UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED: September 30, 2015
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
Commission
File Number: ________________
SMACK
SPORTSWEAR, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
26-1665960 |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
6025
Macadam Ct
Agoura
Hills, CA 91301
(Address
of principal executive offices, Zip Code)
(818)
404-5541
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 ☒ 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 (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐
No ☒
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.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ |
Smaller
reporting company |
☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☒ No ☐
The
number of shares of registrant’s common stock outstanding as of November 13, 2014 was 22,117,776.
FORM
10-Q
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
SEPTEMBER
30, 2015
TABLE
OF CONTENTS
| |
| |
Page | |
PART I - FINANCIAL INFORMATION |
| |
| |
| |
Item 1. | |
Condensed Consolidated Financial Statements | |
| 3 | |
Item 2. | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| 14 | |
Item 3. | |
Quantitative and Qualitative Disclosures About Market Risk | |
| 19 | |
Item 4. | |
Controls and Procedures | |
| 20 | |
| |
| |
| | |
PART II | |
OTHER INFORMATION | |
| | |
| |
| |
| | |
Item 1. | |
Legal Proceedings | |
| | |
Item 1A. | |
Risk Factors | |
| 22 | |
Item 2. | |
Unregistered Sales of Equity Securities and Use of Proceeds | |
| 22 | |
Item 3. | |
Defaults Upon Senior Securities | |
| 22 | |
Item 4. | |
Mine Safety Disclosures | |
| 22 | |
Item 5. | |
Other Information | |
| 22 | |
Item 6. | |
Exhibits | |
| 22 | |
| |
| |
| | |
SIGNATURES | |
| 23 | |
Smack
Sportswear, Inc.
Condensed
Consolidated Balance Sheets
| |
September 30, | | |
June 30, | |
| |
2015 | | |
2015 | |
ASSETS | |
(Unaudited) | | |
| |
CURRENT ASSETS | |
| | |
| |
Cash held in escrow | |
$ | 18,811 | | |
$ | - | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 18,811 | | |
$ | - | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS' DEFICIT | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 244,640 | | |
$ | 220,790 | |
Payroll and sales taxes payable | |
| 271,398 | | |
| 271,398 | |
Customer deposits | |
| 8,500 | | |
| 8,500 | |
Due to former officer | |
| - | | |
| 132,900 | |
Amounts due to related parties | |
| 125,000 | | |
| 113,000 | |
Notes payable - related parties | |
| 150,000 | | |
| 153,901 | |
Note payable | |
| 47,650 | | |
| - | |
Total current liabilities | |
| 847,188 | | |
| 900,489 | |
| |
| | | |
| | |
Notes payable - related parties | |
| 150,000 | | |
| 150,000 | |
Total liabilities | |
| 997,188 | | |
| 1,050,489 | |
| |
| | | |
| | |
SHAREHOLDERS' DEFICIT | |
| | | |
| | |
Preferred stock, no par value, 5,000,000 shares authorized; Series A Voting Preferred stock, 2,000,000 shares authorized; No shares issued and outstanding | |
| - | | |
| - | |
Common stock, $0.001 par value, 70,000,000 shares authorized; 22,117,776 shares issued and outstanding | |
| 66,353 | | |
| 66,353 | |
Additional paid-in capital | |
| 1,264,782 | | |
| 1,264,782 | |
Accumulated deficit | |
| (2,309,512 | ) | |
| (2,381,624 | ) |
Total shareholders' deficit | |
| (978,377 | ) | |
| (1,050,489 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | |
$ | 18,811 | | |
$ | - | |
The accompanying
notes are an integral part of these condensed consolidated financial statements.
Smack
Sportswear, Inc.
