Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(X
)
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF
1934
|
For
the quarterly period ended December 31,
2009
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( )
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF
1934
|
For
the transition period form July 1,2009 to December
31,2009
|
|
Commission
File
number 333-136492
|
|
VERIFY
SMART CORP.
|
(Exact
name of registrant as specified in its charter)
Nevada
|
20-5005810
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(State
or other jurisdiction of incorporation or organization)
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(IRS Employer Identification
No.)
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57
Montague Street, Brooklyn NY 11201
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(Address
of principal executive offices)
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(718)
855-7136
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(Registrant’s
telephone number, including area
code)
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N/A
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(Former
name, former address and former fiscal year, if changed since last
report)
|
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
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-K (ss.229.405 of this
charter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “small
reporting company” Rule 12b-2 of the Exchange Act.
Large
accelerated
filer [ ] Accelerated
filer [ ]
Non-accelerated
filer [ ] (Do not check
if a small reporting
company) Small
reporting company [X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
Yes
[X] No[ ]
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PROCEDING FIVE YEARS
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ ] No
[ ]
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
52,215,000
common shares issued and outstanding as of February 9, 2010
2
INDEX
Page
Number
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|||
PART
1.
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FINANCIAL
INFORMATION
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||
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ITEM 1. |
Financial
Statements (unaudited)
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4
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Balance
Sheets as at December 31, 2009 and June 30, 2009
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5
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||
Statements
of Operations
For
the three and six months ended December 31, 2009 and 2008 and from
Inception (May 31, 2006) to December 31, 2009
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6
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||
Statements
of Cash Flows
For
the six months ended December 31, 2009 and 2008 and from Inception (May
31, 2006) to December 31, 2009
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7
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||
Notes
to the Financial Statements.
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9
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||
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ITEM
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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17
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ITEM
3.
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Quantitative
and Qualitative Disclosure about Market Risk
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25
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ITEM
4.
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Controls
and Procedures
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25
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ITEM
4T
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Controls
and Procedures
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25
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PART
11.
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OTHER
INFORMATION
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26
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|
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ITEM 1. |
Legal
Proceedings
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26
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ITEM
1A
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Risk
Factors
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26
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ITEM 2. |
Unregistered
Sales of Equity Securities and Use of Proceeds
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28
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ITEM 3. |
Defaults
Upon Senior Securities
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28
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ITEM 4. |
Submission
of Matters to a Vote of Security Holders
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28
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ITEM 5. |
Other
Information
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28
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ITEM 6. |
Exhibits
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28
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SIGNATURES.
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30
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3
PART 1 –
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
These
financial statements have been prepared by Verify Smart Corp. without audit,
pursuant to the rules and regulations of Securities and Exchange Commission
(“SEC”). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with such SEC rules and regulations.
The accompanying balance sheets of Verify Smart Corp. (Development stage
company) at December 31, 2009 (with comparative figures as at June 30, 2009) and
the statement of operations for the three and six months ended December 31, 2009
and 2008 and from inception (May 31, 2006) to December 31, 2009, and
the statement of cash flows for the six months ended December 31, 2009 and 2008
and from inception (May 31, 2006) to December 31, 2009 have been prepared by the
Company’s management in conformity with accounting principles generally accepted
in the United States of America. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature.
Operating
results for the three and six months ended December 31, 2009 are not necessarily
indicative of the results that can be expected for the year ending June 30,
2010.
4
VERIFY
SMART CORP.
(A
development Stage Company)
BALANCE
SHEETS
As
of
|
As
of
|
|||||||
December
31
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June
30
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|||||||
2009
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2009
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|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
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$ | 9,733 | $ | 9,733 | ||||
Prepaid
expense
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209,250 | 413,643 | ||||||
Total
Current Assets
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218,983 | 423,376 | ||||||
Other
Assets
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||||||||
Prepaid
expense-Long term
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185,937 | - | ||||||
Deposit
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- | 10,626 | ||||||
Total
Other Assets
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185,937 | 10,626 | ||||||
Total
Assets
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$ | 404,920 | $ | 434,002 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
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||||||||
Accounts
payable
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$ | 93,705 | $ | 8,718 | ||||
Loan
payable
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89,786 | 35,947 | ||||||
Total
Current Liabilities
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183,491 | 44,665 | ||||||
Total
Liabilities
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183,491 | 44,665 | ||||||
Contingencies
and Commitments
|
||||||||
Stockholders’
Equity
|
||||||||
Common
Stock, $0.001 par value, 250,000,000 shares authorized;
|
||||||||
52,215,000
shares and 61,025,000 shares issued and outstanding as of December 31 and
June 30, 2009
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52,215 | 61,025 | ||||||
Additional
Paid-in Capital
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1,378,907 | 852,097 | ||||||
Deficit
Accumulated During the Development Stage
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(1,209,693 | ) | (523,785 | ) | ||||
Total
Stockholders' Equity
|
221,429 | 389,337 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 404,920 | $ | 434,002 |
The
accompanying notes are an integral part of these unaudited financial
statements.
5
VERIFY
SMART CORP.
(A
development Stage Company)
Statements
of Operations (Unaudited)
May
31, 2006
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||||||||||||||||||||
December
31, 2009
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December
31, 2008
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(Inception)
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||||||||||||||||||
Three
months
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Six
Months
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Three
months
|
Six
Months
|
through
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||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
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December
31, 2009
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||||||||||||||||
REVENUES
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||||||||||||||||||||
Revenues
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$ | - | $ | - | $ | - | ||||||||||||||
Total
Revenues
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- | - | - | |||||||||||||||||
Operation
Expenses
|
||||||||||||||||||||
General
& Administrative expenses
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9,564 | 40,744 | 930 | 1,391 | 69,887 | |||||||||||||||
Professional
fees
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18,166 | 35,997 | 2,000 | 6,000 | 79,432 | |||||||||||||||
Consulting
fees
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127,916 | 604,412 |
-
|
-
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1,053,835 | |||||||||||||||
Total
operation expenses
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155,646 | 681,153 | 2,930 | 7,391 | 1,203,154 | |||||||||||||||
Loss
from operations
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(155,646 | ) | (681,153 | ) | (2,930 | ) | (7,391 | ) | (1,203,154 | ) | ||||||||||
Exchange
loss
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(1,564 | ) | (4,755 | ) | - | - | (6,539 | ) | ||||||||||||
Net
Loss
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$ | (157,210 | ) | $ | (685,908 | ) | $ | (2,930 | ) | $ | (7,391 | ) | $ | (1,209,693 | ) | |||||
Net
Loss Per Share - Basic and Diluted
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$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
Weighted
Average Shares Outstanding
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55,081,304 | 58,329,783 | 4,000,000 | 4,000,000 |
The
accompanying notes are an integral part of these unaudited financial
statements.
