UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(X )	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934

	For the fiscal year ended June 30, 2011

(  )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

	For the transition period from                     to                      .

Commission File number       333-136492

VERIFY SMART CORP.

(Exact name of registrant as specified in its charter)

Nevada	20-5005810
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

57 Montague Street, Brooklyn NY 11201

(Address of principal executive offices)

(718) 855-7136

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class	Name of each exchange on which registered
n/a	n/a

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of  class

Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

	Yes	[   ]	No	[X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

	Yes	[   ]	No	[X]

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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	[X]	No	[   ]

 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-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	[X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

	Yes	[   ]	No	[X]

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	[X]
(Do not check if a 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	[X]

 

The aggregate market value of common stock held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold, was approximately $2,692,035 as of December 31, 2010 (the last business day of the registrant’s most recently completed second quarter), assuming solely for the purpose of this calculation that all directors, officers and more than 10% stockholders of the registrant are affiliates. The determination of affiliate status for this purpose is not necessarily conclusive for any other purpose.

 

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

52,785,000 shares of common stock of the registrant outstanding as of November 30, 2012

 

DOCUMENTS INCORPORATED BY REFERENCE

None

 

  

  

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TABLE OF CONTENTS

PART 1		Page
ITEM 1.	Business.	4
ITEM 1A.	Risk Factors.	7
ITEM 1B.	Unresolved Staff Comments.	11
ITEM 2.	Properties.	11
ITEM 3.	Legal Proceedings.	11
ITEM 4.	(Removed and Reserved)	11
PART II
ITEM 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	11
ITEM 6	Selected Financial Date	13
ITEM 7.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations.	13
ITEM 7A.	Quantitative and Qualitative Disclosure about Market Risk.	23
ITEM 8.	Financial Statement and Supplementary Data.	23
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	38
ITEM 9A	Controls and Procedures.	38
ITEM 9B	Other information	39
PART III
ITEM 10.	Directors, Executive Officers of the Registrant	40
ITEM 11.	Executive Compensation.	43
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management	45
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	47
ITEM 14	Principal Accounting Fees and Services.	48
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	49
SIGNATURES		51

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FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements with-in the meaning of Section 27A of the Securities Act (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these statements on our beliefs and assumptions, based on information currently available to us. These forward-looking statements are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, our total market opportunity and our business plans and objectives set forth under the sections entitled "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Forward-looking statements are not guarantees of performance. Our future results and requirements may differ materially from those described in the forward-looking statements. Many of the factors that will determine these results and requirements are beyond our control. In addition to the risks and uncertainties discussed in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of

Operations," investors should consider those discussed under "Risk Factors, and elsewhere herein, and in other filings with the SEC."

These forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect changes in our business anticipated results of our operations, strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

  

PART 1

 

ITEM 1.  BUSINESS

 

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors”, which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this annual report, the terms "we", "us", "our company", mean Verify Smart Corp., a Nevada corporation, unless otherwise indicated.

Corporate History

The address of our principal executive office is 57 Montague Street, Brooklyn NY, USA. Our telephone number is (718) 855-7136.

Effective March 19, 2009, we effected a fifteen (15) for one (1) forward stock split of our authorized and issued and outstanding common stock and the reduction of our authorized common stock As a result, our authorized capital changed to 250,000,000 shares of common stock with a par value of $0.001, and on the effective date, our issued and outstanding shares increased from 4,000,000 shares of common stock to 60,000,000 shares of common stock.

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Also effective March 19, 2009, we have changed our name from "Treasure Explorations Inc." to "Verify Smart Corp.".

The name change and forward stock split became effective with the Over-the-Counter Bulletin Board at the opening for trading on March 24, 2009 under the new stock symbol "VSMR".

We have not been involved in any bankruptcy, receivership or similar proceeding.

Our Current Business

We were incorporated in the state of Nevada on May 31, 2006. From our incorporation to March 19, 2009, we had been in the business of the exploration and development of a mineral property in New Westminster, Simalkameen Mining Division of British Columbia, consisting of 336 hectares included with 16 mineral title cells. Our property was without known reserves and our program was exploratory in nature. We completed the Phase 1 exploration program in our property, the results of which were not promising and did not justify further expense.

  

Because we were not successful in our exploration program, we abandoned the mineral claims and focused on the identification of suitable businesses with which to enter into a business opportunity or business combination.

Effective March 19, 2009, we effected a fifteen (15) for one (1) forward stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital changed to 250,000,000 shares of common stock with a par value of $0.001, and on the effective date, our issued and outstanding shares increased from 4,000,000 shares of common stock to 60,000,000 shares of common stock.

Also effective March 19, 2009, we changed our name from "Treasure Explorations Inc." to "Verify Smart Corp". The change of name was approved by our directors and a majority of our shareholders.

On November 31, 2009, Tony Cinotti was appointed as a director of our company.

Our board of directors now consists of Tony Cinotti.

Effective March 25, 2009, the Company entered into a joint venture agreement with Verified Capital Corp. and Verified Transactions Corp. relating to the formation and operation of a joint venture corporation that will sell internet security software for credit card fraud prevention.

Upon the satisfaction of customary closing conditions, the Company will contribute an aggregate of $5,000,000 to the joint venture corporation, payable as to $2,000,000 by May 1, 2009 and $3,000,000 by July 1, 2009, for a 70% interest in the joint venture corporation.

By amendment of May 19, 2009, the companies have agreed that all obligations of the Joint Venture agreement have been deemed to have occurred and the agreement is in full force in good standing. In addition to the foregoing, Verified Transactions Corp. will grant to the joint venture corporation a 25 year worldwide exclusive license to market and sell Verified Transaction Corp.'s internet security software and all other internet business of whatsoever nature and including all future developments of such business for a 25 % interest in the joint venture corporation. Verified Capital Corp. will be granted a 5% interest in the joint venture corporation upon the transfer of certain assets.

Upon the closing of the joint venture agreement, the Company would be the operator of the joint venture corporation and will contract with Verified Capital Corp. to be the sub-operator.

