Attached files
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EX-31.2 - EXHIBIT 31.2 - Smartag International, Inc. | exhibit31_2.htm |
EX-32 - EXHIBIT 32 - Smartag International, Inc. | exhibit32.htm |
EX-31.1 - EXHIBIT 31.1 - Smartag International, Inc. | exhibit31_1.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
ý QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
Quarterly Period Ended June 30, 2010
or
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from
to
Commission
File Number 000-53792
SMARTAG INTERNATIONAL,
INC.
(Exact
name of registrant issuer as specified in its charter)
Nevada
|
81-0554149
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
1328 West Balboa Boulevard Suite C, Newport Beach,
CA 92661
|
||
(Address
of principal executive offices, including zip code)
|
||
Registrant’s
phone number, including area code (949)
903-0468
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ý NO
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of
this chapter) during the preceding twelve months (or shorter period that the
registrant was required to submit and post such files).
YES
NO ý
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer Accelerated Filer Non-accelerated Filer Smaller
reporting company ý
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ý No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Outstanding
at August 13, 2010
|
|
Common
Stock, $.001 par value
|
10,137,151
|
INDEX
Page
No.
|
||
FINANCIAL
INFORMATION
|
||
ITEM
1.
|
FINANCIAL
STATEMENTS:
|
|
Condensed
Balance Sheets as of June 30, 2010 (unaudited) and December 31,
2009
|
3
|
|
Condensed
Statements of Operations (unaudited) for the Three and Six Months Ended
June 30, 2010 and 2009
|
4
|
|
Condensed
Statements of Cash Flows (Unaudited) for the Three and Six Months ended
June 30, 2010 and 2009
|
5
|
|
Notes
to Condensed Financial Statements
|
6
|
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
13
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
16
|
ITEM
4T.
|
CONTROLS
AND PROCEDURES
|
16
|
PART
II
|
OTHER
INFORMATION
|
|
ITEM
1
|
LEGAL
PROCEEDINGS
|
17
|
ITEM
1A
|
RISK
FACTORS
|
17
|
ITEM
2
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
17
|
ITEM
3
|
DEFAULTS
UPON SENIOR SECURITIES
|
17
|
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
17
|
ITEM
5
|
OTHER
INFORMATION
|
17
|
ITEM
6
|
EXHIBITS
|
17
|
-
2 -
PART I -
FINANCIAL INFORMATION
ITEM
I — FINANCIAL STATEMENTS
Smartag
International, Inc.
(a
development stage company)
CONDENSED
BALANCE SHEETS
June
30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 6,086 | $ | 10,298 | ||||
TOTAL
CURRENT ASSETS
|
6,086 | 10,298 | ||||||
TOTAL
ASSETS
|
$ | 6,086 | $ | 10,298 | ||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
11,840 | 3,090 | ||||||
Secured
revolving note payable, related party
|
86,274 | 77,568 | ||||||
Convertible
note payable, related party
|
25,000 | 25,000 | ||||||
TOTAL
CURRENT LIABILITIES
|
123,114 | 105,658 | ||||||
STOCKHOLDERS’
EQUITY DEFICIT:
|
||||||||
Preferred
stock, 25,000,000 shares authorized, no shares issued and outstanding at
June 30, 2010 and December 31, 2009, respectively
|
- | - | ||||||
Common
stock, $.001 par value, 500,000,000 shares authorized, 10,137,151 shares
issued and outstanding at June 30, 2010 and December 31, 2009,
respectively
|
10,137 | 10,137 | ||||||
Additional
paid in capital
|
1,203,861 | 1,203,861 | ||||||
Accumulated
deficit
|
(1,331,026 | ) | (1,309,358 | ) | ||||
TOTAL
STOCKHOLDERS’ DEFICIT
|
(117,028 | ) | (95,360 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$ | 6,086 | $ | 10,298 |
The
accompanying notes are an integral part of the financial
statements.
-
3 -
(a
development stage company)
CONDENSED
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
Inception
(March 24, 1999) through June 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
REVENUES
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
COST
OF SALES
|
- | - | - | - | - | |||||||||||||||
GROSS
PROFIT
|
- | - | - | - | - | |||||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||||||
General
and administrative expenses
|
15,667 | 15,314 | 21,667 | 41,664 | 1,331,026 | |||||||||||||||
Total
operating expenses
|
15,667 | 15,314 | 21,667 | 41,664 | 1,331,026 | |||||||||||||||
LOSS
FROM OPERATIONS
|
(15,667 | ) | (15,314 | ) | (21,667 | ) | (41,664 | ) | (1,331,026 | ) | ||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||||||
Other
income
|
- | - | - | - | - | |||||||||||||||
Total
other expense
|
- | - | - | - | - | |||||||||||||||
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
(15,667 | ) | (15,314 | ) | (21,667 | ) | (41,664 | ) | (1,331,026 | ) | ||||||||||
Provision
for income taxes
|
- | - | - | - | - | |||||||||||||||
NET
LOSS APPLICABLE TO COMMON STOCKHOLDERS
|
$ | (15,667 | ) | $ | (15,314 | ) | $ | (21,667 | ) | $ | (41,664 | ) | $ | (1,331,026 | ) | |||||
NET
LOSS PER SHARE OF COMMON STOCK — Basic and diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
WEIGHTED
AVERAGE SHARES OUTSTANDING — Basic and diluted
|
10,137,151 | 10,137,151 | 10,137,151 | 10,137,151 |
The
accompanying notes are an integral part of the financial
statements.