6
VERIFY
SMART CORP.
(A
development Stage Company)
STATEMENTS
OF CASH FLOWS (Unaudited)
For
the
Six
Months
Ended
December
31,
2009
|
For
the
Six
Months
Ended
December
31,
2008
|
May
31, 2006
(inception)
through
to December 31,
2009
|
||||||||||
OPERATING
ACTIVITIES
|
|
|||||||||||
Net
income (loss)
|
$ | (685,908 | ) | $ | (7,391 | ) | $ | (1,209,693 | ) | |||
Adjustments
to reconcile net loss to net cash provided by (used in)
operating activities:
|
||||||||||||
Foreign
exchange gain(loss)
|
||||||||||||
Stock-based
compensation
|
536,456 | - | 974,563 | |||||||||
Changes
in operating Activities
|
||||||||||||
Prepaid
expense
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10,626 | 2,000 | - | |||||||||
Accounts
payable
|
84,987 | (163 | ) | 93,705 | ||||||||
Net
Cash Used in Operating Activities
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(53,839 | ) | (5,554 | ) | (141,425 | ) | ||||||
Investing
Activities
|
||||||||||||
Deposit
decrease
|
- | - | - | |||||||||
Net
Cash Used in Investment Activities:
|
- | - | - | |||||||||
Financing
Activities
|
- | |||||||||||
Issuance
of common stock
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- | - | 62,500 | |||||||||
Share
issuance costs
|
- | - | (1,128 | ) | ||||||||
Proceeds
from loan payable
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53,839 | - | 89,786 | |||||||||
Net
Cash Provided by Financing Activities
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$ | 53,839 | - | 151,158 | ||||||||
(Decrease)
Increase in Cash
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- | (5,554 | ) | 9,733 | ||||||||
Cash at beginning of period
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9,733 | 19,231 | -- | |||||||||
Cash
– End of Period
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$ | 9,733 | $ | 13,677 | $ | 9,733 | ||||||
|
||||||||||||
Supplemental
Disclosures of Cash Flow Information
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
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$ | -- | $ | -- | $ | -- | ||||||
Income
Taxes
|
$ | -- | $ | -- | $ | -- | ||||||
Non-Cash
investing and financing activities
Common
stock issued for services
|
$ | 518,000 | $ | - | $ | 1,369,750 |
The
accompanying notes are an integral part of these unaudited financial
statements.
7
VERIFY
SMART CORP.
(A
development Stage Company)
Statements
of Changes in Stockholders' Equity
From May
31, 2006 (Inception) through December 31, 2009
(Unaudited)
|
||||||||||||
Common
Stock
|
Additional
|
Deficit
Accumulated
|
||||||||||
Shares
|
Par
Value
|
Paid-in
Capital
|
|
During
the
Development
|
|
Total
|
||||||
#
|
$
|
$
|
$
|
$
|
||||||||
Balance
- May 31, 2006 (Date of Inception)
|
||||||||||||
Stock
issued for cash on May 31, 2006 at $0.0003 per share
|
30,000,000
|
30,000
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(20,000)
|
10,000
|
||||||||
Net
loss for the period
|
0
|
0
|
(430)
|
(430)
|
||||||||
Balance
- June 30, 2006
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30,000,000
|
30,000
|
|
(20,000)
|
|
(430)
|
9,570
|
|||||
Stock
issued for cash on October 31, 2006
|
||||||||||||
at
$0.0013 per share
|
30,000,000
|
30,000
|
10,000
|
0
|
40,000
|
|||||||
Net
loss for the year
|
(14,000)
|
(14,000)
|
||||||||||
Balance
- June 30, 2007
|
60,000,000
|
60,000
|
(10,000)
|
(14,430)
|
35,570
|
|||||||
Net
loss for the year
|
(14,502)
|
(14,502)
|
||||||||||
Balance
- June 30, 2008
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60,000,000
|
60,000
|
(10,000)
|
(28,932)
|
21,068
|
|||||||
Stock
issued for consulting services
|
1,015,000
|
1,015
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850,735
|
851,750
|
||||||||
Stock
issued for cash on May 27, 2009 at
|
||||||||||||
$1.25
per share, net of share issuance costs
|
10,000
|
10
|
11,362
|
11,372
|
||||||||
Net
loss for the year
|
(494,853)
|
(494,853)
|
||||||||||
Balance
- June 30, 2009
|
61,025,000
|
61,025
|
852,097
|
(523,785)
|
389,337
|
|||||||
Stock
issued for consulting services
|
1,190,000
|
1,190
|
516,810
|
518,000
|
||||||||
Stock
cancelled
|
(10,000,000)
|
(10,000)
|
10,000
|
-
|
||||||||
Net
loss for the six months ended December 31, 2009
|
(685,908)
|
(685,908)
|
||||||||||
Balance
- December 31, 2009
|
52,215,000
|
52,215
|
1,378,907
|
(1,209,693)
|
221,429
|
The
accompanying notes are an integral part of these unaudited financial
statements.
8
VERIFY
SMART CORP.
(A
development Stage Company)
Notes
to the Financial Statements (Unaudited)
December
31, 2009
NOTE1.
ORGANIZATION
Verify
Smart Corp. (the “Company”) was incorporated under the laws of the State of
Nevada on May 31, 2006. The Company was originally formed to engage in the
acquisition, exploration and development of natural resource properties.
Effective March 25, 2009, the Company entered into a joint venture agreement
with Verified Capital Corp. and Verified Transaction Corp. relating to the
formation and operation of a joint venture corporation that will sell internet
security software for credit card fraud prevention (Note 11).
Effective
March 19, 2009 the Company changed the name from Treasure Explorations Inc. to
Verify Smart Corp.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting
Methods
The
Company recognizes income and expenses based on the accrual method of
accounting. These financial statements and related notes are presented in
accordance with accounting principles generally accepted in the United States,
and are expressed in US dollars. The Company has elected a June 30
year-end.
Dividend
Policy
The
Company has not yet adopted a policy regarding payment of
dividends.
|
Basic and Diluted Net
Income (loss) Per Share
|
Basic net
incomes (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding. Diluted net income (loss) per
share amounts are computed using the weighted average number of common and
common equivalent shares outstanding as if shares had been issued on the
exercise of the common share rights unless the exercise becomes anti dilutive
and then only the basic per share amounts are shown in the report.
Cash
Equivalents
The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents.
Use of Estimates and
Assumptions
The
preparation of the 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
VERIFY
SMART CORP.