As at September 19, 2012, the joint venture agreement was terminated by mutual consent of the parties and ownership of the patented verification technology was transferred to Assured Mobile Technologies LLC. During the course of this former joint venture agreement, the Company did not pay any cash or share consideration to Verified Capital Corp or to Verified Transaction Corp. in respect its ownership stake in the joint venture or in respect of the license to use the patented technology. No joint venture corporation was formed in relation to the joint venture and the Company did not incur any material costs in respect of its obligations under the joint venture. Additionally, the Company is not subject to any penalty or residual obligations under the joint venture agreement.

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Effective August 14, 2009, we entered into a consulting agreement with Cohen Independent Research Group wherein Cohen Independent Research has agreed to provide certain consulting services to our company. As compensation under the agreement we have agreed to issue 1,000,000 restricted common shares of our company. The 1,000,000 common shares were issued on August 14, 2009. The agreement expires on August 14, 2011.

   

DESCRIPTION OF THE BUSINESS

The business will market and sell its licensed software which provides a comprehensive solution to credit card fraud by addressing the security needs of consumer clients, credit card companies, banks and merchants through instant verification that is inexpensive to implement and simple to use.

The software operates through the use of a cellular phone for secured verification of monetary transactions. The software has been developed to include debit card purchases, internet purchases, ATM, passport and mortgage verification.

       *    gift cards (pre-loaded format).

Competition

Our product offerings are targeted at the rapidly evolving market for Internet security services, including network security, authentication and validation, which enable secure e-commerce and communications over wireline and wireless IP networks. The market for authentication and verification products is intensely competitive, subject to rapid change and significantly affected by new product and service introductions and other market activities of industry participants.

No assurance can be given that our competitors will not develop new technologies or enhancements to existing products or services or introduce new products and services that will offer superior price or performance features. We expect our competitors to offer new and existing products and services at prices necessary to gain or retain market share. Some of our competitors have substantial financial resources, which may enable them to withstand sustained price competition or a market downturn better than us. There can be no assurance that we will be able to compete successfully in the pricing of our products and services, or otherwise, in the future.

Government Regulation

In order to offer products that connect to payment networks, electronic payment system providers must certify their products and services with card associations, financial institutions, and payment processors, as well as comply with government and telecommunications company regulations.

Sales and Marketing

Business development encompassing sales and marketing efforts has been achieved through our network of contacts that lead to engagement with key decision makers of companies in our target market.

  

Intellectual Property

We rely primarily on a combination of copyrights, trademarks, service marks, patents, restrictions on disclosure and other methods to protect our intellectual property. We also enter into confidentiality and/or invention assignment agreements with our employees, consultants and current and potential affiliates, customers and business partners. We also generally control access to and distribution of proprietary documentation and other confidential information.

We have filed numerous patent applications with respect to certain of our technology in the U.S. Patent and Trademark Office and patent offices outside the U.S. Patents may not be awarded with respect to these applications and even if such patents are awarded, such patents may not provide us with sufficient protection of our intellectual property.

We do not have any trademark registrations.

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Employees

Our only employee is our director.

Going Concern

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.

Subsidiaries

We do not have any subsidiaries.

Reports to Security Holders

We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together with our annual audited financial statements upon request. We are required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.

The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at  1-800-SEC-0330  1-800-SEC-0330 . We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.

ITEM 1A.   RISK FACTORS

Risk Factors

An investment in our securities involves a high degree of risk.  In evaluating our business and its future expectations, an investor should consider carefully the risk factors noted below.  Any of the following risk factors, if they occur, could seriously harm our business and its operations. There may be risk factors we do not know exist at this time and therefore they are not included in the risk factors listed below.   Even if they are deemed immaterial at the present time, they could develop whereby they will adversely affect our business.  Our shares are speculative by nature and therefore the risk of purchasing our share is high.   One should consider whether they can assume a loss of their entire investment.

All future investors in our shares should read this Form 10-K in its entirety including the financial statements and notes attached thereto.

Risks Relating to Our Business

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We have a limited operating history.  As such, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects.  We may not be able to achieve a similar growth rate in future periods.  Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance.  Our success is significantly dependent on meeting business objectives.  Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history.  We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage.  If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

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We have incurred losses in prior periods and may incur losses in the future.

We incurred net losses of $1,592,114 for the period from May 31, 2006 (inception) to June 30, 2011.  No assurance can be given that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. No assurance can be given that future operations will be profitable. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.

We have limited funds available for operating expenses. If we do not obtain funds when needed, we will have to cease our operations.

Currently, we have limited operating capital. As of June 30, 2011, our cash available was approximately $2,727. In the foreseeable future, we expect to incur significant expenses during the development stage of our identity protection/secured transaction services business. During the year ended June 30, 2011, we have not raised any equity funding. We may be unable to locate further sources of capital or may find that capital is not available on terms that are acceptable to us to fund our additional expenses. There is the possibility that we will run out of funds, and this may affect our operations and thus our profitability. If we cannot obtain funds when needed, we may have to cease our operations.

We depend on attracting and retaining qualified employees, the failure of which could result in a material decline in our revenues.

We are a provider of identity protection/secured transaction services. Our revenues and future growth depend on our ability to attract and retain qualified employees. This is especially crucial to our business, as these employees will generate revenue by providing the services that are the staple product that we offer. We may face difficulties in recruiting and retaining sufficient numbers of qualified employees because the market may not have enough of such personnel. In addition, we compete with other companies for qualified employees. If we are unable to retain such employees, we could face a material decline in our revenue.

   

If we fail to implement our business strategy, our business, financial condition and results of operations could be materially and adversely affected.

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. We may not be able to implement our business strategy successfully or achieve the anticipated benefits of our business plan. If we are unable to do so, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business plan successfully, our operating results may not improve to the extent we anticipate, or at all.

Our success depends on our ability to manage growth effectively. If we do not manage growth effectively, we may not be able to maintain profitability.