-
4 -
Smartag
International, Inc.
(Formerly
Known as Art4Love, Inc.)
CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
Inception
(March 24, 1999) through June 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
Net
loss
|
$ | (15,667 | ) | $ | (15,314 | ) | $ | (21,667 | ) | $ | (41,664 | ) | $ | (1,331,026 | ) | |||||
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||||||||||||||
Debt
issued in exchange for services with related party
|
- | - | - | - | 25,000 | |||||||||||||||
Shares
issued in exchange for debt with related party
|
- | - | - | - | 50,000 | |||||||||||||||
Changes
in operating assets and liabilities;
|
||||||||||||||||||||
Accounts
payable
|
2,750 | 229 | 8,750 | 229 | 11,840 | |||||||||||||||
Net
cash used in operating activities
|
(12,917 | ) | (15,085 | ) | (12,917 | ) | (41,435 | ) | (1,244,186 | ) | ||||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
Net
cash provided by investing activities
|
- | - | - | - | - | |||||||||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
Issuance
of common stock for cash
|
- | - | - | - | 1,148,300 | |||||||||||||||
Capital
contribution, related party
|
- | - | - | - | 15,698 | |||||||||||||||
Proceeds
from secured revolving note payable, related party
|
8,705 | 20,000 | 8,705 | 47,568 | 86,274 | |||||||||||||||
Net
cash provided by financing activities
|
8,705 | 20,000 | 8,705 | 47,568 | 1,250,272 | |||||||||||||||
NET
INCREASE (DECREASE) IN CASH
|
(4,212 | ) | 4,915 | (4,212 | ) | 6,133 | 6,086 | |||||||||||||
CASH,
Beginning of period
|
10,298 | 1,218 | 10,298 | - | - | |||||||||||||||
CASH,
End of period
|
$ | 6,086 | $ | 6,133 | $ | 6,086 | $ | 6,133 | $ | 6,086 | ||||||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||||||||||||
Cash
received/(paid) during the period for:
|
||||||||||||||||||||
Interest
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Income
taxes
|
$ | - | $ | - | $ | - | $ | - | $ | - |
The
accompanying notes are an integral part of the financial
statements.
-
5 -
Smartag
International, Inc.
(a
development stage company)
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1 – BASIS OF PRESENTATION AND ORGANIZATION
The
accompanying unaudited condensed financial statements of Smartag International
Inc. (the "Company") are presented in accordance with the requirements for Form
10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures
required by generally accepted accounting principles. In the opinion of
management, all adjustments (all of which were of a normal recurring nature)
considered necessary to fairly present the financial position, results of
operations, and cash flows of the Company on a consistent basis, have been
made.
These
results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's financial statements. Operating results for the three and six
months ended June 30, 2010 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2010.
The
Company recommends that the accompanying condensed financial statements for the
interim period be read in conjunction with the Company's financial statements
for the year ended December 31, 2009 included in the Company's Annual Report on
Form 10-K.
Current
Operations and Background
Smartag
International, Inc., a Nevada corporation (“Smartag,” “Company,” “we,” “us,” or
“our”), was formed as Theca Corporation on March 24, 1999 in
Colorado. The Company is in the development stage as defined in
Financial Accounting Standards Board Statement No. 7. On November 29, 2004, we
merged with Art4Love, Inc., a Delaware corporation, into Art4Love, Inc. a Nevada
corporation. Art4love, Inc. attempted to sell and lease art to
companies and individuals from artists’ collections worldwide. The
Company ceased operations in December 2006. On February 19, 2009,
Art4Love changed its name to Smartag International, Inc.
Business
Currently,
the Company seeks suitable candidates for a business combination with a private
company. The Company has made no efforts to identify a possible
business combination. As a result, the Company has not conducted negotiations or
entered into a letter of intent concerning any target business. The business
purpose of the Company is to seek the acquisition of or merger with, an existing
company. The Company selected December 31 as its fiscal year end.
The
Company is currently considered to be a "blank check" company. The U.S.