(A
development Stage Company)
Notes
to the Financial Statements (Unaudited)
December
31, 2009
(
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income
Taxes
Income
taxes are provided in accordance with ASC 740 ACCOUNTING FOR INCOME TAXES. A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carry forwards.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Recent Accounting
Pronouncements
In May
2009, FASB issued ASC 855, SUBSEQUENT EVENTS, which establishes general stands
of for the evaluation, recognition and disclosure of events and transactions
that occur after the balance sheet date. Although there is new terminology, the
standard is based on the same principles as those that currently exist in the
auditing standards. The standard, which includes a new required disclosure of
the date through which an entity has evaluated subsequent events, is effective
for interim or annual periods ending after June 15, 2009. The adoption of ASC
855 did not have a material effect on the Company’s financial
statements.
In June
2009, the FASB issued guidance now codified as ASC 105, GENERLLY ACCEPTED
ACCOUNTING PRINCIPLES as the single source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with U.S. GAAP, aside from
those issued by the SEC. ASC 105 does not change current U. S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all
authoritative literature related to a particular topic in one place. The
adoption of ASC 105 did not have a material impact on the Company’s financial
statements, but did eliminate all references to pre-codification
standards.
The
Company has implemented all new accounting pronouncements that are in effect and
that may impact its financial statements and does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial statements or results of
operations.
10
VERIFY
SMART CORP.
(Development
Stage Company)
Notes
to the Financial Statements (Unaudited)
December
31, 2009
NOTE
3. GOING CONCERN
The
accompanying financial statements are presented on a going concern basis. The
Company had limited operations during the period from May 31, 2006 (date of
inception) to December 31, 2009 and generated a net loss of $1,209,693. This
condition raises substantial doubt about the Company’s ability to continue as a
going concern. Because the Company is currently in the development stage,
management believes that the Company’s current cash and cash equivalents of
$9,733 is not sufficient to cover the expenses they will incur during the next
twelve months in a limited operations scenario or until they raise additional
funding.
NOTE4. LOAN
PAYABLE
At
December 31, 2009, the Company owes $89,786 (June 30, 2009 -$35,947) loans from
an unrelated party.
NOTE5.WARRANTS
AND OPTIONS
There are
no warrants or options outstanding to acquire any additional shares of common
stock.
NOTE
6. RELATED PARTY TRANSACTIONS
The
officers and directors of the Company may, in the future, become involved in
other business opportunities as they become available, they may face a conflict
in selecting between the Company and their other business opportunities. The
Company has not formulated a policy for the resolution of such
conflicts.
NOTE
7. INCOME TAXES
The
Company utilizes the liability method of accounting for income
taxes. Under the liability method deferred tax assets and liabilities
are determined based on differences between financial reporting and the tax
bases of the assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect, when the differences are expected to be
reversed. An allowance against deferred tax assets is recorded,
when it is more likely than not, that such tax benefits will not be
realized.
NOTE
8. NET OPERATING LOSSES
On
December 31, 2009 the Company had a net operating loss carry forward of $132,157
for income tax purposes. The tax benefit of approximately $44,933
from the loss carry forward has been fully offset by a valuation reserve because
the future tax benefit is undeterminable since the Company is unable to
establish a predictable projection of operating profits for future
years. Losses will expire during 2030.
11
VERIFY
SMART CORP.
(Development
Stage Company)
Notes
to the Financial Statements (Unaudited)
December
31, 2009
NOTE.
9. STOCK TRANSACTIONS
Transactions,
other than employees’ stock issuance, are in accordance with ASC 718,
Compensation – STOCK COMPENSATION. Thus issuances shall be accounted for based
on the fair value of the consideration received. Transactions with employees’
stock issuance are in accordance with ASC 718. These issuances shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, or whichever is more readily
determinable.
On March
19, 2009 the Company effected a 15 for 1 forward split of its issued and
outstanding share capital such that every one share of common stock issued and
outstanding prior to the split was exchanged for fifteen post – split shares of
common stock. The Company’s post-split authorized capital increased to
250,000,000 shares of common stock with a par value of $0.001 per share. All
share amounts have been retroactively adjusted for all periods
presented.
On March
25, 2009, the Company issued 750,000 shares of common stock at a fair value of
$0.75 per share, amounting $562,500, pursuant to a consulting
agreement.
On March
30, 2009, the Company issued 100,000 shares of common stock at a fair value of
$0.75 per share, amounting $75,000, pursuant to a consulting
agreement.
On April
9, 2009, the Company issued 15,000 shares of common stock at a fair value of
$2.05 per share, amounting $30,750, pursuant to a consulting
agreement.
On May 1,
2009, the Company issued 100,000 shares of common stock at a fair value of $1.34
per share, amounting $134,000, pursuant to a consulting agreement.
On May
27, 2009, the Company issued 10,000 shares of common stock at $1.25 per share
for cash proceeds of $12,500. The Company paid finders’ fee of $1,128 (CDN
$1,250) in connection with the private placement.
On June
1, 2009, the Company issued 50,000 shares of common stock at a fair value $1 per
share, amounting $50,000, pursuant to a consulting agreement.
As of
June 30, 2009, the Company had 61,025,000 shares of common stock issued and
outstanding.
On July
14, 2009, the Company entered a consulting service agreement and issued 50,000
shares of restricted common stock at a fair value $0.53 per share, amounting
$26,500 as compensation.
On August
15, 2009, the Company completed a private placement and issued 500,000 shares of
common stock to Black Diamond Investment Group (“Black Diamond”) at $0.50 per
share for cash proceeds of $250,000. The consulting agreement was
entered
12
between
Black Diamond and Verify Smart Corp., a private company located in British
Virgin Island. Accordingly, these shares were issued in error. The shares are
being returned to treasury for cancellation and the correct share issuance will
take place from the private. The Company has treated the shares as
unissued.
On August
14, 2009, the Company enter a consulting service agreement and issued 1,000,000
shares of common stock at a fair value $0.425 per share, amounting $425,000 as
compensation.
13
VERIFY
SMART CORP.
(A
development Stage Company)
Notes
to the Financial Statements (Unaudited)
December
31, 2009
NOTE.9. STOCK TRANSACTIONS -
Continued
.On
October 28, 2009, 10,000,000 shares of common stocks from Howard Gelfand were
cancelled and returned.
On
November 15, 2009, the Company enter three consulting service agreements and
issued 140,000 shares of common stock at a fair value $0.475 per share,
amounting $66,500 as compensation.
As of
December 31, 2009, the Company had 52,215,000 shares of common stock issued and
outstanding.
NOTE.10.
STOCKHOLDERS’ EQUITY
The
stockholders’ equity section of the Company contains the following classes of
capital stock as of December 31, 2009: Common stock, $0.001 par value:
250,000,000 shares authorized; 52,215,000 shares issued and
outstanding.
NOTE.
11. JOINT VENTURE AGREEMENT
Effective
March 25, 2009, the Company entered into a joint venture agreement with Verified
Capital Corp. and Verified Transaction Corp. relating to the formation and
operation of a joint venture corporation that will sell internet security
software for credit card fraud prevention.