Even if we are successful in obtaining new business, failure to manage our growth could adversely affect our financial condition. We may experience extended periods of very rapid growth. If we are not able to manage our growth effectively, our business and financial condition could materially suffer. Our growth may significantly strain our managerial, operational and financial resources and systems. To manage our growth effectively, we will have to continue to implement and improve our operational, financial and management controls, reporting systems and procedures. In addition, we must effectively expand, train and manage our employees. We will be unable to manage our businesses effectively if we are unable to alleviate the strain on resources caused by growth in a timely and successful manner. We may not be able to manage our growth and a failure to do so could have a material adverse effect on our business.

U.S. investors may experience difficulties in attempting to enforce judgments based upon U.S. federal securities laws against us and our non-U.S. resident directors.

All of our operations and our assets are located outside the United States and some of our directors and officer are foreign citizens. As a result, it may be difficult or impossible for U.S. investors to enforce judgments of U.S. courts for civil liabilities against any of our individual directors or officers.

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Our auditors have expressed substantial doubt about our ability to continue as a going concern.

Our auditors’ report on our June 30, 2011 financial statements expressed an opinion that our Company’s capital resources as of June 30, 2011 are not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raise additional funds.   These conditions raise substantial doubt about our ability to continue as a going concern.   If we do not obtain additional funds there is the distinct possibility that we will no longer be a going concern and will cease operation which means any persons purchasing shares will loss their entire investment in our Company.

 

If we cannot continue to develop or acquire rights to new products in a timely manner, and at favorable margins, we may not be able to compete effectively.

 

We believe that our future success will depend, in part, upon our ability to introduce innovative design extensions for our existing products and to develop, or acquire the rights to market and distribute, new products. No assurance can be given that we will be successful in the introduction, distribution and marketing of any new products or product innovations or achieve market acceptance of such products. Our failure to develop or acquire rights to new products or to introduce such products successfully and in a timely manner, and at favorable margins, would harm our ability to successfully grow our business and could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to obtain additional financing our business operations will be harmed and if we do obtain additional financing our then existing stockholders may suffer substantial dilution.

We will need to obtain additional financing in order to complete our business plan.  Obtaining additional financing will be subject to market conditions, industry trends, investor sentiment and investor acceptance of our business plan and management.  These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us.  If we are not successful in obtaining financing in

the amount necessary to further our operations or unable to obtain financing on favorable terms, implementation of our business plan may fail or be delayed.  If we are unsuccessful in obtaining additional financing when we need it, our business may fail before we ever become profitable and our stockholders may lose their entire investment.  If we are successful in obtaining additional financing it would likely result in dilution to existing stockholders.

We may be subject to new future corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.

 

We may face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations that may be subsequently adopted by the Securities and Exchange Commission and the Public Company Accounting Oversight Board.  These laws, rules and regulations continue to evolve and may become increasingly stringent in the future.  We are presently not required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”).  We strive to continuously evaluate and improve our control structure.  The financial cost of compliance with future laws, rules and regulations is expected to be substantial.  No assurance can be given that we will be able to fully comply with these future laws, rules and regulations that address corporate governance, internal control reporting and similar matters.  Failure to comply with such laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities.

Inability of our officers and directors to devote sufficient time to the operation of the business may limit our success.

Presently, our officers and directors allocate only a portion of their time to the operation of our business. If the business requires more time for operations than anticipated or the business develops faster than anticipated, the officers and directors may not be able to devote sufficient time to the operation of the business to ensure that it continues as a going concern. This lack of sufficient time of our management may result in limited growth and success of the business.

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The Company may have difficulty managing any future growth.

To implement our business objectives, we may need to grow rapidly in the future and we expect that such growth would lead to increased responsibility for both existing and new management personnel.  To help manage future growth effectively we must hire and integrate new personnel and manage expanded operations.  The growth in business, headcount and relationships with customers and other third parties is expected to place a significant strain on our management systems and resources.  Our failure to manage our future growth successfully would have a material adverse effect on the quality of our products, our ability to retain customers and key personnel and our operating results and financial condition.

Risks Relating to Our Common Shares

Trading on the OTC bulletin board may be volatile and sporadic, which could depress the market price of our common shares and make it difficult for our shareholders to resell their shares.

Our common shares are quoted on the OTC Bulletin Board service. Trading in shares quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common shares for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of the shares.

  

Our share is a penny stock. Trading of our share may be restricted by the SEC's Penny Stock Regulations which may limit a shareholder's ability to buy and sell our shares.

Our share is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the shares that are subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common shares.

FINRA sales practice requirements may also limit a shareholder's ability to buy and sell our share.

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, or FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our share.

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Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common shares.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

There are no unresolved staff comments at the date of this Form 10-K.

ITEM 2.  PROPERTIES

We do not own any real property. Our principal business office is located at 57 Montague Street, Brooklyn, NY, USA 11201.

 

ITEM 3. LEGAL PROCEEDINGS

 

Other than as set out below, our company is not a party to any pending legal proceeding and no legal proceeding is contemplated or threatened as of the date of this annual report.

ITEM 4. (REMOVED AND RESERVED)

 

  

PART l1

ITEM 5.  MARKET REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 

 Market Information

 The Company's common stock is quoted in the Over-the-Counter Bulletin Board under the symbol VSMR:OTC US.

 The following information concerning the high and low bid prices of the Company's common stock on the Over-the-Counter Bulletin Board.

Quarterly period		High			Low
Fiscal year ended June 30, 2011:
First Quarter		$	0.23		$	0.05
Second Quarter		$	0.10		$	0.03
Third Quarter		$	0.06		$	0.01
Fourth Quarter		$	0.05		$	0.01
Fiscal year ended June 30, 2010:
First Quarter		$	1.52		$	0.80
Second Quarter		$	1.04		$	0.38
Third Quarter		$	0.54		$	0.12
Fourth Quarter		$	0.54		$	0.01

 

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Common Stock

 All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.

 As of June 30, 2011, there are approximately 52 shareholders of record, including beneficial holders of the Company’s common stock, with 52,785,000 shares outstanding.

The Company had no Common shares in treasury stock as of June 30, 2011.

The Company is authorized to issue up to 250,000,000 shares of common stock.

The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company's Certificate of Incorporation and By-Laws.

 Dividends

The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.  

Debt Securities

The Company has not issued any debt securities to date and does not anticipate or contemplate issuing any debt securities in the foreseeable future.

