|
Inception
|
||||||||
|
For the year
|
(October 24, 2013)
|
|||||||
|
ended
|
to
|
|||||||
|
November 30,
|
November 30,
|
|||||||
|
2014
|
2013
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
|
Net loss
|
$ | (135,595 | ) | $ | (33,265 | ) | ||
|
Adjustments to reconcile net income
|
||||||||
|
to net cash used in operating activities:
|
||||||||
|
Stock issued for services - related party
|
- | 20,000 | ||||||
|
Depreciation and amortization
|
950 | - | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Increase in prepaid expenses
|
5,000 | (5,000 | ) | |||||
|
Increase in accounts payable and accounts payable – related party
|
4,504 | 275 | ||||||
|
Increase in accrued interest payable – related party
|
4,950 | 76 | ||||||
|
Net cash used in operating activities
|
(120,191 | ) | (17,914 | ) | ||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
|
Website development costs
|
(5,700 | ) | - | |||||
|
Net cash used in investing activities
|
(5,700 | ) | - | |||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
|
Proceeds from note payable
|
80,000 | 20,000 | ||||||
|
Proceeds from the sale of common stock
|
50,000 | - | ||||||
|
Net cash provided by financing activities
|
130,000 | 20,000 | ||||||
|
NET CHANGE IN CASH
|
4,109 | 2,086 | ||||||
|
CASH AT BEGINNING OF PERIOD
|
2,086 | - | ||||||
|
CASH AT END OF PERIOD
|
$ | 6,195 | $ | 2,086 | ||||
|
SUPPLEMENTAL INFORMATION:
|
||||||||
|
Interest paid
|
$ | - | $ | - | ||||
|
Income taxes paid
|
$ | - | $ | - | ||||
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
|
Stock issued for executive compensation - related party
|
$ | - | $ | 20,000 | ||||
See Accompanying Notes to Financial Statements.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
Organization
The Company was incorporated on October 24, 2013 (Date of Inception) under the laws of the State of Nevada, as Smart Server, Inc.
The Company has not commenced significant operations and, in accordance with ASC Topic 915, the Company is considered a development stage company.
Nature of operations
The Company will design and develop a mobile payment application that will offer customers at participating restaurants, bars and clubs the ability to pay their bill with their smartphone – without even having to ask for the check.
Year end
The Company’s year end is November 30.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Website
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes. The Company has commenced amortization upon completion of the Company’s fully operational website. Amortization expense for the year ended November 30, 2014 and for the period from inception (October 24, 2013) to November 30, 2013 was $950 and $0, respectively.
Revenue recognition
We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.
The Company will record revenue when it is realizable and earned and the services have been rendered to the customers.
Advertising costs
Advertising costs are anticipated to be expensed as incurred; however there were no advertising costs included in general and administrative expenses for the year ended November 30, 2014 and for the period from Inception (October 24, 2013) to November 30, 2013.
Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2014 and 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1:
The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value of financial instruments (continued)
Level 2
:
FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
Stock-based compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
Earnings per share
The Company follows ASC Topic 260 to account for the earnings per share. Basic earning per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earning per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Income taxes
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
Income taxes (continued)
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of November 30, 2014 and 2013, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material affect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. As of November 30, 2014 and 2013, no income tax expense has been incurred.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Recent pronouncements
The Company has evaluated the recent accounting pronouncements through February 2015 and believes that none of them will have a material effect on the company’s financial statements except for the following ASU below.
The Company has elected early adoption of Accounting Standard Update (ASU) 2014-10, Topic 915,
Development Stage Entities, Elimination of Certain Financial Reporting Requirements
. ASU 2014-10 removes all incremental financial reporting requirements for development stage entities, including, but not limited to, inception-to-date financial information included on the statements of operations, statements of stockholders’ equity (deficit) and statements of cash flows. As a result of the Company’s early adoption, all references to the Company as a development stage entity have been removed. The adoption of this pronouncement has no impact on the Company’s financial position, results of operations or liquidity.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring start up costs and expenses. As a result, the Company incurred accumulated net losses from Inception (October 24, 2013) through the period ended November 30, 2014 of ($168,860). In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. These 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 result from this uncertainty.
As of November 30, 2014 and 2013, the Company had prepaid expenses totaling $0 and $5,000, respectively. The prepaid professional fees will be expensed on a straight line basis over the remaining life of the service period.
During the year ended November 30, 2014, the Company amortized the entire balance of prepaid expenses upon the completion of services rendered to the Company.