Securities and Exchange Commission (the “SEC”) defines those companies as "any
development stage company that is issuing a penny stock, within the meaning of
Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and that has no specific business plan or purpose, or has
indicated that its business plan is to merge with an unidentified company or
companies." Under SEC Rule 12b-2 under the Exchange Act, the Company also
qualifies as a “shell company,” because it has no or nominal assets (other than
cash) and no or nominal operations. Many states have enacted
statutes, rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not intend to
undertake any efforts to cause a market to develop in our securities, either
debt or equity, until we have successfully concluded a business combination. The
Company intends to comply with the periodic reporting requirements of the
Exchange Act for so long as it is subject to those requirements.
The
Company’s principal business objective for the next 12 months and beyond such
time will be to achieve long-term growth potential through a combination with a
business rather than immediate, short-term earnings. The Company will not
restrict its potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of
business.
-
6 -
The
analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company. As of this
date the Company has not entered into any definitive agreement with any party,
nor have there been any specific discussions with any potential business
combination candidate regarding business opportunities for the
Company. The Company has unrestricted flexibility in seeking,
analyzing and participating in potential business opportunities. In its efforts
to analyze potential acquisition targets, the Company will consider the
following kinds of factors:
(a)
|
Potential
for growth, indicated by new technology, anticipated market expansion or
new products;
|
(b)
|
Competitive
position as compared to other firms of similar size and experience within
the industry segment as well as within the industry as a
whole;
|
(c)
|
Strength
and diversity of management, either in place or scheduled for
recruitment;
|
(d)
|
Capital
requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements or from other
sources;
|
(e)
|
The
cost of participation by the Company as compared to the perceived tangible
and intangible values and
potentials;
|
(f)
|
The
extent to which the business opportunity can be
advanced;
|
(g)
|
The
accessibility of required management expertise, personnel, raw materials,
services, professional assistance and other required items;
and
|
(h)
|
Other
relevant factors.
|
In
applying the foregoing criteria, no one of which will be controlling, management
will attempt to analyze all factors and circumstances and make a determination
based upon reasonable investigative measures and available data. Potentially
available business opportunities may occur in many different industries, and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Due to the Company's limited capital available for investigation,
the Company may not discover or adequately evaluate adverse facts about the
opportunity to be acquired.
Form
of Acquisition
The
manner in which the Company participates in an opportunity will depend upon the
nature of the opportunity, the respective needs and desires of the Company and
the promoters of the opportunity, and the relative negotiating strength of the
Company and such promoters.
It is
likely that the Company will acquire its participation in a business opportunity
through the issuance of common stock or other securities of the Company.
Although the terms of any such transaction cannot be predicted, it should be
noted that in certain circumstances the criteria for determining whether or not
an acquisition is a so-called "tax free" reorganization under Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code") depends upon
whether the owners of the acquired business own 80% or more of the voting stock
of the surviving entity. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under the
Code, all prior stockholders would in such circumstances retain 20% or less of
the total issued and outstanding shares of the surviving entity. Under other
circumstances, depending upon the relative negotiating strength of the parties,
prior stockholders may retain substantially less than 20% of the total issued
and outstanding shares of the surviving entity. This could result in substantial
additional dilution to the equity of those who were stockholders of the Company
prior to such reorganization.
-
7 -
The
present stockholders of the Company will likely not have control of a majority
of the voting securities of the Company following a reorganization transaction.
As part of such a transaction, all or a majority of the Company's directors, may
resign and one or more new directors may be appointed without any vote by
stockholders.
In the
case of an acquisition, the transaction may be accomplished upon the sole
determination of management without any vote or approval by stockholders. In the
case of a statutory merger or consolidation directly involving the Company, it
will likely be necessary to call a stockholders' meeting and obtain the approval
of the holders of a majority of the outstanding securities. The necessity to
obtain such stockholder approval may result in delay and additional expense in
the consummation of any proposed transaction and will also give rise to certain
appraisal rights to dissenting stockholders. Most likely, management will seek
to structure any such transaction so as not to require stockholder
approval.
It is
anticipated that the investigation of specific business opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention and
substantial cost for accountants, attorneys and others. If a decision is made
not to participate in a specific business opportunity, the costs theretofore
incurred in the related investigation might not be recoverable. Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
to the Registrant of the related costs incurred.
We
presently have no employees apart from our management. Our officers and
directors are engaged in outside business activities and anticipate that they
will devote to our business very limited time until the acquisition of a
successful business opportunity has been identified. We expect no significant
changes in the number of our employees other than such changes, if any, incident
to a business combination.
Basis of
Presentation — The accompanying financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America.
Going
Concern — Since inception, the Company and has a cumulative net loss of
$1,331,026. Since inception, the Company has also been dependent upon the
receipt of capital investment or other financing to fund its operations. The
Company currently has no source of operating revenue, and has only limited
working capital with which to pursue its business plan, which contemplates the
completion of a business combination with an operating company. The amount of
capital required to sustain operations until the successful completion of a
business combination is subject to future events and uncertainties. It may be
necessary for the Company to secure additional working capital through loans or
sales of common stock, and there can be no assurance that such funding will be
available in the future. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The
accompanying financial statements have been presented on the basis of the
continuation of the Company as a going concern and do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
- The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as
well as the reported amounts of revenues and expenses. Actual results could
differ from these estimates.