 Stock Purchase Warrants

The Company had not issued any stock purchase warrants to June 30, 2011. Pursuant to a private placement subscription agreement, on November 9, 2012 the Company issued 500,000 units @ $0.10 per unit. Each unit consists of one share of common stock in the capital of the Company, and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common stock in the capital of the Company for a period of 18 months at a price per warrant of $0.30.

 Recent Sales of Unregistered Securities

During the year ended June 30, 2011, the Company had no stock activity.

During the year ended June 30, 2010, the Company issued the following common shares:

i) On July 14, 2009, the Company entered a consulting service agreement and issued 50,000 shares of restricted common stock at a fair value $0.53 per share, amounting $26,500 as compensation.

  

ii) On August 14, 2009, the Company entered into a consulting service agreement and issued 1,000,000 shares of common stock at a fair value $0.425 per share, amounting $425,000 as compensation.

  

iii) On October 28, 2009, 10,000,000 shares of common stock from Howard Gelfand were cancelled and returned.

  

iv) On November 15, 2009, the Company entered into three consulting service agreements and issued 140,000 shares of common stock at a fair value $0.475 per share, amounting $66,500 as compensation.

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v) On April 24, 2010, the Company issued 550,000 shares of common stock at $0.10 per share for cash proceeds of $55,000.  The Company issued 20,000 shares of common stock at a deemed fair value of $2,000 in connection with the private placement.

ITEM 6.  SELECTED FINANCIAL DATA

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 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended June 30, 2011 and June 30, 2010 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors" of this annual report.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Forward-Looking Statements

 

This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.

Recently Issued Accounting Pronouncements

Refer to the notes to the financial statements for a complete description of recent accounting pronouncements.

Company Overview

Verify Smart Corp. (the "Company") was incorporated under the laws of the State of Nevada on May 31, 2006. The Company was originally formed to engage in the acquisition, exploration and development of natural resource properties. Effective March 25, 2009, the Company commenced activity involving developing and selling internet security software for credit card fraud prevention.

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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 3 Summary of Significant Accounting Policies to the Financial Statements contained in Item 8 of this document certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the financial statements.

 

Use of Estimates and Assumptions

Preparation of the Company’s financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.  The significant areas requiring management’s estimates and assumptions relate to determining the fair value of stock-based compensation, fair value of shares issued for services and the acquisitions, and useful lives of long-lived assets.

  

Development Stage Company

The Company is a development stage company as defined by SFAS 7, Accounting and Reporting by Development Stage Enterprises (codified in ASC 915, Development Stage Entities).  The Company is devoting substantially all of its present efforts to establishing a new business.  All losses accumulated since inception have been considered as part of the Company’s development stage activities.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three

months or less to be cash equivalents. At June 30, 2011 and 2010 cash consists primarily of cash   on deposit.

Impairment of Long-Lived Assets

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets (codified in ASC 360, Property, Plant, and Equipment), the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.  The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset.  Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Financial Instruments and Concentration of Risk

The fair values of financial instruments, which include cash, accounts payable and accrued liabilities and loans payable, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.  Management does not believe that the Company is subject to significant interest currency or credit risks arising from these financial instruments.

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Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS 128, Earnings per Share (codified in ASC 260, Earnings Per Share), which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) before and after discontinued operations, by the weighted average number of common shares outstanding (denominator) during the period, including contingently issuable shares where the contingency has been resolved.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar.  Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS 52, Foreign Currency Translation (codified in ASC 830, Foreign Currency Matters), using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars.  The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Comprehensive Loss

SFAS 130, Reporting Comprehensive Income, (codified in ASC 220, Comprehensive Income) establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  At June 30, 2011, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Common Share Non-Monetary Consideration

In situations where common shares are issued and the fair value of the goods or services received is readily determinable, the fair value of the common shares is used to measure and record the transaction.  The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:

	i)		the counterparty’s performance is complete;
	ii)		a commitment for performance by the counterparty to earn the common shares is reached; or
iii)		the common shares are issued if they are fully vested and non-forfeitable at that date.

Stock-Based Compensation

The Company had adopted the fair value recognition provisions of SFAS 123R, Share-Based Payment, (codified in ASC 718, Compensation-Stock Compensation).  The Company adopted SFAS 123R using the modified-prospective-transition method.  Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.  In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of SFAS 123R. 

15

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with SFAS 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18, (codified in ASC 505, Equity).  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

Income Taxes

 

Income taxes are provided in accordance with ASC 740 Accounting For Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Plan of Operations

The business will market and sell its licensed software which provides a comprehensive solution to credit card fraud by addressing the security needs of consumer clients, credit card companies, banks and merchants through instant verification that is inexpensive to implement and simple to use.

The software operates through the use of a cellular phone for secured verification of monetary transactions. The software has been developed to include debit card purchases, internet purchases, ATM, passport and mortgage verification.

We had also entered into preliminary discussions with Verified Capital Corp. wherein we would acquire either the assets or outstanding shares of common stock of Verified Capital Corp. The parties will jointly determine the optimum structure for the acquisition in order to best satisfy tax planning, regulatory and other considerations, including mutually agreed upon performance based milestones.

The acquisition contemplated by the preliminary discussions was subject to the fulfillment of certain conditions precedent, due diligence and the negotiation of a definitive agreement. As at September 19, 2012, the joint venture agreement was terminated by mutual consent of the par

On April 3, 2009, we entered into an agreement with China Trust to launch our first credit card "VeriSmart (TM) Platinum Visa".

Under the terms of the agreement, China Trust will distribute, for pilot, 2,500 co-branded VeriSmart(TM) Platinum Visa Cards linked to our patent-pending Authentication system, VerifyNGo(TM), to serve as enterprise payroll, payout and remittance solutions affording centralized control and management of fund disbursement globally, anytime, anywhere.