Condensed
Consolidated Statements of Operations
| |
Three Months Ended | |
| |
September 30 | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| |
Sales | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Cost of goods sold | |
| - | | |
| - | |
| |
| | | |
| | |
Gross profit | |
| - | | |
| - | |
| |
| | | |
| | |
Selling, general and administrative expenses | |
| 52,423 | | |
| 44,299 | |
| |
| | | |
| | |
Loss from operations | |
| (52,423 | ) | |
| (44,299 | ) |
| |
| | | |
| | |
Other expense | |
| | | |
| | |
Interest expense | |
| 8,365 | | |
| 7,523 | |
| |
| 8,365 | | |
| 7,523 | |
| |
| | | |
| | |
Loss from continuing operations | |
| (60,788 | ) | |
| (51,822 | ) |
| |
| | | |
| | |
Discontinued operations | |
| | | |
| | |
Loss from discontinued operations | |
| - | | |
| (91,405 | ) |
Gain from sale of discontinued operations | |
| 132,900 | | |
| - | |
Income (loss) from discontinued operations | |
| 132,900 | | |
| (91,405 | ) |
| |
| | | |
| | |
NET INCOME (LOSS) | |
$ | 72,112 | | |
$ | (143,227 | ) |
| |
| | | |
| | |
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE: | |
| | | |
| | |
Loss per share from continuing operations | |
$ | - | | |
$ | - | |
Income (loss) per share from discontinued operations | |
$ | 0.01 | | |
$ | - | |
Net income (loss) per share | |
$ | - | | |
$ | (0.01 | ) |
| |
| | | |
| | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |
| | | |
| | |
BASIC AND DILUTED | |
| 22,117,776 | | |
| 18,789,153 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Smack
Sportswear, Inc.
Condensed
Consolidated Statement of Shareholders' Deficit
Three
Months Ended September 30, 2015 (Unaudited)
| |
Preferred Stock | | |
Common Stock | | |
Additional
Paid-in | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, June 30, 2015 | |
| - | | |
| - | | |
| 22,117,776 | | |
| 66,353 | | |
| 1,264,782 | | |
| (2,381,624 | ) | |
| (1,050,489 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income for the three months ended September 30, 2015 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,112 | | |
| 72,112 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, September 30, 2015 (Unaudited) | |
| - | | |
$ | - | | |
| 22,117,776 | | |
$ | 66,353 | | |
$ | 1,264,782 | | |
$ | (2,309,512 | ) | |
$ | (978,377 | ) |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Smack
Sportswear, Inc.
Condensed
Consolidated Statements of Cash Flows
| |
Three Months Ended | |
| |
September 30 | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
Cash Flows from Operating Activities | |
| | |
| |
Net income | |
$ | 72,112 | | |
$ | - | |
Adjustments to reconcile net income to net cash used in operating activities of continuing operations | |
| | | |
| | |
Gain from sale of discontinued operations | |
| (132,900 | ) | |
| - | |
Changes in Assets and Liabilities | |
| | | |
| | |
(Decrease) Increase in: | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 23,850 | | |
| - | |
Amounts due to related parties | |
| 12,000 | | |
| - | |
Net cash used in operating activities from continuing operations | |
| (24,938 | ) | |
| - | |
Net cash used in operating activities from discontinued operations | |
| - | | |
| (34,270 | ) |
Net cash used in operating activities | |
| (24,938 | ) | |
| (34,270 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from promissory notes payable | |
| 47,650 | | |
| - | |
Repayment of notes payable | |
| (3,901 | ) | |
| - | |
Cash held in escrow | |
| (18,811 | ) | |
| | |
Net cash provided by financing activities of continuing operations | |
| 24,938 | | |
| - | |
Net cash provided by financing activities of discontinued operations | |
| - | | |
| 35,200 | |
Net cash provided by financing activities | |
| 24,938 | | |
| 35,200 | |
| |
| | | |
| | |
Net decrease in cash | |
| - | | |
| 930 | |
Cash beginning of period | |
| - | | |
| 824 | |
Cash end of period | |
$ | - | | |
$ | 1,754 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information | |
| | | |
| | |
Interest paid | |
$ | - | | |
$ | - | |
Taxes paid | |
$ | - | | |
$ | - | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
1 - ORGANIZATION, OPERATIONS AND BASIS OF ACCOUNTING
The
accompanying unaudited condensed consolidated financial statements of Smack Sportswear, Inc. and Subsidiary (the “Company”)
have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In
the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating
results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2016. For further information refer to the financial statements and footnotes thereto included
in the Company's Form 10-K for the year ended June 30, 2015.