Upon the
satisfaction of customary closing conditions, the Company will contribute an
aggregate of $5,000,000 to the joint venture corporation, payable as $2,000,000
by May 1, 2009 and $3,000,000 by July 1, 2009, for a 70% interest in the joint
venture corporation.
By
amendment of May 19, 2009, the companies have agreed that all obligations of the
Joint Venture agreement have been deemed to have occurred and the agreement is
in full force in good standing. In addition to the foregoing, Verified
Transactions Corp. will grant to the joint venture corporation a 25 year
worldwide exclusive license to market and sell Verified Transaction Corp.’s
internet security software and all other internet business of whatsoever nature
and including all future developments of such business for a 25% interest in the
joint venture corporation. Verified Capital Corp. will be granted a 5% interest
in joint venture corporation upon the transfer of certain assets. Upon the
closing of the joint venture agreement, the Company is the operator of the joint
venture corporation and will contract with Verified Capital Corp. to be the
sub-operator.
As of
December 31, 2009, the joint venture corporation has not yet been
formed.
14
VERIFY
SMART CORP.
(A
development Stage Company)
Notes
to the Financial Statements
December
31, 2009
(Unaudited-
Prepared by Management)
NOTE.
12. COMMITMENTS
a)
|
On
March 30, 2009, the Company entered into a consulting agreement with New
Vision Consulting Corporation wherein New Vision has agreed to provide
certain consulting services to the Company. As compensation under the
agreement, the Company agreed to issue 1,000,000 restricted shares of
common stock. As further compensation for service to be rendered, New
Vision shall receive an additional 500,000 restricted common shares prior
to July 31, 2009. The agreement expires on September 30, 2009. On May 19,
2009, the Company issued 1,000,000 restricted shares of common stock at a
fair value of $750,000 to New Vision for services to be provided over a
six month period. On July 15, 2009, the consulting agreement was
terminated as New Vision was unable or unwilling to perform the services.
The Company asked for return the issued shares for
cancellation.
|
b)
|
On
June 1, 2009, the Company entered into a consulting agreement with David
Karpa wherein David Karpa has agreed to provide certain consulting
services to the Company. As compensation under the agreement, the Company
agreed to issue 50,000 restricted shares of common stock. The agreement
expires on November 30, 2009. On June 1, 2009, the Company issued 50,000
restricted shares of common stock at a fair value of $50,000 to David
Karpa for services to be provided over a six month period. As at December
31, 2009, $50,000 was recognized as consulting
expense.
|
c)
|
On
July 14, 2009, the Company entered into a consulting agreement with Wei
Cheng wherein Wei Cheng has agreed to provide certain consulting services
to the Company. As compensation under the agreement, the Company agreed to
issue 50,000 restricted shares of common stock. The agreement expires on
January 14, 2010. On August 15, 2009, the Company issued 50,000 restricted
shares of common stock at a fair value of $26,000 to Wei Cheng for
agreeing to enter into this agreement. The Company shall also provide
Cheng 50,000 shares of common stock, released in increments of 12,500
shares at the end of each 60 days period, commencement upon the agreement
date. At December 31, 2009 the Company recorded $48,583
payable.
|
d)
|
On
August 14, 2009, the Company entered into a consulting agreement with
Cohen Independent Group (“Cohen”) wherein Cohen has agreed to provide
certain consulting services to the Company. As compensation under the
agreement, the Company agreed to issue 1,000,000 restricted shares of
common stock. The agreement expires on August 14, 2011. On September 14,
2009, the Company issued 1,000,000 restricted shares of common stock at a
fair value of $425,000 to Cohen for services to be provided over a two
year periods. As at December 31, 2009, $159,375 is included in prepaid
expenses-short-term and $185,937 in prepaid expense-long-term and will be
recognized over the remaining term of the consulting
agreement.
|
e)
|
On
September 22, 2009, the Company entered into a compensation agreement with
AMG Group Inc. (“AMG”) wherein AMG has agreed to provide certain
consulting services to the company. The agreement expires on September 22,
2011.
|
15
VERIFY
SMART CORP.
(A
development Stage Company)
Notes
to the Financial Statements
December
31, 2009
(Unaudited-
Prepared by Management)
12.
|
COMMITMENTS
- Continued
|
In
consideration of the consulting services provided by AMG, the Company hereby
agrees to pay AMG the compensation as follows:
|
i)
|
asset
acquisition, merger, or other value acquisition or disposition (the
“Event”) – the Company will pay within 30 days of closing of such an Event
an amount equal to, at AMG election, 5% in cash or 10% in common stock
with the stock priced at the weighted average stock price for the year, on
the stated value of the Event or, failing contractual value, the fair
market value of the Event;
|
|
ii)
|
card
issuers or internet users – the Company will pay to AMG an amount of 10%
of cash flow received by the Company (less direct third party costs) from
bank, and any other business paying the Company based on card use or
internet use of the Company’s products for the first five years and 5%
thereafter for an additional five years. For the first institution of in
excess of one million cards signed, the Company will pay AMG one million
common shares the Company.
|
|
iii)
|
the
Company shall pay AMG a monthly fee of $5,000 starting July 1 and
pre-approved expenses.
|
As of
December 31, 2009, the Company accrued $30,000 payable.
f) The
Company entered into a five year office lease agreement effective May 1, 2009.
There is no penalty payment due under the terms of the lease agreement. The
Company forfeited the deposit.
g) On
November 15, 2009, we entered into a consulting agreement with Eileen Duperron
wherein Eileen Duperron has agreed to provide certain consulting services to the
Company. As compensation under the agreement, we have agreed to issue 40,000
restricted common shares of our company. The agreement expires on May 15,
2010.
h) On
November 15, 2009, we entered into a consulting agreement with Kim Baker wherein
Kim Baker has agreed to provide certain consulting services to the Company. As
compensation under the agreement, we have agreed to issue 50,000 restricted
common shares of our company. The agreement expires on May 15,
2010.
j) On
November 15, 2009, we entered into a consulting agreement with Intentional and
Purposeful Living wherein Intentional and Purposeful Living has agreed to
provide certain consulting services to our company. As compensation under the
agreement, we have agreed to issue 50,000 restricted common shares of the
Company. The agreement expires on May 15, 2010.
13.
|
SUBSEQUENT
EVENTS
|
Pursuant
to ASC 855, the Company has evaluated all events to transactions that accrued
from December 31, 2009 through February 16, 2010, the date of issuance of the
unaudited financial
16
statements.
During this period, the Company did not have any material recognizable
subsequent events.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
FORWARD
– LOOKING STATEMENTS
The
quarterly report contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward – looking statements by terminology such as “may”, “should”,
“expects”, “plan”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of these terms or other comparable
terminology. These statements are only predictions and involve know and unknown
risks, uncertainties and other factors, that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward – looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable
law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our
unaudited financial statements are stated in United States dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this quarterly report.