On April 6, 2009, we entered into a services agreement with European hosting and infrastructure provider Prime Interactive S.R.O. The services agreement with Prime Interactive accelerates the European leg of our expansion plan and compliments our company's existing capabilities. Under the terms of the agreement Prime Interactive will be providing the following services to our company:

* Web and Mobile Application Development

* Data Centre infrastructure servicing Europe and located in Slovakia

* Marketing access to a legacy worldwide customer base of 130,000

* Marketing access to established European Financial Industry vertical

16

Our Products / Services

Through our interest in the joint venture, we currently offer or intend to offer the following four product lines consisting of:

(i) VerifyNGo,

(ii) VerifyGateway,

(iii) VerifyTransfer and

(iv) VeriSmart Card.

VerifyNGo

VerifyNGo is a comprehensive authentication system which addresses security concerns through an instant verification process. It is an easy, inexpensive and unique solution that uses a response to an individual's mobile phone as verification for a transaction. VerifyNGo address the security needs of clients, credit card companies, banks and merchants through an instant verification process.

VerifyNGo will provide secure verification for the following types of transactions:

       *    debit and credit card purchases

       *    internet purchases

       *    ATM transactions

       *    passport applications

       *    credit applications

       *    mortgage verifications

       *    access to medical history

       *    entry into secured areas

VerifyNGo requires no special hardware, software, upgrades or training. All that is required is for the user to have a mobile phone or PDA.

A typical VerifyNGo process occurs in the following way:

The process starts when a user performs an action which contains a certain security constraint (i.e. online purchase, website login). Once the user performs an action that contains a security constraint, a VerifyNGO authentication is triggered sending a message to the user's mobile phone or PDA.

The message options include:

       *    Phone call

       *    SMS detailing the action

       *    One time password via SMS

       *    WAP Push, opening a mobile web page

The user receives the request and authorizes the action via mobile phone or PDA. Finally, the system receives the response, determines authenticity and then grants or denies the user's access to the action.

VerifyGateway

VerifyGateway is cutting-edge technology for secure and confidential online payment processing. It acts as a processing hub and intermediary between a business' website and their account provider, giving an enhanced network and superior transaction capabilities to make e-commerce reliable and seamless. It's simple, economical technology, accredited by most major banks and ensures the secure, successful delivery of billions of transactions to billions of ports worldwide.

VerifyGateway provides a system that easily accepts credit card payments from customers and instills confidence because every transaction is sent through a secured system. The system complies with privacy and security regulations globally, and allows client companies to safely manage and track funds across all borders and boundaries. This innovative technical infrastructure is unrivaled in the industry.

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Business-to-business services include:

       *    Processing transaction for major credit cards such as MasterCard and Visa

       *    PCI-certified processing centers

       *    Support for major merchant processing networks

       *    Transaction reports with the necessary data to track daily activity

       *    Reliable and secure business solutions

VerifyTransfer

VerifyTransfer is a comprehensive remittance service allowing business clients to easily and securely send and receive money instantly, in person, online, wirelessly, or by phone.

Using VerifyGateway, VerifyTransfer covers all aspects of the process from transaction logging to retrieval.

The service offers:

       *    easier remittance payments

       *    faster data transmission    

       *    multiple recipient accounts

       *    fast, flexible payment options

       *    24 hour, 7 day/week client support

       *    cutting-edge security, fraud monitoring, and reporting

       *    increased accuracy and speed of contributions to member accounts

       *    synchronization with sophisticated retrieval methods, including remittance on Visa cards

*

mobile to mobile money transfers (PDA's and iPhones)

 *  comprehensive tracking and reporting on transactions and client accounts, providing details and  history.

VeriSmart Card

The VeriSmart Card is a Visa co-branded, multipurpose prepaid card designed to work optimally with VeriSmart's own secure remittance service, VerifyTransfer, or to be easily integrated with any existing remittance platform.

It can be used, worldwide, for:

*    traditional debit/credit card transactions in Visa affiliated establishments

*   payment processing between individuals and organizations (e.g.; commission and payroll  payments, accounts payable, etc.)

*   gift cards (pre-loaded format)

       *    ATM transactions for Visa ATMs

Requirements and Utilization of Funds

 

To implement our plan of operations, including some or all of the above described milestones (objectives), we will need to continue to raise capital (“equity”) in an amount between $135,000 and $1.0 million in equity from restricted stock sales or other acceptable financing options over the next 6-12 month period beginning in the first quarter of 2013 on terms and conditions to be determined. Management may elect to seek subsequent interim or “bridge” financing in the form of debt (corporate loans) as may be necessary.

 

We anticipate the need to raise additional capital beyond the first 6 months of operations, subject to the successful implementation of our initial milestones over the first 180 days of operations and our revenue growth cycle thereafter. At this time, management is unable to determine the specific amounts and terms of such future financings.

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Proceeds

 

We foresee the proceeds from capital raised to be allocated as follows: (a) consolidation and integration; (b) growth capital; (c) research and due diligence; (d) pre-development plant costs; (e) product enhancements and technology partners; (f) new business development; (g) legal, audit, SEC filings and compliance fees; (h) financing costs; (i) working capital (general and administrative); (j) reserve capital for costs of acquisition and market expansion.

Financial Condition, Liquidity and Capital Resources

We have cash and cash equivalents of $2,727 as at June 30, 2011.   We are indebted to creditors in the amount of $135,282. These advances were paid for auditing, office, legal, transfer agent and filing fees payable.

During the last year we did not raise any funds from investors.

Management believes that our current financial condition, liquidity and capital resources may not satisfy our cash requirements for the next 12 months and as such we will need to either raise additional proceeds and/or our officers and/or directors will need to make additional financial commitments to our company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our objectives, including marketing and sales of our product, and legal and accounting fees, through financial commitments from future debt/equity financings, if and when possible.

 

Management believes that we may generate sales revenue during the fiscal year ended in 2013, but that these sales revenues will not satisfy our cash requirements to implement the first 6-12 months of our business plan, including, but not limited to, project acquisitions and integration costs, and other operating expenses and corporate overhead (which is subject to change depending upon pending business opportunities and available financing).

 

We have no committed source for funds as of this date. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail to satisfy our future cash requirements as a result of these uncertainties.

 

If we are unsuccessful in raising the additional proceeds from officers and/or directors, we may then have to seek additional funds through debt financing, which would be extremely difficult for an early stage company to secure and may not be available to us. However, if such financing is available, we would likely have to pay additional costs associated with high-risk loans and be subject to above market interest rates.