Nature
of the Business
SMACK
Sportswear (“SMACK”) was originally incorporated in Nevada in October 2007. The Company’s primary business activities
were the manufacturer and sale of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July
1, 2015, the Company has ceased operations and is looking for opportunities to acquire operating companies or merge with other
operational entities.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity
of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed
consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going
concern. During the three months ended September 30, 2015, the Company incurred a net loss from operations of $52,423 and cash
used in operating activities was $24,938, and as of that date, is delinquent in payments of $271,398 for payroll and sales taxes.
As of September 30, 2015, the Company had a working capital deficiency of $828,377 and a shareholders’ deficit of $978,377.
Furthermore, on July 27, 2015, the Company sold substantially all of its assets and business operations to a former officer. As
a result, the Company’s operations since that date have ceased. These factors, among others, raise substantial doubt about
the Company’s ability to continue as a going concern. The opinion of our independent registered public accounting firm on our audited financial statements as of
and for the year ended June 30, 2015 contains an explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern.
The
ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon,
among other things, an additional cash infusion and an identification of new business opportunities. During the three months ended
September 30, 2015, the Company raised $47,650 from an investor to pay past obligations and to allow the Company to continue operating
in its shell status and raised an additional $5,000 from the investor in October 2015. Management believes this funding and future
funding will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow it
to continue looking for opportunities to acquire operating companies or merge with other operational entities. No assurance can
be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company.
Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of
debt financing, or cause substantial dilution for our stock holders, in case of equity financing.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representations of the Company’s management, which is responsible for
their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States
of America and have been consistently applied in the preparation of the financial statements.
Basis
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Team Sports Superstore.
All significant intercompany transactions and balances have been eliminated in consolidation.
Loss
per Share Calculations
Basic
earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares
available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per
share for the three months ended September 30, 2015 and 2014, as there are no potential shares outstanding that would have a dilutive
effect.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use
of Estimates
The
preparation of the condensed financial statements in conformity with accounting principles generally accepted in the U.S requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period.
Significant estimates are used in valuing the fair value of common stock issued for services, among others. Actual results could
differ from these estimates.
Fair
Value of Financial Instruments
The
Fair Value of Financial Instruments requires disclosure of fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of September 30, 2015, the balances reported for cash and accounts payable
and accrued expenses approximate their fair value because of their short maturities. Debt balances are stated at historical amounts
less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate
with lender risk profiles for similar companies.
Recently
Issued Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue
from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under
current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require
that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also
will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill
a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. Entities can transition to the standard
either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the
impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting.
In
August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties
in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s
ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide
certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.
The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter,
with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated
results of operations, financial condition or liquidity.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING (CONTINUED)
Recently
Issued Accounting Pronouncements (continued)
In
November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in
a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not
change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial
instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded
derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities
that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for
public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early
adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated
results of operations, financial condition or liquidity.
In
January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items for financial statement presentation
purposes. This ASU is effective for fiscal years beginning after December 15, 2015. The adoption of this ASU is not expected to
have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.
Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact
on the Company’s present or future consolidated financial statements.