Income
Taxes — The Company records income taxes in accordance with the
provisions of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 740, “Income Taxes.” The
standard requires, among other provisions, an asset and liability approach to
recognize deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the financial statement carrying
amounts and tax basis of assets and liabilities. Valuation allowances
are provided if based upon the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be
realized.
Cash and Cash
Equivalents - Cash and cash equivalents, if any, include all highly
liquid instruments with an original maturity of three months or less at the date
of purchase.
-
8 -
Fair Value of
Financial Instruments - On July 1, 2008, the Company adopted Accounting
Standards Codification Topic 820, Fair Value Measurements and Disclosures
("Topic 820"). Topic 820 defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosure
requirements for fair value measures. The three levels are defined as
follows:
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to valuation methodology are unobservable and significant to the
fair measurement.
|
The fair
value of the Company's cash and cash equivalents, accrued liabilities and
accounts payable approximate carrying value because of the short-term nature of
these items.
Stock-Based
Compensation — The Company records transactions under share based payment
arrangements in accordance with the provisions of the FASB ASC Topic 718, “Share
Based Payment Arrangements”. The standard requires recognition of the
cost of employee services received in exchange for an award of equity
instruments in the financial statements over the period the employee is required
to perform the services in exchange for the award. The standard also requires
measurement of the cost of employee services received in exchange for an award.
The Company is using the modified prospective method allowed under this
standard. Accordingly, upon adoption, prior period amounts have not been
restated. Under this application, the Company recorded the cumulative effect of
compensation expense for the unvested portion of previously granted awards that
remain outstanding at the date of adoption and recorded compensation expense for
all awards granted after the date of adoption.
The
standard provides that income tax effects of share-based payments are recognized
in the financial statements for those awards that will normally result in tax
deduction under existing law. Under current U.S. federal tax law, the Company
would receive a compensation expense deduction related to non-qualified stock
options only when those options are exercised and vested shares are received.
Accordingly, the financial statement recognition of compensation cost for
non-qualified stock options creates a deductible temporary difference which
results in a deferred tax asset and a corresponding deferred tax benefit in the
income statement. The Company does not recognize a tax benefit for compensation
expense related to incentive stock options unless the underlying shares are
disposed in a disqualifying disposition.
Net Loss Per
Share — The Company computes net loss per share in accordance with FASB
ASC Topic 260, “Earnings per Share,” Under the provisions of the standard, basic
and diluted net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of shares of
common stock outstanding during the period. Common equivalent shares
related to stock options and warrants have been excluded from the computation of
basic and diluted earnings per share, for the years ended December 31, 2009 and
2008 because their effect is anti-dilutive.
Comprehensive
Loss - Comprehensive loss is defined as all changes in stockholders'
equity, exclusive of transactions with owners, such as capital investments.
Comprehensive loss includes net loss, changes in certain assets and liabilities
that are reported directly in equity such as translation adjustments on
investments in foreign subsidiaries and unrealized gains (losses) on
available-for-sale securities. For the quarter ended June 30, 2010, the
Company's comprehensive loss was the same as its net loss.
Concentration of
Credit Risk — Financial instruments that potentially subject the Company
to a concentration of credit risk consist of cash. The Company
maintains its cash with high credit quality financial institutions; at times,
such balances with any one financial institution may exceed FDIC insured
limits.
Financial
Instruments — Our financial instruments consist of cash, accounts
payable, and notes payable. The carrying values of cash, accounts
payable, and notes payable are representative of their fair values due to their
short-term maturities.
-
9 -
Recently Issued
Accounting Pronouncements - In June 2009, the Financial Accounting
Standards Board (FASB) issued a new standard regarding the accounting for
transfers of financial assets amending the existing guidance on transfers of
financial assets to, among other things, eliminate the qualifying
special-purpose entity concept, include a new unit of account definition that
must be met for transfers of portions of financial assets to be eligible for
sale accounting, clarify and change the derecognition criteria for a transfer to
be accounted for as a sale, and require significant additional disclosure. This
standard was effective for new transfers of financial assets beginning
January 1, 2010. The adoption of this standard did not have a material
impact on the financial statements.
In
June 2009, the FASB issued a new standard that revises the consolidation
guidance for variable-interest entities. The modifications include the
elimination of the exemption for qualifying special purpose entities, a new
approach for determining who should consolidate a variable-interest entity, and
changes to when it is necessary to reassess who should consolidate a
variable-interest entity. The adoption of this standard did not have a material
impact on our financial statements.
In October 2009, the FASB issued
Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable
Revenue Arrangements—a consensus of the FASB Emerging Issues Task
Force , that provides
amendments to the criteria for separating consideration in multiple-deliverable
arrangements. As a result of these amendments, multiple-deliverable revenue
arrangements will be separated in more circumstances than under existing U.S.