   

At such time as these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.

 

The staged development of our business will continue over the next 12 months. Other than engaging and/or retaining independent consultants to assist the Company in various administrative and marketing related needs, we do not anticipate a significant change in the number of our employees, if any, unless we are able to obtain adequate financing.

 

Our auditors have issued a “going concern” opinion. This means that there is substantial doubt that we can continue as an on-going business for the next 12 months unless we obtain additional capital to pay our expenses. This is because we have not generated revenues and no substantial revenues are anticipated in the near-term. Accordingly, we must raise cash from sources other than from the sale of our products.

Results from Operations

 

The following summary financial data was derived from our financial statements.   This information is only a summary and does not provide all the information contained in our financial statements and related notes thereto.  You should read the “Management’s Discussion and Analysis or Plan of Operations” and our financial statements and related noted included elsewhere in this Form 10-K.

19

Our operating results for the years ended June 30, 2011 and 2010 are summarized as follows:

		For the year ended June 30, 2011				For the year ended June 30, 2010
Revenue		$	-				-
Operating Expenses			221,010				840,830
Other Expenses			1,555				4,934
Net (Loss)		$	(222,565)				(845,764)

Our expenses for years ended June 30, 2011 and 2010 are outlined in the table below:

		For the year ended June 30, 2011						For the year ended June 30, 2010
Operating Expenses
General and administrative expenses		$		430				$	52,072
Professional fees				840					51,804
Management fees			219,740							736,954
Total Operating Expenses		$		221,010				$	840,830
Other Expenses
Interest expense		$		1,555				$	212
Exchange loss				-					4,722
Total Other Expenses		$		1,555				$	4,934

   

The decrease in professional fees during the year ended June 30, 2011 as compared to the year ended June 30, 2010 is primarily due to decreased business activity in areas such as accounting, auditing and legal. The decrease in management fees during the year ended June 30, 2011 is primarily related to termination of consulting agreements under former management and less business activity as the Company prepares for its new business venture.

During the period from inception (May 31, 2006) to June 30, 2011 we have had accumulated losses of $1,592,114 which are as follows:

General and administrative expenses		$	81,645
Professional fees			96,080
Management fees		1,406,116
Interest expense			1,767
Exchange loss			6,506
Net (Loss)		$	(1,592,114)

Our balance sheets as at June 30, 2011 and 2010 are summarized as follows:

		As at June 30, 2011			As at June 30, 2010
Cash	$	2,728				9,728
Total assets	$	29,290				248,861
Total liabilities	$	135,282				132,288
Total shareholders’ equity (deficit)	$	(105,992)				116,573

Our Company has no plant or significant equipment to sell and we have no intension to purchase any plant or significant equipment in the immediate future. Presently we do not have any money to buy any significant assets.

20

Working Capital

 

	As of June 30,
	2011				2010
Current Assets	$	29,290				222,298
Current Liabilities		135,282				132,288
Working Capital (Deficit)	$	(105,992)				90,010

 

Cash Flows

 

 

We anticipate that we will incur approximately $150,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. Accordingly, we will need to obtain additional financing in order to complete our business plan.

 

Cash (Used in) in Operating Activities

 

We used net cash in operating activities in the amount of $14,031 during the year ended June 30, 2011. Cash used in operating activities was provided by financing activities. 

 

Cash Provided by Financing Activities

 

Cash was provided of $7,030 in financing activities during the year ended June 30, 2011, which was attributable mainly to proceeds from loans payable.

 

Our historical results do not necessary indicate results expected for any future periods.

Liquidity and Capital Resources

 

We realize that we will have to raise cash in the near future to continue our operations.  If, in the future, we are unable to raise cash we might not be able to pay our creditors.

The following represents the minimum cash requirements over the next year to meet our current and future financial obligations:

Investor relations		$	10,000
Office and administration			1,000
Rent			12,000
Transfer agent and filing fees			4,500
Auditing			15,000
Accounting			7,000
Legal			18,000
Consulting fees			5,000
Foreign exchange			-
Estimated cash required before payment of accounts payable			72,500
Add:  Accounts payable as at June 30, 2011			16,253
Estimated cash required over next twelve months		$	56,247

  

21

Disclosure of Outstanding Share Data

 

As of June 30, 2011, we had 52,785,000 shares of common stock issued and outstanding..

 

Going Concern Uncertainties

 

The Company and has a cumulative net loss of $1,592,114. The Company currently has only limited working capital with which continue its operating activities. The amount of capital required to sustain operations   is subject to future events and uncertainties, but the Company anticipates it will need to obtain approximately $135,000 in additional capital in the form of debt or equity in order to cover its current expenses over the next 12 months and continue to implement its business plan.  Whether such capital will be obtainable, or obtainable on commercially reasonable terms is at this date uncertain. These circumstances raise substantial doubt about the Company's ability to continue as a going concern.

Capital Expenditures

We have not incurred any material capital expenditures.

 

Commitments and 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.

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.

Stock Option Grants

To date, we have not granted any stock options.

Warrants

We have not issued and do not have outstanding any warrants to purchase shares of our common stock.

Dividends

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

1.   we would not be able to pay our debts as they become due in the usual course of business; or

	2.   our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.

Securities Authorized For Issuance under Equity Compensation Plans

We currently do not have any stock option or equity compensation plans or arrangements.

 

Our Limited Operating History and Working Capital Position

 

To meet our need for cash we will have to raise money.  Our working capital deficit as at June 30, 2011 is $105,992. We cannot guarantee that we will be able to raise enough money in the future to stay in business.   Whatever money we do raise will be used as working capital to meet current obligations. We will attempt to raise additional money through subsequent private placements, public offering or loans.

22

 

Off-balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Short and long-term Trend Liabilities

 

We are unaware of any known trends, events or uncertainties that have or are reasonably likely to have a material impact on our business either in the long-term or long-term liquidity which have not been disclosed under the section on Risk Factors.

   

Internal and External Sources of Liquidity

 

There are no material internal or external sources of liquidity.