NOTE
3 – CASH HELD IN ESCROW
As
of September 30, 2015, the Company had $18,811 of cash that was held in trust for the Company by its legal counsel. The funds
were held in an escrow account in the name of the legal counsel.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
4 – NOTES PAYABLE – RELATED PARTIES
Notes payable to related parties consist of the following
as of September 30, 2015 and June 30, 2015:
| |
September 30,
2015 | | |
June 30,
2015 | |
| |
(Unaudited) | | |
| |
| |
| | |
| |
Loan payable – related party (a) | |
$ | - | | |
$ | 3,901 | |
Unsecured promissory note due to related party (b) | |
| 150,000 | | |
| 150,000 | |
Unsecured promissory note due to related party (c) | |
| 150,000 | | |
| 150,000 | |
| |
| | | |
| | |
TOTAL | |
| 300,000 | | |
| 303,901 | |
| |
| | | |
| | |
Less: Current portion | |
| (150,000 | ) | |
| (153,901 | ) |
| |
| | | |
| | |
LONG-TERM PORTION | |
$ | 150,000 | | |
$ | 150,000 | |
a. |
As of June 30, 2015, the Company had a loan payable due to a family member
of the former CEO in the amount of $3,901. In September 2015, the $3,901 balance was repaid and no amount was owed under the agreement
as of September 30, 2015. |
b. |
In February 2014, the Company entered into an unsecured promissory note
agreement with a shareholder. The agreement allows for the Company to borrow up to $150,000 at an interest rate of 10 percent
per year. As of September 30, 2015 and June 30, 2015, the outstanding balance of the note was $150,000. The outstanding principal
amount and all accrued and unpaid interest is due by December 2016. On October 30, 2015, a total of $55,039 was converted into
1,375,975 shares of the Company’s common stock (see Note 6). |
c. |
In February 2014, the Company entered into an unsecured promissory note
agreement with a shareholder. The agreement allows for the Company to borrow up to $150,000 at an interest rate of 10 percent
per year. As of September 30, 2015 and June 30, 2015, the outstanding balance of the note was $150,000. The outstanding principal
amount and all accrued and unpaid interest is due by January 2016. On October 30, 2015, a total of $54,755 was converted into
1,368,872 shares of the Company’s common stock (see Note 6). |
For the three months ended September 30, 2015
and 2014, the Company incurred $8,365 and $7,523, respectively, of interest expense relating to the unsecured promissory notes.
The total amount of accrued interest payable relating to those notes at September 30, 2015 and June 30, 2015 was $48,049 and $39,684,
respectively.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
5 – NOTE PAYABLE
In
August 2015, the Company entered into an unsecured promissory note agreement with an individual. The agreement allows for the
Company to borrow up to $47,650 at an interest rate of 10 percent per year. The outstanding balance under the agreement at September
30, 2015 was $47,650. The outstanding principal amount and all accrued and unpaid interest is due by August 2016.
NOTE
6 – DISCONTINUED OPERATIONS
The
Company’s primary business activities were the manufacturer and sale of performance and lifestyle based indoor and sand
volleyball apparel and accessories. As of July 1, 2015, the company has ceased operations. On July 27, 2015, the Company entered
into an Asset Purchase agreement with the former CEO to sell to him the remaining assets of the Company that related to this business
line. The purchase price of the assets sold was $132,900, which was paid by the cancellation of indebtedness owed by the Company
to the former CEO. The Company and the former CEO also executed and delivered mutual release agreements that released each party
from any and all claims, liabilities and indebtedness owed to the other. As of that date, the former CEO also resigned as a director
of the Company.
The
Company has reclassified its previously issued financial statements to segregate the discontinued operations as of the earliest
period reported, and has reflected a gain on discontinued operations of $132,900 as of September 30, 2015 relating to the extinguishment
of amounts due the former officer.
Revenue
and expenses related to the discontinued operations were as follows:
| |
Three months
ended | |
| |
September 30,
2014 | |
| |
| |
Sales | |
$ | 54,034 | |
| |
| | |
Cost of Goods Sold | |
| 27,363 | |
| |
| | |
Gross Profit | |
| 26,671 | |
| |
| | |
Selling, general and administrative costs | |
| 118,076 | |
| |
| | |
Loss from operations | |
$ | 91,405 | |
In
connection with such divestiture, the former CEO also agreed to sell all his shares of common stock in the Company (6,824,336
shares, or approximately 31%) for an aggregate purchase price of $90,000. These sales will be made in four equal tranches, payable
by an unidentified buyer in cash on or prior to August 30, 2015, October 1, 2015, January 2, 2016 and April 1, 2016. If a buyer
is not identified and/or the sale is not consummated by any of said dates, the former CEO has no further obligation to sell his
shares. The former CEO agreed not to sell, dispose of or transfer his shares in the Company other as provided above. In August
2015 and September 2015, the first two tranches totaling 3,412,168 shares were sold for a total of $45,000.
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
NOTE
7 – AMOUNTS DUE TO RELATED PARTIES
As
of September 30, 2015 and June 30, 2015, the Company owed an officer $100,000 and $88,000, respectively, relating to unpaid compensation
and these amounts are reflected in Amounts Due to Related Parties on the accompanying September 30, 2015 and June 30, 2015 condensed
consolidated Balance Sheets. As of September 30, 2015 and June 30, 2015, the Company also owed $25,000 of compensation to a former
officer and Director. This amount is reflected in Amounts Due to Related Parties on the accompanying September 30, 2015 and June
30, 2015 condensed consolidated Balance Sheets.