GAAP. The ASU does this by establishing a selling price hierarchy for
determining the selling price of a deliverable. The selling price used for each
deliverable will be based on vendor-specific objective evidence if available,
third-party evidence if vendor-specific objective evidence is not available, or
estimated selling price if neither vendor-specific objective evidence nor
third-party evidence is available. A vendor will be required to determine its
best estimate of selling price in a manner that is consistent with that used to
determine the price to sell the deliverable on a standalone basis. This ASU also
eliminates the residual method of allocation and will require that arrangement
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method, which allocates any
discount in the overall arrangement proportionally to each deliverable based on
its relative selling price. Expanded disclosures of qualitative and quantitative
information regarding application of the multiple-deliverable revenue
arrangement guidance are also required under the ASU. The ASU does not apply to
arrangements for which industry specific allocation and measurement guidance
exists, such as long-term construction contracts and software transactions.
The Company is currently evaluating the
impact of this standard on our financial statements.
In
October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That
Include Software Elements—a consensus of the FASB Emerging Issues Task
Force, that reduces the types of transactions that fall within the
current scope of software revenue recognition guidance. Existing software
revenue recognition guidance requires that its provisions be applied to an
entire arrangement when the sale of any products or services containing or
utilizing software when the software is considered more than incidental to the
product or service. As a result of the amendments included in ASU
No. 2009-14, many tangible products and services that rely on software will
be accounted for under the multiple-element arrangements revenue recognition
guidance rather than under the software revenue recognition guidance. Under the
ASU, the following components would be excluded from the scope of software
revenue recognition guidance: the tangible element of the product,
software products bundled with tangible products where the software components
and non-software components function together to deliver the product’s essential
functionality, and undelivered components that relate to software that is
essential to the tangible product’s functionality. The ASU also provides
guidance on how to allocate transaction consideration when an arrangement
contains both deliverables within the scope of software revenue guidance
(software deliverables) and deliverables not within the scope of that guidance
(non-software deliverables). The Company is currently evaluating the impact of
this standard on our financial statements.
In
January 2010, the FASB issued ASU No. 2010-6, Improving Disclosures About Fair
Value Measurements , that amends existing disclosure requirements
under FASB Accounting Standards Codification (ASC) 820 by adding required
disclosures about items transferring into and out of levels 1 and 2 in the fair
value hierarchy; adding separate disclosures about purchases, sales, issuances,
and settlements relative to level 3 measurements; and clarifying, among other
things, the existing fair value disclosures about the level of disaggregation.
For 3M this ASU is effective for the first quarter of 2010, except for the
requirement to provide level 3 activity of purchases, sales, issuances, and
settlements on a gross basis, which is effective beginning the first quarter of
2011. The Company is currently evaluating the impact of this standard on our
financial statements.
In
April 2010, the FASB issued ASU No. 2010-17, Milestone Method of Revenue
Recognition— a consensus of the FASB Emerging Issues Task Force that
recognizes the milestone method as an acceptable revenue recognition method for
substantive milestones in research or development arrangements. This standard
would require its provisions be met in order for an entity to recognize
consideration that is contingent upon achievement of a substantive milestone as
revenue in its entirety in the period in which the milestone is achieved. In
addition, this ASU would require disclosure of certain information with respect
to arrangements that contain milestones. The Company is currently evaluating the
impact of this standard on our financial statements.
-
10 -
NOTE
3 – NOTES PAYABLE
Convertible
Note
On
November 18, 2008, Smartag issued a Convertible Note (the " Convertible Note ")
for $25,000 to Ventana Capital Partners, Inc. (“Ventana”) in connection with
$10,000 cash and $15,000 in professional services paid by
Ventana. The Convertible Note is due on December 31, 2010 and bares
no interest. The Convertible Note may be converted at a time, at the
option of the holder, into 5,000,000 shares of common stock of Smartag at $0.005
per share.
Secured
Note
On March
17, 2009, we entered into a Secured Revolving Promissory Note (the “Secured
Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority
stockholder of the Company. Under the terms of the Note, Smartag
Solutions Bhd, agreed to advance to the Company, from time to time and at the
request of the Company, amounts up to an aggregate of $200,000 until December
31, 2010. All advances shall be paid on or before December 31, 2010
and interest shall accrue from the date of any advances on any principal amount
withdrawn, and on accrued and unpaid interest thereon, at the rate of zero
percent (0%) per annum, compounded annually. As of June 30, 2010, Smartag
Solutions Bhd advanced us $86,274. The Secured Note ranks senior to
all current and future indebtedness of Smartag and is secured by substantially
all of the assets of Smartag.
NOTE
4 – RELATED PARTY TRANSACTIONS
On
December 9, 2008, the Company converted $50,000 owed for consulting services to
Chad Love Lieberman, the Company’s then President and sole director into
10,000,000 shares of the Company’s common stock.
