The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31,
2013 (UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND ORGANIZATION
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 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.
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)
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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)
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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.
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.
Going Concern
—
The accompanying condensed financial statements have been prepared assuming the Company will continue as a going concern. During
the three and six months ended March 31, 2013, the Company had a net loss of $3,835 and 18,765, respectively. At March 31, 2013,
the Company had working capital of ($171,599) and stockholders’ deficit of $171,599. Since inception, the Company has also
been dependent upon the receipt of capital investment or other financing to fund its operations. 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 condensed 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.
Use of Estimates
—The preparation of financial statements in conformity with generally accepted accounting principles 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 at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
— The Company considers investments with original maturities of 90 days or less to be cash equivalents.
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.
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 because their
effect is anti-dilutive.
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.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements
- Adopted
In May 2011, the FASB issued Accounting
Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs”. The amendments result in common fair value measurement and disclosure requirements
in U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRSs), and do not require
additional fair value measurements and are not intended to establish valuation standards or affect valuation practices. The amendments
in this update are effective during interim and annual periods beginning after December 15, 2011. Adoption of the new amendment
did not have a material effect on the Company’s financial position, results of operations or cash flow.
Recently Issued Accounting Pronouncements
– Not Adopted
In December 2011, the FASB issued ASU 2011-11, Balance
Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose
information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those
arrangements on its financial position. This update will enhance disclosures required by U.S. GAAP by requiring improved information
about financial instruments and derivative instruments. The requirements of this update are effective for annual reporting periods
beginning on or after January 1, 2013, and interim periods within those annual periods. Entities should provide the disclosures
required retrospectively for all comparative periods presented. We are currently evaluating the impact of adopting ASU 2011-11
on the consolidated financial statements.
The FASB issued Accounting Standards
Update (ASU) No. 2012-02 Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,
on July 27, 2012, to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution
rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the
likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine
if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September
15, 2012. Early adoption is permitted. The adoption of this accounting guidance will not have a material impact on our financial
statements and related disclosures.
Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management
to have a material impact on the Company's present or future financial statements.
NOTE 2 - Note Payable
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 September 30, 2013. All
advances shall be paid on or before September 30, 2013 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 March 31, 2013, Smartag Solutions Bhd advanced us $173,002. 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 3 – Related-party transactions
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 September 30, 2013. All advances
shall be paid on or before September 30, 2013 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 March 31, 2013,
Smartag Solutions Bhd advanced us $173,002. The Secured Note ranks senior to all current and future indebtedness of
Smartag and are secured by substantially all of the assets of Smartag.
NOTE 4 – Equity
Authorized Stock:
As of March 31, 2013, 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. During the year ended September 30, 2012 and the three and six month periods ended March 31, 2013 and 2012, no
stock was authorized or issued.
Outstanding Options and Warrants:
None
NOTE 5 – Subsequent
Events
Management has evaluated all activity
through April 17, 2013, the issue date of these financial statements, and has concluded that no subsequent events have occurred
that would require recognition in the financial statements or disclosure in the notes to the financial statements.