In this
quarterly report, unless otherwise specified, all dollar amounts are expressed
in United States dollars. All references to "common stock" refer to the common
shares in our capital stock.
As used
in this quarterly report, the terms "we", "us", "our", "our company" and
"Verify" mean Verify Smart Corp., unless otherwise stated.
CORPORATE
OVERVIEW
The
address of our principal executive office is 57 Montague Street, Brooklyn NY
11201.Our telephone number is 718- 855-7136.
Effective
March 19, 2009, we effected a fifteen (15) for one (1) forward stock split of
our authorized and issued and outstanding common stock. and the reduction of our
authorized common stock As a result, our authorized capital has changed to
250,000,000 shares of common stock with a par value of $0.001 and our issued and
outstanding shares have increased from 4,000,000 shares of common stock to
60,000,000 shares of common stock.
Also
effective March 19, 2009, we have changed our name from "Treasure
Explorations
Inc." to "Verify Smart Corp".
The name
change and forward stock split became effective with the Over-the-Counter
Bulletin Board at the opening for trading on March 24, 2009 under the new stock
symbol "VSMR".
17
We have not been involved in any
bankruptcy, receivership or similar proceeding.
GENERAL
OVERVIEW
We were
incorporated in the state of Nevada on May 31, 2006. Since our incorporation, we
had been in the business of the exploration and development of a mineral
property in New Westminster, Simalkameen Mining Division of British Columbia,
consisting of 336 hectares included with 16 mineral title cells. Our property
was without known reserves and our program was exploratory in nature. We
completed the Phase 1 exploration program in our property, the results of which
were not promising and did not justify further expense. Because we were not
successful in our exploration program, we abandoned the mineral claims and
focused on the identification of suitable businesses with which to enter into a
business opportunity or business combination.
Effective
March 19, 2009, we effected a fifteen (15) for one (1) forward stock split of
our authorized and issued and outstanding common stock. As a result, our
authorized capital has changed to 250,000,000 shares of common stock with a par
value of $0.001 and our issued and outstanding shares have increased from
4,000,000 shares of common stock to 60,000,000 shares of common
stock.
Also
effective March 19, 2009, we have changed our name from "Treasure Explorations
Inc." to "Verify Smart Corp". The change of name was approved by our directors
and a majority of our shareholders.
On March
24, 2009, Ralph Santos was appointed as a director of our company.
On March
24, 2009 Manly Shore resigned as president, chief executive officer and chief
financial officer of our company and Ralph Santos was appointed president, chief
executive officer and chief financial officer of our company.
On April
14, 2009, Adi Muljo was appointed as a director of our company.
Our board
of directors now consists of Ralph Santos and Adi Muljo.
On March
25, 2009, we entered into a joint venture agreement with Verified Capital Corp.
and Verified Transactions Corp. relating to the formation and operation of a
joint venture corporation that will sell internet security software for credit
card fraud prevention. Upon the satisfaction of customary closing conditions, we
will earn a 70% interest in the joint venture.
We were
required to contribute $2,000,000 by May 1, 2009, of which $250,000 will be paid
to Verified Transactions Corp. as a license fee. Until such time as we have
raised the $2,000,000, we will not be entitled to receive any revenue from the
joint venture corporation. We were further required to contribute $3,000,000 to
the joint venture by July 1, 2009, of which $500,000 will be paid to Verified
Transactions Corp. as a license fee. As of the date of this report, we have not
yet contributed the $2,000,000 owed to the joint venture. A joint venture
corporation has not been formed, and as per the joint venture agreement we are
the operator of the joint venture corporation. We have contracted the operator
rights to Verified Capital Corp. as the sub-operator.
18
By
amendment agreement of May 19, 2009, the Companies have agreed to a mutual
understanding and agreement that the Joint Venture has been satisfactorily
performed by our company and that we have performed the required financial
obligations of Section 5.01 through both fund raising and joint venture cost
sharing and accordingly, VSC's obligations of Section 5.01 are fully satisfied,
the Joint Venture agreement is in full force and effect in good standing and
VSC's revenue sharing right to 70% of the Joint Venture's revenue commences the
date of the amendment agreement.
Pursuant
to the joint venture agreement, Verified Transactions Corp. has provided to the
joint venture an exclusive world-wide license to use, sell and sub-license its
internet security software and all other internet business of such nature and
including all future development of such business.
The term
of the license is for a period of 25 years with an option to renew for an
additional 25 years for a payment of $5,000,000. In consideration for the
granting of the license, Verified Transactions Corp. will receive the license
fees disclosed above, 10% of the revenue of the joint venture to a maximum of
$1,250,000 and a 3% royalty on the gross revenue of the joint
venture.
We have
the right to acquire all of Verified Capital Corp.'s interest in the joint
venture and all of Verified Transactions Corp.'s interest in the joint venture ,
excluding the royalty as set out in the joint venture agreement, at market value
at the earlier of the joint venture generating $100 million in aggregate revenue
per year with a minimum net margin of 25% or 5 years. Market value
shall be determined by an agreed valuator or, failing agreement, we may hire a
top-five chartered accountancy firm to prepare a market value report and, absent
material error of standard calculation, such report shall be final.
Pursuant
to the terms of the joint venture agreement, we have agreed to permit and have
the right to tender to all shareholders and creditors of each of Verified
Capital Corp. and Verified Transactions Corp. to convert their debts and shares
into shares of our company on a one for one basis subject to our company raising
the $2,000,000 (as set out above) and the joint venture earning gross cash flow
of not less than $100,000 per week.
Under the
license, Ralph Santos, our president, will receive a 10% carried equity interest
in the Gateway internet business of the joint venture corporation. Mr. Santos is
also a significant equity owner in Verified Transactions Corp. and Verified
Capital Corp.
On March
25, 2009, we entered into a consulting agreement with Duke Enterprises LLC
wherein Duke Enterprises has agreed to provide certain consulting services to
our company. As compensation under the agreement, we have agreed to issue 75,000
restricted common shares of our company. The 75,000 restricted shares were
issued on May 19, 2009. The agreement expired on September 25,
2009.
On March
30, 2009, we entered into a consulting agreement with New Vision Consulting
Corporation, wherein New Vision has agreed to provide certain consulting
services to our company. As compensation under the agreement, we have agreed to
issue 1,000,000 restricted common shares of our company. As further compensation
for services to be rendered, New Vision shall receive an additional 500,000
restricted common shares of our company. 1,000,000 shares of common stock were
issued on May 19, 2009. The New Vision consulting agreement
19
expireson
September 30, 2009. As of July 15, the Company terminated the consulting service
with New Vision.