On
December 31, 2008, Chad Love Lieberman, the Company’s then President and sole
director, paid $15,698 of the Company’s expenses. This amount was
charged to paid in capital.
On
November 18, 2008, Smartag issued a Convertible Note (the " Convertible Note ")
for $25,000 to Ventana Capital Partners, Inc. (“Ventana”) in connection with
cash, cash equivalents and professional services paid by Ventana. The
Convertible Note is due on December 31, 2010 and bares no
interest. The Convertible Note may be converted at a time, at the
option of the holder, into shares of common stock of Smartag at $0.005 per
share.
On
December 31, 2008, pursuant to a Share Purchase Agreement Chad Love Lieberman,
the Company’s former majority stockholder and President, sold to Smartag
Solutions Bhd. an aggregate of 10,000,000 shares of Company common stock which
amounted to 98.6% of the Company. On December 31, 2008, Mr. Lieberman
resigned as President.
On March
17, 2009, we entered into a Revolving Promissory Note (the “Secured Note”) with
Smartag Solutions Bhd, a Malaysian corporation, the majority stockholder of the
Company. Under the terms of the Note, Smartag Solutions Bhd., agreed
to advance to the Company, from time to time and at the request of the Company,
amounts up to an aggregate of $200,000 until December 31, 2010. All
advances shall be paid on or before December 31, 2010 and interest
shall accrue from the date of any advances on any principal amount withdrawn,
and on accrued and unpaid interest thereon, at the rate of zero percent (0%) per
annum, compounded annually. As of June 30, 2010, Smartag Solutions Bhd advanced
us $86,274. The Secured Note ranks senior to all current and future
indebtedness of Smartag and is secured by substantially all of the assets of
Smartag.
NOTE
5 – EQUITY
As of
December 31, 2009, there were authorized 500,000,000 shares of common stock, par
value $0.001 per share and 25,000,000 shares of preferred stock, par value
$0.001 per share. Each common share entitles the holder to one vote,
in person or proxy, on any matter on which action of the stockholder of the
corporation is sought.
On
December 8, 2008, a reverse split of 1 for 200 was effectuated.
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11 -
Share
Issuance:
On
November 1, 2008, the Company entered into a Consulting Agreement (“Agreement”)
with Ventana under which was issued 2,000,000 (10,000 post-split) restricted
shares of the Company’s common stock for services to be rendered.
On
December 9, 2008, the Company converted $50,000 owed for consulting services to
Chad Love Lieberman, the Company’s President and sole director into 10,000,000
(post-split shares) of the Company’s common stock.
Outstanding
Options and Warrants:
None
NOTE
6 – COMMITMENTS AND CONTINGENCIES
On
January 7, 2009, we entered into an agreement with Venor, Inc. to provide
consulting services on a month to month basis. Eric Stoppenhagen, a
principle of Venor, Inc., will provide executive financial services to the
Company. Venor, Inc. will be paid $5,000 every month. This
contract was terminated as of September 30, 2009.
NOTE
7 – SUBSEQUENT EVENTS
In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through August 13, 2010,
the date the financial statements were issued. As of this date, nothing has
happened that requires disclosure.
-
12 -
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
information contained in this Form 10-Q is intended to update the information
contained in our Annual Report on Form 10-K for the year ended December 31, 2009
and presumes that readers have access to, and will have read, the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
other information contained in such Form 10-K. The following
discussion and analysis also should be read together with our financial
statements and the notes to the financial statements included elsewhere in this
Form 10-Q.
The
following discussion contains certain statements that may be deemed
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements appear in a number of
places in this Report, including, without limitation, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” These
statements are not guarantees of future performance and involve risks,
uncertainties and requirements that are difficult to predict or are beyond our
control. Forward-looking statements speak only as of the date of this
quarterly report. You should not put undue reliance on any forward-looking
statements. We strongly encourage investors to carefully read the
factors described in our Annual Report on Form 10-K for the year ended December
31, 2009 in the section entitled “Risk Factors” for a description of certain
risks that could, among other things, cause actual results to differ from these
forward-looking statements. We assume no responsibility to update the
forward-looking statements contained in this quarterly report on Form 10-Q. The
following should also be read in conjunction with the unaudited Financial
Statements and notes thereto that appear elsewhere in this report.
Business
Development
Smartag
International, Inc., a Nevada corporation (“Smartag,” “Company,” “we,” “us,” or
“our”), was formed as Theca Corporation on March 24, 1999 in
Colorado. The Company is in the development stage as defined in
Financial Accounting Standards Board ASC Topic 915. On November 29, 2004, we
merged with Art4Love, Inc., a Delaware corporation, into Art4Love, Inc. a Nevada
corporation. Art4love, Inc. attempted to sell and lease art to
companies and individuals from artists’ collections worldwide. The
Company ceased operations in December 2006.