On
October 31, 2015, the amounts due to the related parties totaling $125,000 on that date was converted into 3,125,000 share of
the Company’s common stock (see Note 6).
NOTE
8 – SUBSEQUENT EVENTS
On
October 30, 2015, the Company entered into Debt Conversion agreements with an officer, a former officer and two promissory
note holders. A certain portion of the debt was converted at the fair value of the common stock on that date, which was $0.04
per share. As of October 30, 2015, the Company owed an officer $100,000 for unpaid compensation (see Note 5) and this amount
was converted into 2,500,000 shares of the Company’s common stock. As of October 30, 2015, the Company owed a former
officer $25,000 for unpaid compensation (see Note 5) and this amount was converted into 625,000 shares of the Company’s
common stock. As of October 30, 2015, the Company owed two promissory note holders $300,000 of principal and $49,794 of
accrued and unpaid interest (see Note 3). On that date, a total of $109,794 was converted into 2,744,847 shares of the
Company’s common stock. In total, on October 30, 2015, $234,794 of debt was converted into 5,869,847 shares of the
Company’s common stock.
In October 2015, the Company borrowed an additional $5,000 from an individual (see Note
3). The total amount owed to the individual as of October 31, 2015 was $52,650.
In November 2015, the Company entered into a
letter of intent (LOI) to acquire an entertainment company by issuing to the two shareholders of said company 100,000,000
shares of common stock of the Company. As a result of the proposed transaction, the entertainment company would become a
majority owned subsidiary of the Company and the board of the Company will consist of persons appointed by the entertainment
company. The closing of the proposed transaction is conditioned on several terms, including the satisfactory due diligence by
each party of the other. It is the intent of the parties that the definitive agreement will be executed and delivered by
November 30th. The Company filed Form 8-K on November 12th relating to the LOI.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
Form 10-Q contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond
our control, which may include statements about our:
|
● |
business
strategy; |
|
|
|
|
● |
financial
strategy; |
|
|
|
|
● |
future
operating results; and |
|
|
|
|
● |
plans,
objectives, expectations and intentions contained in this report that are not historical. |
All
statements, other than statements of historical fact included in this report, regarding our strategy, intellectual property, future
operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management
are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,”
“intend,” “estimate,” “expect,” “project” and similar expressions are intended
to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking
statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements.
Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we
make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. These
statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” as
well as in this report generally. Actual events or results may differ materially from those discussed in forward-looking
statements as a result of various factors. In light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact occur.
Organizational
History and Plan of Operation
Subsequent
to June 30, 2015, the Company ceased its operations relating to the manufacturing and sales of sportswear. During the next 12
months, the Company intends to seek, investigate and, if such investigation warrants, acquire an interest in one or more business
opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of a publicly held corporation.
At this time, the Company has no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific
business or company, and the Company has not identified any specific business or company for investigation and evaluation. No
member of management or promoter of the Company has had any material discussions with any other company with respect to any acquisition
of that company.
The
Company will not restrict its search to any specific business, industry or geographical location, and the Company may participate
in a business venture of virtually any kind or nature. The discussion of the proposed plan of operation under this caption and
throughout this Annual Report is purposefully general and is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The
Company will have to obtain funds in one or more private placements to finance the operation of any acquired business. Persons
purchasing securities in these placements and other shareholders will likely not have the opportunity to participate in the decision
relating to any acquisition. The Company's proposed business is sometimes referred to as a "blind pool" because any
investors will entrust their investment monies to the Company's management before they have a chance to analyze any ultimate use
to which their money may be put. Consequently, the Company's potential success is heavily dependent on the Company's management,
which will have virtually unlimited discretion in searching for and entering into a business opportunity. None of the officers
and directors of the Company has had any experience in the proposed business of the Company. There can be no assurance that the
Company will be able to raise any funds in private placements. In any private placement, management may purchase shares on the
same terms as offered in the private placement.