Effective
June 5, 2009, we entered into an agreement with Ellick Corporation to provide
our VerifyGateway, VeriSmart Card and VerifyNgo suite of services. As part of
this agreement, Ellick Corp. will provide our company with Voice Over Internet
Protocol (VOIP) and Contact Centre capabilities in Manila.
Effective
June 11, 2009, we entered into an agreement with Crown Mutual Corporation to
provide our VerifyGateway and VerifyNgo suite of services.
Effective
June 19, 2009, we entered into an agreement with BetED Corporation to provide
our VerifyGateway and VerifyNgo suite of services.
On July
14, 2009, we entered into a consulting agreement with Wei (David) Cheng wherein
David Cheng has agreed to provide certain consulting services to our company. As
compensation under the agreement, we have agreed to issue 50,000 restricted
common shares of our company. The 50,000 common shares were issued on August 15,
2009. The agreement expires on January 14, 2010.
On July
14, 2009, we entered into an investment purchase agreement with Black Diamond
Investment Group Corp. wherein Black Diamond had agreed to purchase 500,000
common shares in consideration of the payment of $0.50 per share for an
aggregate purchase price of $250,000. We issued the 500,000 common shares on
August 15, 2009. These shares were issued in error. The Black Diamond agreement
was with Verify Smart Corp. (BVI), a private company, and the above shares are
being returned to treasury for cancellation and the correct share issuance will
take place from the private company.
Effective
August 14, 2009, we entered into a consulting agreement with Cohen Independent
Research Group wherein Cohen Independent Research has agreed to provide certain
consulting services to our company. As compensation under the agreement we have
agreed to issue 1,000,000 restricted common shares of our company. The 1,000,000
common shares were issued on August 14, 2009. The agreement expires on August
14, 2011.
On
September 22, 2009, we entered into a compensation agreement with AMG Group Inc.
wherein AMG Group Inc. has agreed to provide certain services to our company.
The agreement expires on September 22, 2011.
On
September 29, 2009, we signed a Beta Agreement with OneWorld Connections, Inc.
to integrate all four of our applications for possible integration into
alllevels of it's worldwide businesses.
On
October 7, 2009, we signed a Letter of Intent with iMobile Interactive of New
Jersey for iMobile to provide CDN (Content Delivery Network) and SMS (Short
Message Service (text)) solutions to Verify Smart in more than 160
countries.
On
October 8, 2009, we signed a Letter of Intent with iPay Commerce VenturesInc.
(IPCV), a subsidiary of the Intellectual Property Ventures Group Corporation, a
listed company on the Philippine Stock Exchange to initiate a two-stage
integration of our VerifyTransfer platform.
20
On
October 21, 2009, we signed a Memorandum of Understanding with Mr.
Theodore"Teddy" Permadi Rachmat of Indonesia. The Memorandum of Understanding
outlines the terms of an agreement between Mr. Rachmat and Verify Smart to form
a joint venture company to introduce our technology to financial institutions,
businesses and economic development groups in Southeast Asia.
In this
quarterly report, unllThe following discussion and analysis should be read in
conjunction with Verify Smart Corp’s (“Verify Smart”, “we” or “us”) financial
statements and the notes related thereto. The discussion of results, causes and
trends should not be construed to infer conclusions that such results, causes or
trends necessarily will continue in the future.
On
November 15, 2009, we signed the consulting agreements with Kim Baker, Eileen
Duperron, and Intentional and Purposeful Living, has agreed to provide certain
consulting services to our company. As compensation under the agreement we have
agreed to issue 140,000 restricted common shares of our company. The 140,000
common shares were issued on January 14, 2010. The agreement expires on May 15,
2010.
The
financial statements mentioned above have been prepared in conformity with
accounting principles generally accepted in the United States of America and are
stated in United States dollars.
DESCRIPTION
OF THE JOINT VENTURE BUSINESS
The joint
venture business will market and sell its licensed software which provides a
comprehensive solution to credit card fraud by addressing the security needs of
consumer clients, credit card companies, banks and merchants through instant
verification that is inexpensive to implement and simple to use.
The
software operates through the use of a cellular phone for secured verification
of monetary transactions. The software has been developed to include debit card
purchases, internet purchases, ATM, passport and mortgage
verification.
We have
also entered into preliminary discussions with Verified Capital Corp. wherein we
would acquire either the assets or outstanding shares of common stock of
Verified Capital Corp. The parties will jointly determine the optimum structure
for the acquisition in order to best satisfy tax planning, regulatory and other
considerations, including mutually agreed upon performance based
milestones.
The
acquisition contemplated by the preliminary discussions is subject to the
fulfillment of certain conditions precedent, due diligence and the negotiation
of a definitive agreement.
On April
3, 2009, the joint venture entered into an agreement with China Trust to launch
our first credit card "VeriSmart(TM) Platinum Visa".
Under the
terms of the agreement, China Trust will distribute, for pilot, 2,500 co-branded
VeriSmart(TM) Platinum Visa Cards linked to our patent-pending Authentication
system, VerifyNGo(TM), to serve as enterprise payroll, payout and remittance
solutions affording centralized control and management of fund disbursement
globally, anytime, anywhere.
21
On April
6, 2009, we entered into a services agreement with European hosting and
infrastructure provider Prime Interactive S.R.O. The services agreement with
Prime Interactive accelerates the European leg of our expansion plan and
compliments our company's existing capabilities.
Under the
terms of the agreement Prime Interactive will be providing the following
services to our company:
* Web
and Mobile Application Development
* Data
Centre infrastructure servicing Europe and located in Slovakia
* Marketing
access to a legacy worldwide customer base of 130,000
* Marketing
access to established European Financial Industry vertical
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008
The
following summary of our results of operations should be read in conjunction
with our financial statements for the three and six months period ended December
31, 2009 and 2008.
We have
not generated any revenue since inception and are dependent upon obtaining
financing to pursue our business activities. For these reasons, our auditors
believe that there is substantial doubt that we will be able to continue as a
going concern.