On
December 31, 2008, pursuant to a Share Purchase Agreement Chad Love Lieberman,
the Company’s former majority stockholder and President, sold to Smartag
Solutions Bhd. an aggregate of 10,000,000 shares of Company common stock (the
“Sale”) which amounted to 98.6% of the Company.
On
February 19, 2009, Art4Love changed its name to Smartag International,
Inc.
Business
of Issuer
Currently,
the Company seeks suitable candidates for a business combination with a private
company. The Company has made no efforts to identify a possible
business combination. As a result, the Company has not conducted negotiations or
entered into a letter of intent concerning any target business. The business
purpose of the Company is to seek the acquisition of, or merger with, an
existing company. The Company selected December 31 as its fiscal year
end.
The
Company is currently considered to be a "blank check" company. The U.S.
Securities and Exchange Commission (the “SEC”) defines those companies as "any
development stage company that is issuing a penny stock, within the meaning of
Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and that has no specific business plan or purpose, or has
indicated that its business plan is to merge with an unidentified company or
companies." Under SEC Rule 12b-2 under the Exchange Act, the Company also
qualifies as a “shell company,” because it has no or nominal assets (other than
cash) and no or nominal operations. Many states have enacted
statutes, rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not intend to
undertake any efforts to cause a market to develop in our securities, either
debt or equity, until we have successfully concluded a business combination. The
Company intends to comply with the periodic reporting requirements of the
Exchange Act for so long as it is subject to those requirements.
-
13 -
The
Company’s principal business objective for the next 12 months and beyond such
time will be to achieve long-term growth potential through a combination with a
business rather than immediate, short-term earnings. The Company will not
restrict its potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of
business.
The
analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company. As of this
date, the Company has not entered into any definitive agreement with any party,
nor have there been any specific discussions with any potential business
combination candidate regarding business opportunities for the
Company. The Company has unrestricted flexibility in seeking,
analyzing and participating in potential business opportunities. In its efforts
to analyze potential acquisition targets, the Company will consider the
following kinds of factors:
a)
|
Potential
for growth, indicated by new technology, anticipated market expansion or
new products;
|
b)
|
Competitive
position as compared to other firms of similar size and experience within
the industry segment as well as within the industry as a
whole;
|
c)
|
Strength
and diversity of management, either in place or scheduled for
recruitment;
|
d)
|
Capital
requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements or from other
sources;
|
e)
|
The
cost of participation by the Company as compared to the perceived tangible
and intangible values and
potentials;
|
f)
|
The
extent to which the business opportunity can be
advanced;
|
g)
|
The
accessibility of required management expertise, personnel, raw materials,
services, professional assistance and other required items;
and
|
h)
|
Other
relevant factors.
|
In
applying the foregoing criteria, no one of which will be controlling, management
will attempt to analyze all factors and circumstances and make a determination
based upon reasonable investigative measures and available data. Potentially
available business opportunities may occur in many different industries, and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Due to the Company's limited capital available for investigation,
the Company may not discover or adequately evaluate adverse facts about the
opportunity to be acquired.
Form
of Acquisition
The
manner in which the Company participates in an opportunity will depend upon the
nature of the opportunity, the respective needs and desires of the Company and
the promoters of the opportunity, and the relative negotiating strength of the
Company and such promoters.
It is
likely that the Company will acquire its participation in a business opportunity
through the issuance of common stock or other securities of the Company.
Although the terms of any such transaction cannot be predicted, it should be
noted that in certain circumstances the criteria for determining whether or not
an acquisition is a so-called "tax free" reorganization under Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code") depends upon
whether the owners of the acquired business own 80% or more of the voting stock
of the surviving entity. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under the
Code, all prior stockholders would in such circumstances retain 20% or less of
the total issued and outstanding shares of the surviving entity. Under other
circumstances, depending upon the relative negotiating strength of the parties,
prior stockholders may retain substantially less than 20% of the total issued
and outstanding shares of the surviving entity. This could result in substantial
additional dilution to the equity of those who were stockholders of the Company
prior to such reorganization.
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14 -
The
present stockholders of the Company will likely not have control of a majority
of the voting securities of the Company following a reorganization transaction.
As part of such a transaction, all or a majority of the Company's directors may
resign and one or more new directors may be appointed without any vote by
stockholders.
In the
case of an acquisition, the transaction may be accomplished upon the sole
determination of management without any vote or approval by stockholders. In the
case of a statutory merger or consolidation directly involving the Company, it
will likely be necessary to call a stockholders' meeting and obtain the approval
of the holders of a majority of the outstanding securities. The necessity to
obtain such stockholder approval may result in delay and additional expense in
the consummation of any proposed transaction and will also give rise to certain
appraisal rights to dissenting stockholders. Most likely, management will seek
to structure any such transaction so as not to require stockholder
approval.
It is
anticipated that the investigation of specific business opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention and
substantial cost for accountants, attorneys and others. If a decision is made
not to participate in a specific business opportunity, the costs theretofore
incurred in the related investigation might not be recoverable. Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
to the Registrant of the related costs incurred.