Management
anticipates that it will only participate in one potential business venture. This lack of diversification should be considered
a substantial risk in investing in the Company because it will not permit the Company to offset potential losses from one venture
against gains from another. The Company may seek a business opportunity with a firm which only recently commenced operations,
or a developing company in need of additional funds for expansion into new products or markets, or seeking to develop a new product
or service, or an established business which may be experiencing financial or operating difficulties and is in the need for additional
capital which is perceived to be easier to raise by a public company. In some instances, a business opportunity may involve the
acquisition or merger with a corporation which does not need substantial additional cash but which desires to establish a public
trading market for its common stock. The Company may purchase assets and establish wholly owned subsidiaries in various business
or purchase existing businesses as subsidiaries.
The
Company anticipates that the selection of a business opportunity in which to participate will be complex and extremely risky.
Because of general economic conditions, rapid technological advances being made in some industries, and shortages of available
capital, management believes that there are numerous firms seeking the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or improving the terms on which additional equity financing
may be sought, providing liquidity for the principals of a business, creating a means for providing incentive stock options or
similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all shareholders,
and other factors. 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.
As
part of any transaction, the acquired company may require that management or other stockholders of the Company sell all or a portion
of their shares to the acquired company, or to the principals of the acquired company. It is anticipated that the sales price
of such shares will be lower than the current market price or anticipated market price of the Company's Common Stock. The Company's
funds are not expected to be used for purposes of any stock purchase from insiders. The Company shareholders will not be provided
the opportunity to approve or consent to such sale. The opportunity to sell all or a portion of their shares in connection with
an acquisition may influence management's decision to enter into a specific transaction. However, management believes that since
the anticipated sales price will be less than market value, that the potential of a stock sale by management will be a material
factor on their decision to enter a specific transaction.
The
above description of potential sales of management stock is not based upon any corporate bylaw, shareholder or board resolution,
or contract or agreement. No other payments of cash or property are expected to be received by management in connection with any
acquisition.
The
Company has not formulated any policy regarding the use of consultants or outside advisors, but does not anticipate that it will
use the services of such persons.
The
Company has, and will continue to have, insufficient capital with which to provide the owners of business opportunities with any
significant cash or other assets. However, management believes the Company will offer owners of business opportunities the opportunity
to acquire a controlling ownership interest in a public company at substantially less cost than is required to conduct an initial
public offering. The owners of the business opportunities will, however, incur significant post-merger or acquisition registration
costs in the event they wish to register a portion of their shares for subsequent sale. The Company will also incur significant
legal and accounting costs in connection with the acquisition of a business opportunity including the costs of preparing post-effective
amendments, Forms 8-K, agreements and related reports and documents nevertheless, the officers and directors of the Company have
not conducted market research and are not aware of statistical data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The
Company does not intend to make any loans to any prospective merger or acquisition candidates or to unaffiliated third parties.
Critical
Accounting Policies
The
Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application
of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management
to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical
within the SEC definition.
Use
of Estimates
The
preparation of the condensed financial statements in conformity with accounting principles generally accepted in the U.S requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period.
Significant estimates are used in valuing the fair value of common stock issued for services, among others. Actual results could
differ from these estimates.
Fair
Value of Financial Instruments
The
Fair Value of Financial Instruments requires disclosure of fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of September 30, 2015, the balances reported for cash and accounts payable
and accrued expenses approximate their fair value because of their short maturities. Debt balances are stated at historical amounts
less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate
with lender risk profiles for similar companies.
Recently
Issued Accounting Pronouncements
Management
reviewed accounting pronouncements issued during the three months ended September 30, 2015, and the following pronouncements were
adopted during the period.
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue
from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under
current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require
that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also
will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill
a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. Entities can transition to the standard
either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the
impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting.
In
August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties
in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s
ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide
certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.
The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter,
with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated
results of operations, financial condition or liquidity.
In
November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in
a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not
change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial
instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded
derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities
that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for
public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early
adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated
results of operations, financial condition or liquidity.
In
January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items for financial statement presentation
purposes. This ASU is effective for fiscal years beginning after December 15, 2015. The adoption of this ASU is not expected to
have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.