Our
operating results for the three month period ended December 31, 2009 and 2008
and the changes between those periods for the respective items are summarized as
follows:
Change
Between
|
||||||||||||
Three
Month
|
||||||||||||
Three
Month
|
Three
Month
|
Period
Ended
|
||||||||||
Period
Ended
|
Period
Ended
|
December
31, 2009
|
||||||||||
December
31,
|
December
31,
|
&
December 31,
|
||||||||||
2009
|
2008
|
2008
|
||||||||||
Revenue
|
$ | Nil | $ | Nil | $ | Nil | ||||||
General
and administrative expenses
|
$ | 9,564 | $ | 930 | $ | 8,634 | ||||||
Consulting
expense
|
$ | 127,916 | $ | Nil | $ | 127,916 | ||||||
Professional
fees
|
$ | 18,166 | $ | 2,000 | $ | 16,166 | ||||||
Exchange
loss
|
$ | (1,564 | ) | $ | Nil | $ | (1,564 | ) | ||||
Net
loss
|
$ | (157,210 | ) | $ | (2,930 | ) | $ | (154,280 | ) |
Change
Between
|
||||||||||||
Six
Month
|
||||||||||||
Six
Month
|
Six
Month
|
Period
Ended
|
||||||||||
Period
Ended
|
Period
Ended
|
December
31, 2009
|
||||||||||
December
31,
|
December
31,
|
&
December 31,
|
||||||||||
2009
|
2008
|
2008
|
||||||||||
Revenue
|
$ | Nil | $ | Nil | $ | Nil | ||||||
General
and administrative expenses
|
$ | 40,744 | $ | 1,391 | $ | 39,353 | ||||||
Consulting
expense
|
$ | 604,412 | $ | Nil | $ | 604,412 | ||||||
Professional
fees
|
$ | 35,997 | $ | 6,000 | $ | 29,997 | ||||||
Exchange
loss
|
$ | (4,755 | ) | $ | Nil | $ | (4,755 | ) | ||||
Net
loss
|
$ | (685,908 | ) | $ | (7,391 | ) | $ | (678,517 | ) |
22
LIQUIDITY
AND FINANCIAL CONDITION
WORKING
CAPITAL
Change
between
|
||||||||||||
December
31, 2009
|
||||||||||||
and
|
||||||||||||
December
31,
|
June
30,
|
June
30,
|
||||||||||
2009
|
2009
|
2009
|
||||||||||
($)
|
($)
|
($)
|
||||||||||
Current
Assets
|
218,983 | 423,376 | (204,393 | ) | ||||||||
Current
Liabilities
|
183,491 | 44,665 | 138,826 | |||||||||
Working
Capital/(Deficit)
|
35,492 | 378,711 | (343,219 | ) |
CASH
FLOWS
Change
Between
|
||||||||||||
Period
Ended
|
||||||||||||
Six
Month
|
Six
Month
|
December
31, 2009
|
||||||||||
Period
Ended
|
Period
Ended
|
and
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||
2009
|
2008 |
2008
|
||||||||||
($)
|
($) |
($)
|
||||||||||
Net
Cash (used in) Operating Activities
|
(53,839 | ) | (5,554 | ) | (48,285 | ) | ||||||
Net
Cash provided by Financing Activities
|
Nil
|
Nil |
Nil
|
|||||||||
Net
Cash used for Investing Activities
|
53,839 | Nil | 53,839 | |||||||||
Net Increase (Decrease) in Cash During Period |
Nil
|
(5,554 | ) | 5,554 |
As of
December 31, 2009, our total assets were $404,920 and our total liabilities were
$183,491. We had a working capital surplus of $221,429. Our financial statements
report a net loss of $157,210 for the three months ended December 31, 2009, and
a net loss of $1,209,693 for the period from May 31, 2006 (inception) to
December 31, 2009.
GOING
CONCERN
Due to
the uncertainty of our ability to meet our current operating and capital
expenses, in their report on the annual financial statements for the year ended
June 30, 2009, our independent auditors included an explanatory paragraph
regarding concerns about our ability to continue as a going
concern.
We
anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. At this time, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock or through a loan from our directors to meet
our obligations over the next twelve months. We do not have any arrangements in
place for any future debt or equity financing.
CONTRACTUAL
OBLIGATIONS
As a
"smaller reporting company", we are not required to provide tabular disclosure
obligations.
23
OFF-BALANCE
SHEET ARRANGEMENTS
We have
no 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 stockholders.
CRITICAL
ACCOUNTING POLICIES
BASIS
OF ACCOUNTING
The
Company's financial statements are prepared using the accrual method of
accounting. We have elected a June 30, year-end.
BASIC
AND DILUTE NET INCOME (LOSS) PER SHARE
Our
company computes net loss per share in accordance with ASC 260 Earnings Per
Share which requires presentation of both basic and diluted earnings per share
(EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the
period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing Diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti dilutive.
CASH
EQUIVALENTS
We
consider all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
USE
OF ESTIMATES AND ASSUMPTIONS
The
preparation of the 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME
TAXES
Income
taxes are provided in accordance with ASC 740 Accounting for Income Taxes. A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carry forwards.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
24
Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
RECENT
ACCOUNTING PRONOUNCEMENTS
In May
2009, FASB issued ASC 855, Subsequent Events, which establishes general
standards of for the evaluation, recognition and disclosure of events and
transactions that occur after the balance sheet date. Although there is new
terminology, the standard is based on the same principles as those that
currently exist in the auditing standards. The standard, which includes a new
required disclosure of the date through which an entity has evaluated subsequent
events, is effective for interim or annual periods ending after June 15, 2009.
The adoption of ASC 855 did not have a material effect on our company's
financial statements. Refer to Note 13.
In June
2009, the FASB issued guidance now codified as ASC 105, Generally Accepted
Accounting Principles as the single source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with U.S. GAAP, aside from
those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all
authoritative literature related to a particular topic in one place. The
adoption of ASC 105 did not have a material impact on our company's financial
statements, but did eliminate all references to pre-codification
standards
Our
company has implemented all new accounting pronouncements that are in effect and
that may impact our financial statements and does not believe that there are any
other new accounting pronouncements that have been issued that might have a
material impact on our financial position or results of operations.
ITEM
3. QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS.
As a
"smaller reporting company", we are not required to provide the information
required by this Item.
ITEM
4(T). CONTROLS AND PROCEDURES.
MANAGEMENT'S
REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president, chief executive officer
and chief financial officer (who is acting as our principal executive officer,
principal financial officer and principle accounting officer) to allow for
timely decisions regarding required disclosure.
As of
December 31, 2009, the end of our quarter covered by this report, we carried out
an evaluation, under the supervision and with the participation of our
president, chief executive officer and chief financial officer (who is acting as
our principal executive officer, principal financial officer and principle
accounting officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president,
chief
25
executive
officer and chief financial officer (who is acting as our principal executive
officer, principal financial officer and principle accounting officer) concluded
that our disclosure controls and procedures were not effective as of the end of
the period covered by this quarterly report.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
have been no changes in our internal controls over financial reporting that
occurred during our quarter ended December 31, 2009 that have materially or are
reasonably likely to materially affect, our internal controls over financial
reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
We know
of no material, existing or pending legal proceedings against our company, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
ITEM
1A. RISK FACTORS.
Our
business operations are subject to a number of risks and uncertainties,
including, but not limited to those set forth below:
WE HAVE A
LIMITED OPERATING HISTORY, AND IT IS DIFFICULT TO EVALUATE OUR FINANCIAL
PERFORMANCE AND PROSPECTS. THERE IS NO ASSURANCE THAT WE WILL ACHIEVE
PROFITABILITY OR THAT WE WILL NOT DISCOVER PROBLEMS WITH OUR BUSINESS
MODEL.