 

Changes in the Financial Statements and Accounting Issues

 

We do not know of any cause for any material change from period to period in one or more line items of our financial statements as shown in this Form 10-K.   These audited financial statements adhere with accounting principles generally accepted in the United States of America.  The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments.

 

The going concern basis of presentation assumes we will continue in operation throughout the next fiscal year and into the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business.

 

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements are included in this report:

Title of Document	Page
Report of PLS CPA, A Professional Corp.	25
Balance Sheets as at June 30, 2011 and 2010	26
Statements of Operations for the years ended June 30, 2011 and 2010 and for the period from May 31, 2006 (date of inception) to June 30, 2011	27
Statements of Cash Flows for the years ended June 30, 2011 and 2010 and for the period from May 31, 2006 (date of inception) to June 30, 2011	28

 

Statement of Stockholders’ Equity for the period from May 31, 2006 (date of inception) to June 30, 2011	29
Notes to the Financial Statements	31

23

VERIFY SMART CORP.

(A Development Stage Company)

FINANCIAL STATEMENTS

June 30, 2011

(Stated in U.S. Dollars)

24

PLS CPA, A Professional Corp.

t 4725 Mercury Street #210 t SAN DIEGO t CALIFORNIA 92111t

t TELEPHONE (858)722-5953 t FAX (858) 761-0341  t FAX (858) 433-2979

t E-MAIL changgpark@gmail.com t

 Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Verify Smart Corp.

We have audited the accompanying balance sheets of Verify Smart Corp. (A Development Stage “Company”) as of June 30, 2011 and 2010 and the related statements of operations, changes in shareholders’ equity and cash flows for the years then ended and for the period from May 31, 2006 (inception) through June 30, 2011. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.  

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Verify Smart Corp. as of June 30, 2011 and 2010, and the result of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

The financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company’s losses from operations raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/PLS CPA

____________________

PLS CPA, A Professional Corp.

December 7, 2012

San Diego, CA 92111

25

VERIFY SMART CORP.

(A Development Stage Company)

BALANCE SHEETS

(Stated in US Dollars)

The accompanying notes are an integral part of these financial statements.

26

VERIFY SMART CORP.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Stated in U.S. Dollars) 

The accompanying notes are an integral part of these financial statements.

27

VERIFY SMART CORP.

(A Development Stage Company)

 

STATEMENTS OF CASH FLOWS

(Stated in U.S. Dollars)

The accompanying notes are an integral part of these financial statements.

28

Verify Smart Corp.

(Development Stage Company)

Statements of Stockholders' Equity (Deficit)

From May 31,2006 (Inception) to June 30, 2011 (Stated in U.S. Dollars)

 

		Common Stock
		Shares #				Par Value $				Additional Paid-in Capital $				Deficit Accumulated During the Development Stage $				Total $
Balance - May 31, 2006 (Date of Inception)
Stock issued for cash on May 31, 2006 at $0.0003 per share			30,000,000				30,000				(20,000	)		-					10,000
Net loss for the period			-				-				-				(430	)			(430	)
Balance - June 30, 2006			30,000,000				30,000				(20,000	)			(430	)			9,570
Stock issued for cash on October 31, 2006
at $0.0013 per share			30,000,000				30,000				10,000				-				40,000
Net loss for the year			-				-				-				(14,000	)			(14,000	)
Balance - June 30, 2007			60,000,000				60,000				(10,000	)			(14,430	)			35,570
Net loss for the year			-				-				-				(14,502	)			(14,502	)
Balance - June 30, 2008			60,000,000				60,000				(10,000	)			(28,932	)			21,068
Stock issued for consulting services			1,015,000				1,015				850,735				-				851,750
Stock issued for cash on May 27, 2009 at $1.25 per share, net of share issuance costs			10,000				10				11,362				-				11,372
Net loss for the year			-				-				-				(494,853	)			(494,853	)
Balance - June 30, 2009			61,025,000				61,025				852,097				(523,785	)			389,337
Stock issued for consulting services			1,190,000				1,190				516,810				-				518,000
Stock cancelled			(10,000,000	)			(10,000	)			10,000				-				-
Stock issued for cash on June 30, 2010 at $0.10 per share			550,000				550				54,450				-				55,000
Stock issued for finders fees			20,000				20				(20	)			-				-
Net loss for the year			-				-				-				(845,764	)			(845,764	)
Balance – June 30, 2010			52,785,000				52,785				1,433,337				(1,369,549	)			116,573
Net loss for the year			-				-				-				(222,565	)			(222,565	)
Balance – June 30, 2011			52,785,000			$	52,785			$	1,433,337			$	(1,592,114	)		$	(105,992	)

The accompanying notes are an integral part of these financial statements.

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VERIFY SMART CORP.

(A Development Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

AS OF JUNE 30, 2011

(Stated in U.S. Dollars)

1.

ORGANIZATION AND DESCRIPTION OF BUSINESS

Verify Smart Corp. (the "Company") was incorporated under the laws of the State of Nevada on May 31, 2006. The Company was originally formed to engage in the acquisition, exploration and development of natural resource properties. Effective March 25, 2009, the Company commenced activity involving developing and selling internet security software for credit card fraud prevention (Note 6).

2.

GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss since inception of $1,592,114 for the period from May 31, 2006 (inception) to June 30, 2011, has a stockholders’ deficit of $105,992, and has no revenue. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development and marketing of its projects. The Company plans to continue as a going concern by actively developing and marketing its technology. It intends to raise additional capital for the development and marketing of its project primarily through the issuance of common shares and or the issuance of debt securities. It may also raise additional capital by selling interests in its projects. There can be no assurance that the Company will be successful in marketing and developing its project or in securing financing. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:

Basis of Accounting

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.

Use of Estimates and Assumptions

Preparation of the Company’s financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.  The significant areas requiring management’s estimates and assumptions relate to determining the fair value of stock-based compensation, fair value of shares issued for services and the acquisitions, and useful lives of long-lived assets.