Other
accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future
consolidated financial statements.
Results of Operations
Results
of Operations for the three months ended September 30, 2015 compared to the three months ended September 30, 2014.
Revenue
and Cost of Goods Sold
There
was no revenue or cost of sales from continuing operations for the three months ended September 30, 2015 and 2014.
Selling,
General and Administrative Expenses
Selling,
general and administrative (“SG&A”) expenses for the three months ended September 30, 2015 and 2014
was $52,423 and 44,299, respectively. The Company’s SG&A expenses for the three months ended September 30, 2015
and 2014 primarily consisted of professional service expenses relating to the Company’s audit of the financial
statements and for income tax services.
Other
Income and Expense
Other
income and expense consists of interest expense. Interest expense for the
three months ended September 30, 2015 and 2014 was $8,365 and 7,523, respectively, relating to the promissory notes
payable.
Net
Income (Loss)
Our
net income for the three months ended September 30, 2015 was $72,122 and our net loss for the three months ended September 30,
2014 was $143,227. The net income in 2015 solely related to the other income the Company recorded relating to the Asset Purchase
agreement with its former CEO (see Note 4). The net loss in 2014 related to the Company’s discontinued operations.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts
receivable and accounts payable and capital expenditures.
The
accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity
of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed
consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going
concern. During the three months ended September 30, 2015, the Company incurred a net loss from operations of $52,423 and cash
used in operating activities was $24,938, and as of that date, is delinquent in payments of $271,398 for payroll and sales taxes.
As of September 30, 2015, the Company had a working capital deficiency of $828,377 and a shareholders’ deficit of $978,377.
Furthermore, on July 27, 2015, the Company sold substantially all of its assets and business operations to a former officer. As
a result, the Company’s operations since that date have ceased. These factors, among others, raise substantial doubt about
the Company’s ability to continue as a going concern.
The
ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon,
among other things, an additional cash infusion and an identification of new business opportunities. During the three months ended
September 30, 2015, the Company raised $47,650 from an investor to pay past obligations and to allow the Company to continue operating
in its shell status and raised an additional $5,000 from the investor in October 2015. Management believes this funding and future
funding will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow it
to continue looking for opportunities to acquire operating companies or merge with other operational entities. No assurance can
be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company.
Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of
debt financing, or cause substantial dilution for our stock holders, in case of equity financing.
As
of September 30, 2015 and June 30, 2015, we had cash of $18,811 and $0.00, respectively, and working capital deficit of $828,377
and $900,489, respectively. The decrease in working capital deficit was primarily due to the Asset Purchase agreement the
Company entered into with its former CEO, under which the Company completed the disposition of certain assets of the Company to
the former CEO in exchange for the cancellation of indebtedness owed by the Company to the former CEO in the amount of $132,900.
The
opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended
June 30, 2015 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. During
the first three months of fiscal 2016, we raised an aggregate of $47,650 through a promissory note from an individual. Our
ability to continue as a going concern is dependent upon raising capital from financing transactions and future revenue.
Net
cash used in operating activities was $24,938 for the three months ended September 30, 2015, compared to $34,270 for the three
months ended September 30, 2014. The net cash used in operating activities for the three months ended September 30, 2015 primarily
related to the settlement of the amount due to the Company’s former CEO in the amount of $132,900.
There
were no cash flows used in investing activities for the three months ended September 30, 2015 and September 30, 2014.
Net
cash flows provided by financing activities was $24,938 for the three months ended September 30, 2015, as compared to $35,200
for the three months ended September 30, 2014. For the three months ended September 30, 2015, the Company raised $47,650
from a promissory note payable from an individual.
We
do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds
from the issuance of debt and our offering of shares of common stock together with revenue from operations are currently
sufficient to fund our operating expenses, we will need to raise additional funds in the future so that we can expand
our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing
transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However,
the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain
financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements
that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders
may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce
our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail
our marketing and development plans and possibly cease our operations.
Off-Balance
Sheet Arrangements
We
do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial
condition, revenues, and results of operations, liquidity or capital expenditures.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
We
have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required
to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods
required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Management,
with the participation of the interim Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the interim
Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under
"Management's report on internal control over financial reporting," which are in the process of being remediated as
described below under "Management Plan to Remediate Material Weaknesses."