We have a
limited operating history. As such, it is difficult to evaluate our future
prospects and performance, and therefore we cannot ensure that we will operate
profitably in the future.
WE HAVE
LIMITED FUNDS AVAILABLE FOR OPERATING EXPENSES. IF WE DO NOT OBTAIN FUNDS WHEN
NEEDED, WE WILL HAVE TO CEASE OUR OPERATIONS.
Currently,
we have limited operating capital. As of December 31, 2009, our cash available
was approximately $9,733. In the foreseeable future, we expect to incur
significant expenses if we acquire and develop our new business. We may be
unable to locate sources of capital or may find that capital is not available on
terms that are acceptable to us to fund our additional expenses. There is the
possibility that we will run out of funds, and this may affect our operations
and thus our profitability. If we cannot obtain funds when needed, we may have
to cease our operations.
WE DEPEND
ON ATTRACTING AND RETAINING QUALIFIED EMPLOYEES, THE FAILURE OF WHICH COULD
RESULT IN A MATERIAL DECLINE IN OUR REVENUES.
We intend
to become a provider of identity protection/secured transaction services. Our
revenues and future growth will depend on our ability to attract and retain
qualified employees. This is especially crucial to our proposed business, as
these employees will generate revenue by providing the services that are the
staple product that we offer. We may face difficulties in recruiting and
retaining sufficient numbers of qualified employees because the market may
not
26
have
enough of such personnel. In addition, we compete with other companies for
qualified employees. If we are unable to retain such employees, we could face a
material decline in our revenue.
U.S.
INVESTORS MAY EXPERIENCE DIFFICULTIES IN ATTEMPTING TO ENFORCE JUDGMENTS BASED
UPON U.S. FEDERAL SECURITIES LAWS AGAINST US AND OUR NON-U.S. RESIDENT
DIRECTORS.
All of
our operations and our assets are located outside the United States and some of
our directors and officer are foreign citizens. As a result, it may be difficult
or impossible for U.S. investors to enforce judgments of U.S. courts for civil
liabilities against any of our individual directors or officers.
RISKS
RELATING TO OUR COMMON SHARES
TRADING
ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE
MARKET PRICE OF OUR COMMON SHARES AND MAKE IT DIFFICULT FOR OUR SHAREHOLDERS TO
RESELL THEIR SHARES.
Our
common shares are quoted on the OTC Bulletin Board service. Trading in shares
quoted on the OTC Bulletin Board is often thin and characterized by wide
fluctuations in trading prices, due to many factors that may have little to do
with our operations or business prospects. This volatility could depress the
market price of our common shares for reasons unrelated to operating
performance. Moreover, the OTC Bulletin Board is not a stock exchange, and
trading of securities on the OTC Bulletin Board is often more sporadic than the
trading of securities listed on a quotation system like Nasdaq or a stock
exchange like Amex. Accordingly, shareholders may have difficulty reselling any
of the shares.
OUR SHARE
IS A PENNY STOCK. TRADING OF OUR SHARE MAY BE RESTRICTED BY THE SEC'S PENNY
STOCK REGULATIONS WHICH MAY LIMIT A SHAREHOLDER'S ABILITY TO BUY AND SELL OUR
SHARES.
Our share
is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9
which generally defines "penny stock" to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the
SEC which provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a
27
penny
stock not otherwise exempt from these rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the shares that are subject to
these penny stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe that the penny
stock rules discourage investor interest in and limit the marketability of our
common shares.
FINRA
SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A SHAREHOLDER'S ABILITY TO BUY AND
SELL OUR SHARE.
In
addition to the "penny stock" rules promulgated by the Securities and Exchange
Commission, the Financial Industry Regulatory Authority, or FINRA, has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common shares, which may limit your
ability to buy and sell our share.
TRENDS,
RISKS AND UNCERTAINTIES
We have
sought to identify what we believe to be the most significant risks to our
business, but we cannot predict whether, or to what extent, any of such risks
may be realized nor can we guarantee that we have identified all possible risks
that might arise. Investors should carefully consider all of such risk factors
before making an investment decision with respect to our common
shares.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Effective
August 14, 2009, we issued 1,000,000 restricted shares of our common stock to
one U.S. person (as that term is defined in Regulation S of the Securities Act
of 1933) relying upon Rule 506 of Regulation D of the Securities Act of
1933.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM
5. OTHER INFORMATION.
None.
28
ITEM
6. EXHIBITS.
Exhibits
required by Item 601 of Regulation S-K
Exhibit
Number Description
(3) ARTICLES
OF INCORPORATION AND BY-LAWS
3.1
|
Articles
of Incorporation (incorporated by reference from our Registration
Statement on Form SB-2 filed on August 10,
2006)
|
3.2
|
Bylaws
(incorporated by reference from our Registration Statement on Form S-1
filed on July 21, 2008)
|
3.3
|
Certificate
of Change (incorporated by reference from our Current Report on Form 8-K
filed on March 26, 2009)
|
3.4
|
Certificate
of Amendment (incorporated by reference from our Current Report on Form
8-K filed on March 26, 2009)
|
(10) MATERIAL
CONTRACTS
10.1
|
Joint
Venture Agreement among Verified Capital Corp., Verified Transactions
Corp. and our company dated effective March 25,
2009
|
(incorporated
by reference from our Current Report on Form 8-K file on March 26,
2009)
|
10.2
|
Consulting
Agreement with Wei(David) Cheng (incorporated by reference from our
Current Report on Form 8-K filed on August 20,
2009)
|
10.3
|
Consulting
Agreement with Cohen Independent Research
Group
|
(incorporated
by reference from our Current Report on Form 8-K filed on September 22,
2009)
|
10.4
|
Compensation
Agreement with AMG Group Inc. (incorporated by reference from our Current
Report on Form 8-K filed on October 1,
2009)
|
10.5
|
Consulting
Agreement with Kim Baker, Eileen Duperron, and Intentional and Purposeful
Living (incorporated by reference from our Current Report on Form 8-K
filed on November 23, 2009)
|
(31) RULE
13A-14(D)/15D-14(D) CERTIFICATIONS
31.1*
|
Section
302 Certification of Principal Executive Officer and Principal Financial
Officer.
|
(32) SECTION
1350 CERTIFICATIONS
32.1*
|
Section
906 Certification of Principal Executive Officer and Principal Financial
Officer.
|
29
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.
VERIFY SMART
CORP.
|
|
(Registrant)
|
|
Date: February
9, 2010
|
TONY
CINOTTI
|
Tony
Cinotti
|
|
Director
|
30