TMCnet News
SMART SERVER, INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to: · our current lack of working capital; · inability to raise additional financing; · 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; · deterioration in general or regional economic conditions; · adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; · inability to efficiently manage our operations; · inability to achieve future sales levels or other operating results; and · the unavailability of funds for capital expenditures. For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see "Item 1A. Risk Factors" in this document. Throughout this Quarterly Report references to "we", "our", "us", "Smart Server", "SVTZ", "the Company", and similar terms refer to Smart Server, Inc. 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. 10 -------------------------------------------------------------------------------- DESCRIPTION OF BUSINESS OVERVIEW 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. Our president, Mr. Lane, has no experience in developing mobile applications and websites. 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: 1. Maintain our website - 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. 2. 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: · efficient design and programing writing; · extensive Beta testing through friends and family network, or eventually through current users; · timely and useful downloadable updates; · marketable launch through third party retailer or through the Company's website. 3. 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. 11 -------------------------------------------------------------------------------- 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 of Issuer 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. On May 1, 2014, the Company completed its initial public offering through the sale of 500,000 shares of common stock, resulting in gross proceeds of $50,000. On July 1, 2014, we received notice from our market maker that we were assigned the symbol "SVTZ" to initiate trading on the "over-the-counter market." 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: · 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. 12-------------------------------------------------------------------------------- · 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. · 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. · 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. · 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. · 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. Market and Revenue Generation In order to generate revenues during the next twelve months, we must: 1. 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 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. 13 -------------------------------------------------------------------------------- 2. 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. Our operations, to date, have been devoted primarily to startup and development activities, which include the following: · Formation of the company; · Development of Company logo; · Development of our business plan; · Filing a Trademark application for our logo; · Launching of our preliminary website; and · Begin the design and development of our initial mobile application. Smart Server, Inc., was established in October of 2013. Currently we have temporary offices at 2956 Worden St., San Diego, CA 92110. 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. 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. 14 -------------------------------------------------------------------------------- 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 currently have only one part-time employee, Matthew Lane, who is also our sole officer and director. Mr. Lane has spent approximately 10 years employed in the restaurant and bar industry and has amassed a database of contacts through his experience in the restaurant industry which will be incorporated into our marketing strategy. It is Mr. Lane who is providing us his experience and knowledge for development of our business plan. Initially Mr. Lane will coordinate all of our business operations, including working with our app designer and program writing. We have executed a total of seven promissory notes with E. Venture Resources, Inc., for a total of $100,000, as of August 31, 2014. The terms of the promissory note provide for an interest rate of 6% per annum with all accrued balances due and payable by 24 months from the execution of the promissory note. 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. 15 -------------------------------------------------------------------------------- Consultant On November 11, 2013, we entered into a Consulting Agreement with TechiT Marketing Group, Inc. ("TechiT"), wherein TechiT agreed to assist the Company with designing and developing the Company's website and mobile application. The term of the agreement commenced on November 11, 2013 and will continue for 24 months. We agreed to pay TechiT an initial payment of $2,550.20 (paid on November 26, 2013) and future fees will be based on an hourly basis and as new services are performed and fees are earned. The services being provided in exchange for the $2,550.20 initial payment are: · Design Smart Server Logo · Website Theme and Initial Setup · Domain Purchase & Registration (2 years) www.smart-server.biz · Virtual Private Server Rental 1 Year · Mobile App Setup & Deployment · Apple Individual Developers Subscription "Annual Fee" · WordPress Plugin Subscriptions The services listed above were completed and incorporated into our initial website. After we completed our initial public offering, we utilized $5,700 of the proceeds allocated to working capital to finance our updated website and on or about June 19, 2014, we launched our updated website. The services and enhanced features being provided in exchange for the $5,700 additional payment are: Anticipated Time & Labor · Installation of new commercial app theme [1.5] · Theme Color Scheme Customization [2.0] · Logo and Existing Content Integrations [3.5] · Promotional Graphics Integrations [4.0] · HTML5 Animated Slideshow Development [5.0] · SEC Filings System Integration & Configuration [2.5] · Content Feedback Updates [1.5] · Total Anticipated Hours [20.0] · Total Labor Cost [$5,175.00] Parts & Materials Required · Parts/Materials Required · WordPress blog site theme [$176.00] · Shutterstock Stock Art [$249.00] · Total [$425.00] 16-------------------------------------------------------------------------------- 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 August 31, 2014 the Company had an accumulated deficit of $161,908. 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. RESULTS OF OPERATIONS Results of Operations for the Three Months Ended August 31, 2014. Operating expenses during the three months ended August 31, 2014 were $55,410, consisting of legal and accounting expenses and general and administrative costs associated with filing of regulatory reports for public reporting companies, $54,860 of which was professional fees, $75 was related to general and administrative costs, and the remaining $475 was depreciation and amortization. The increase in professional fees is due to increase in legal work associated with ongoing reporting for the three months ended August 31, 2014. Results of Operations for the Nine Months Ended August 31, 2014. Operating expenses during the nine months ended August 31, 2014 were $125,188, consisting of legal and accounting expenses and general and administrative costs associated with filing of regulatory reports for public reporting companies, $124,166 of which was professional fees, $547 was related to general and administrative costs, and the remaining $475 was depreciation and amortization. The increase in professional fees is due to increase in legal work associated with ongoing reporting for the nine months ended August 31, 2014. Liquidity and Capital Resources Additionally, as of August 31, 2014, the Company has a total of $9,676 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 $100,000. 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. 17 -------------------------------------------------------------------------------- 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: Fiscal Year Nine months ended ended November August 31, 30, 2014 2013 Net cash used in operating activities $ (116,710 ) $ (17,914 ) Net cash used in investing activities $ (5,700 ) $ - Net cash provided by financing activities $ 130,000 $ 20,000 Net increase/(decrease) in Cash $ 7,590 $ 2,086 Cash, beginning $ 2,086 $ - Cash, ending $ 9,676 $ 2,086 Operating activities Net cash used in operating activities was $116,710 for the period ended August 31, 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 August 31, 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 August 31, 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 totaling $80,000 and the offering proceeds from the sale of common stock totaling $50,000 18 -------------------------------------------------------------------------------- We believe that cash flow from operations will not meet our present and near-term cash needs and thus we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months. We will require additional cash resources due to changed business conditions, finalization and launch of our website, implementation of our strategy to expand our sales and marketing initiatives, increase brand and services awareness. If our own financial resources and then current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Emerging Growth Company We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements. 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. |