On November 7, 2013, the Company executed a promissory note with a related party for $20,000. The unsecured note bears interest at 6% per annum with principal and interest due on November 7, 2015. During the year ended November 30, 2014, this promissory note was reclassified to current portion of long term debt.
On December 5, 2013, the Company executed a promissory note with a related party for $10,000. The unsecured note bears interest at 6% per annum with principal and interest due on December 5, 2015.
On January 30, 2014, the Company executed a promissory note with a related party for $20,000. The unsecured note bears interest at 6% per annum with principal and interest due on January 30, 2016.
On March 3, 2014, the Company executed a promissory note with a related party for $10,000. The unsecured note bears interest at 6% per annum with principal and interest due on March 3, 2016.
On March 25, 2014, the Company executed a promissory note with a related party for $10,000. The unsecured note bears interest at 6% per annum with principal and interest due on March 25, 2016.
On April 3, 2014, the Company executed a promissory note with a related party for $15,000. The unsecured note bears interest at 6% per annum with principal and interest due on April 3, 2016.
On July 25, 2014, the Company executed a promissory note with a related party for $15,000. The unsecured note bears interest at 6% per annum with principal and interest due on July 25, 2016.
Interest expense for the year ended November 30, 2014 and for the period from inception (October 24, 2013) through the period ended November 30, 2013 is $4,950 and $76, respectively.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
At November 30, 2014 and 2013, the Company had a federal operating loss carryforward of $168,860 and $33,265, respectively, which begins to expire in 2033.
Components of net deferred tax assets, including a valuation allowance, are as follows at November 30, 2014 and 2013:
|
2014
|
2013
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss carryforward
|
$ | 57,412 | $ | 4,643 | ||||
|
Total deferred tax assets
|
57,412 | 4,643 | ||||||
|
Less: Valuation allowance
|
(57,412 | ) | (4,643 | ) | ||||
|
Net deferred tax assets
|
$ | - | $ | - | ||||
The valuation allowance for deferred tax assets as of November 30, 2014 and 2013 was $57,412 and $4,643, respectively, which will begin to expire in 2033. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of November 30, 2014 and 2013 and maintained a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at November 30, 2014 and 2013:
|
2014
|
2013
|
|||||||
|
Federal statutory rate
|
(35.0 | )% | (35.0 | )% | ||||
|
State taxes, net of federal benefit
|
(0.00 | )% | (0.00 | )% | ||||
|
Change in valuation allowance
|
35.0 | % | 35.0 | % | ||||
|
Effective tax rate
|
0.0 | % | 0.0 | % | ||||
The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock.
Common stock
On November 7, 2013, the Company issued an officer and director of the Company 5,000,000 shares of its $0.001 par value common stock at a price of $0.004 per share for services rendered of $20,000.
On May 1, 2014, the Company issued 500,000 shares of its $0.001 par value common stock at a price of $0.10 per share for cash of $50,000.
During the period from inception (October 24, 2013) through the period ended November 30, 2014, there have been no other issuances of common stock.
SMART SERVER, INC.
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
As of November 30, 2014 and 2013, there were no warrants or options outstanding to acquire any additional shares of common stock.
During the year ended November 30, 2014 and for the period from inception (October 24, 2013) through the period ended November 30, 2013 the Company paid an individual for consulting services totaling $1,200 and $100, respectively. As of November 30, 2014 and 2013, the Company owed the individual a total of $100 and $100, respectively. In March 2015, the individual was appointed as a member of the board of directors and as an officer of the Company and now the individual is considered a related party.
As of November 30, 2014 and 2013, the Company had loans totaling $80,000 and $20,000 and accrued interest totaling $5,026 and $76 due to an entity. During the year ended November 30, 2014, the interest was $4,950 and $76, respectively. In March 2015, there was a new officer and director appointed and the lender is now considered a related party. The lender is an entity that is owned and controlled by a family member of an officer and director of the Company.
On January 27, 2015, the Company executed a promissory note with a related party for $5,000. The unsecured note bears interest at 6% per annum with principal and interest due on January 27, 2017.
On March 16, 2015, the Company’s current sole officer and director resigned and a new individual was appointed to serve as the sole officer and director of the Company.
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsPart IIItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A . Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndepndenceItem 14. Principal Accounting Fees and ServicesItem 15. Exhibits, Financial Statement SchedulesNote 1 Summary Of Significant Accounting PoliciesNote 1 Summary Of Significant Accounting Policies (continued)Note 2 Going ConcernNote 3 Prepaid ExpensesNote 4 Notes Payable Related PartyNote 5 Income TaxesNote 6 Stockholders EquityNote 7 Warrants and OptionsNote 8 Related Party TransactionsNote 9 Subsequent Events