Management's
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision
of, our interim Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures
that:
| ● | pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of our assets; |
| | |
| ● | provide
reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and our Board
of Directors; and |
| | |
| ● | provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on our financial statements. |
Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute,
assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over
financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override.
Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process,
and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control
may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial reporting as of September 30, 2015. In making its
assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain
control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As
a result, our internal control over financial reporting was not effective as of September 30, 2015.
A
"material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim
financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's
review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of
quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly
report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process
consisting of the following:
1)
lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors
on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls
and procedures; and
2)
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application
of US GAAP and SEC disclosure requirements.
We
do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition
and results of operations for the quarter ended September 30, 2015. However, management believes that the lack of a functioning
audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in
the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in
our financial statements in future periods.
Management
Plan to Remediate Material Weaknesses
Management
is pursuing the implementation of corrective measures to address the material weaknesses described below. In an effort to remediate
the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate,
the following series of measures:
We
plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting
in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal
controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available
to us. And we plan to prepare written policies and procedures for accounting and financial reporting with respect to the requirements
and application of US GAAP and SEC disclosure requirements.
We
believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our
internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue
to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve
our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or
determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.
Changes
in Internal Controls
There
have been no changes in our internal control over financial reporting during the most recent fiscal quarter ended September 30,
2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART
II
Item
1. Legal Proceedings.
The
Company is, from time to time, involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary
course of business. These matters are not expected to have a material adverse effect upon the Company’s financial condition.
Item
1A. Risk Factors.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceed
None.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Mine Safety Disclosures
Not
applicable.
Item
5. Other Information.
None.
Item
6. Exhibits.
Exhibit Number |
|
Description of Exhibit |
|
|
|
31.1 |
|
Certification by Interim Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. |
31.2 |
|
Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. |
32.1 |
|
Certification by Interim Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code. |
101.INS |
|
XBRL Instance Document.* |
101.SCH |
|
XBRL Taxonomy Extension Schema.* |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase.* |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase.* |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase.* |
101.PRE |
|
XBRL Extension Presentation Linkbase.* |
* |
Attached
as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2015 formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets,
(ii) the Statement of Operations, (iii) the Statement of Shareholders’ Equity, (iv) the Statement of Cash Flow, and
(v) Notes to Financial Statements. |
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
SMACK
SPORTSWEAR, INC. AND SUBSIDIARY |
|
|
|
Date: November 13, 2015 |
By: |
/s/
Douglas Samuelson |
|
|
Douglas Samuelson |
|
|
Interim Chief
Executive Officer and Chief Financial Officer |
23
EXHIBIT
31.1
CERTIFICATION
I, Douglas
Samuelson, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of SMACK SPORTSWEAR, INC. AND SUBSIDIARY, for the quarter ended September 30, 2015;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. I am
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant
and have:
(a) designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant is made known to us by others, particularly during the period in which this report
is being prepared;
(b) designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. I have
disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: November
13, 2015 |
/s/
Douglas Samuelson |
|
Douglas
Samuelson |
|
Interim
Chief Executive Officer |
EXHIBIT
31.2
CERTIFICATION
I, Douglas
Samuelson, certify that:
1. I have
reviewed this quarterly report on Form 10-Q of SMACK SPORTSWEAR, INC. AND SUBSIDIARY, for the quarter ended September 30, 2015;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. I am
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant
and have:
(a) designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant is made known to us by others, particularly during the period in which this report
is being prepared;
(b) designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. I have
disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: November
13, 2015 |
/s/
Douglas Samuelson |
|
Douglas
Samuelson |
|
Chief
Financial Officer |
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Quarterly Report of SMACK SPORTSWEAR, INC. AND SUBSIDIARY (the “Company”) on Form 10-Q for the quarter ended
September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas
Samuelson, Interim Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
A signed
original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
Date: November
13, 2015 |
/s/
Douglas Samuelson |
|
Douglas
Samuelson |
|
Interim
Chief Executive Officer and Chief Financial Officer |
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