Results
of Operation
For the
six months ended June 30, 2010 and 2009, the Company had no revenues from
continuing operations. It is unlikely the Company will have any revenues unless
it is able to effect an acquisition or merger with an operating company, of
which there can be no assurance. It is management's assertion that these
circumstances may hinder the Company's ability to continue as a going
concern.
For the
six months ended June 30, 2010, the Company had a net loss of $21,667, as
compared with a net loss of $41,664 for the corresponding period in 2009. The
decreases in operating expense for the current period are mainly due to a
decrease in consulting and travel expenses.
Liquidity
and Capital Resources
The
following is a summary of the Company's cash flows provided by (used in)
operating, investing, and financing activities for the six months ended June 30,
2010 and 2009:
Six
months ended June 30,
2010
|
2009
|
|||||||
Operating
Activities
|
$ | (12,917 | ) | $ | (41,435 | ) | ||
Investing
Activities
|
- | - | ||||||
Financing
Activities
|
8,705 | 47,568 | ||||||
Net
Effect on Cash
|
$ | (4,212 | ) | $ | 6,133 |
In the
current period ending June 30, 2010, the Company incurred a net loss of $21,667
which was offset by an increase in accounts payable for the
period. For the period ended June 30, 2009, the Company incurred a
net loss of $41,664. The Company received proceeds from its secured
revolving note payable, related party to cover its operational
losses.
Going
Concern
We
currently have no source of operating revenue, and have only limited working
capital with which to pursue our business plan, which contemplates the
completion of a business combination with an operating company. The amount of
capital required to sustain operations until the successful completion of a
business combination is subject to future events and uncertainties. It may be
necessary for us to secure additional working capital through loans or sales of
common stock, and there can be no assurance that such funding will be available
in the future. These conditions raise substantial doubt about our ability to
continue as a going concern. Our auditor has issued a "going concern"
qualification as part of his opinion in the Audit Report for the year ended
December 31, 2009, and our unaudited financial statements for the quarter ended
June 30, 2010 include a "going concern" footnote.
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15 -
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires estimates
and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses
and related disclosures of contingent assets and liabilities in the financial
statements and accompanying notes. The SEC has defined a company's critical
accounting policies as the ones that are most important to the portrayal of the
company's financial condition and results of operations, and which require the
company to make its most difficult and subjective judgments, often as a result
of the need to make estimates of matters that are inherently uncertain. We
believe that our estimates and assumptions are reasonable under the
circumstances; however, actual results may vary from these estimates and
assumptions. We have identified in Note 2 - "Summary of Accounting Policies" to
the Financial Statements contained in this Quarterly Report certain critical
accounting policies that affect the more significant judgments and estimates
used in the preparation of the financial statements.
Off-Balance
Sheet Arrangements
We have
not entered into any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources and would be considered material to
investors.
Contractual
Obligations
As a
"smaller reporting company" as defined by Item 10 of Regulation S-K, the Company
is not required to provide this information.
Item
3 Quantitative
and Qualitative Disclosures About Market Risk.
As a
"smaller reporting company" as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item
Item
4T Controls
and Procedures.
Evaluation
of 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 pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules, regulations and related forms, and that
such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
As of
June 30, 2010, we carried out an evaluation, under the supervision and with the
participation of our principal executive officer and our principal financial
officer of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our principal executive
officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this report.
Changes
in Internal Controls
There
have been no changes in our internal controls over financial reporting during
the quarter ended June 30, 2010 that have materially affected or are reasonably
likely to materially affect our internal controls.
-
16 -
PART
II -- OTHER INFORMATION
To the
best knowledge of our sole officer and director, the Company is not a party to
any legal proceeding or litigation.
As a
"smaller reporting company" as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item. See the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission
which identifies and discloses certain risks and uncertainties including,
without limitation, those "Risk Factors" included in Item 1A of the Annual
Report.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
None.
None.
ITEM
6.
|
Exhibits
|
||
31
|
Certification
of President pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted
pursuant to section 302 of the Sarbanes-Oxley Act of
2002.
|
||
32
|
Certification
of the Company’s Chief Executive Officer and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
||
-
17 -
SIGNATURES
Pursuant
to the requirements 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.
SMARTAG
INTERNATIONAL, INC.
|
||
Date:
August 13, 2010
|
/s/
PENG KEONG LIM
|
|
Name:
Peng Keong Lim
|
||
Title: Chief
Executive Officer and President
|
||
Date:
August 13, 2010
|
/s/
SIM KAY WAH
|
|
Name:
Sim Kay Wah
Title:
Chief Financial Officer
|
||
-
18 -
EXHIBIT
INDEX
Exhibit
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14
as adopted pursuant to section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32
|
Certification
of the Company’s Chief Executive Officer and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
-
19 -