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Development Stage Company

The Company is a development stage company as defined by SFAS 7, Accounting and Reporting by Development Stage Enterprises (codified in ASC 915, Development Stage Entities).  The Company is devoting substantially all of its present efforts to establishing a new business.  All losses accumulated since inception have been considered as part of the Company’s development stage activities.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three

months or less to be cash equivalents. At June 30, 2011 and 2010, cash consists primarily of cash   on deposit.

Impairment of Long-Lived Assets

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets (codified in ASC 360, Property, Plant, and Equipment), the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.  The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset.  Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Financial Instruments and Concentration of Risk

The fair values of financial instruments, which include cash, accounts payable and accrued liabilities and loans payable, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.  Management does not believe that the Company is subject to significant interest currency or credit risks arising from these financial instruments.

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS 128, Earnings per Share (codified in ASC 260, Earnings Per Share), which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) before and after discontinued operations, by the weighted average number of common shares outstanding (denominator) during the period, including contingently issuable shares where the contingency has been resolved.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar.  Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS 52, Foreign Currency Translation (codified in ASC 830, Foreign Currency Matters), using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars.  The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

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Comprehensive Loss

SFAS 130, Reporting Comprehensive Income, (codified in ASC 220, Comprehensive Income) establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  At June 30, 2011, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Common Share Non-Monetary Consideration

In situations where common shares are issued and the fair value of the goods or services received is readily determinable, the fair value of the common shares is used to measure and record the transaction.  The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:

i)	the counterparty’s performance is complete;
ii)	a commitment for performance by the counterparty to earn the common shares is reached; or

iii)	the common shares are issued if they are fully vested and non-forfeitable at that date.

Stock-Based Compensation

The Company had adopted the fair value recognition provisions of SFAS 123R, Share-Based Payment, (codified in ASC 718, Compensation-Stock Compensation).  The Company adopted SFAS 123R using the modified-prospective-transition method.  Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.  In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of SFAS 123R. 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with SFAS 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18, (codified in ASC 505, Equity).  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

Income Taxes

 

Income taxes are provided in accordance with ASC 740 Accounting For Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

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Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04: “Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. This is a new accounting standard on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The standard is effective for interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company does not expect the adoption of this accounting guidance to have a material impact on its financial statements and related disclosures.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This update will require the presentation of the components of net income and other comprehensive income either in a single continuous statement or in two separate but consecutive statements. In addition, companies are also required to present reclassification adjustments for items that are reclassified from other comprehensive income to net income on the face of the financial statements. The update is effective for fiscal years and interim periods beginning after December 15, 2011. The Company will adopt the new disclosure requirements for comprehensive income beginning January 1, 2012.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements, amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and clarify existing disclosures relating to fair value measurements.  The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2010-06, but does not expect its adoption to have a material impact on the Company’s financial position or results of operations.

4.

LOANS PAYABLE

At June 30, 2011, the Company was indebted for non-interest bearing loans, with no formalized terms of repayment, for $119,029 (June 30, 2010 - $111,999) from unrelated parties.

5.

CAPITAL STOCK

a) Common Stock

As of June 30, 2011 the Company had 52,785,000 shares of common stock issued and outstanding.

During the year ended June 30, 2011, the Company had no stock activity.

As of June 30, 2010 the Company had 52,785,000 shares of common stock issued and outstanding.

During the year ended June 30, 2010, the Company issued the following common shares:

i) On July 14, 2009, the Company entered a consulting service agreement and issued 50,000 shares of restricted common stock at a fair value $0.53 per share, amounting $26,500 as compensation.

  

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ii) On August 14, 2009, the Company entered into a consulting service agreement and issued 1,000,000 shares of common stock at a fair value $0.425 per share, amounting $425,000 as compensation.

  

iii) On October 28, 2009, 10,000,000 shares of common stock from Howard Gelfand were cancelled and returned.

  

iv) On November 15, 2009, the Company entered into three consulting service agreements and issued 140,000 shares of common stock at a fair value $0.475 per share, amounting $66,500 as compensation.

v) On April 24, 2010, the Company issued 550,000 shares of common stock at $0.10 per share for cash proceeds of $55,000.  The Company issued 20,000 shares of common stock at a deemed fair value of $2,000 in connection with the private placement.

b) Share Purchase Warrants and Stock Options

As of June 30, 2011 and 2010 there are no share purchase warrants or stock options outstanding to acquire any additional shares of common stock.

6.

JOINT VENTURE AGREEMENT

Effective March 25, 2009, the Company entered into a joint venture agreement with Verified Capital Corp. and Verified Transactions Corp. relating to the formation and operation of a joint venture corporation that will sell internet security software for credit card fraud prevention.

Upon the satisfaction of customary closing conditions, the Company will contribute an aggregate of $5,000,000 to the joint venture corporation, payable as to $2,000,000 by May 1, 2009 and $3,000,000 by July 1, 2009, for a 70% interest in the joint venture corporation.

By amendment of May 19, 2009, the companies have agreed that all obligations of the Joint Venture agreement have been deemed to have occurred and the agreement is in full force in good standing. In addition to the foregoing, Verified Transactions Corp. will grant to the joint venture corporation a 25 year worldwide exclusive license to market and sell Verified Transaction Corp.'s internet security software and all other internet business of whatsoever nature and including all future developments of such business for a 25 % interest in the joint venture corporation. Verified Capital Corp. will be granted a 5% interest in the joint venture corporation upon the transfer of certain assets.

Upon the closing of the joint venture agreement, the Company would be the operator of the joint venture corporation and will contract with Verified Capital Corp. to be the sub-operator.

As at September 19, 2012, the joint venture agreement was terminated by mutual consent of the parties and ownership of the patented verification technology was transferred to Assured Mobile Technologies LLC. During the course of this former joint venture agreement, the Company did not pay any cash or share consideration to Verified Capital Corp or to Verified Transaction Corp. in respect its ownership stake in the joint venture or in respect of the license to use the patented technology. No joint venture corporation was formed in relation to the joint venture and the Company did not incur any material costs in respect of its obligations under the joint venture. Additionally, the Company is not subject to any penalty or residual obligations under the joint venture agreement.

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7.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

a) On August 14, 2009, the Company entered into a consulting agreement with Cohen Independent Group ("Cohen") wherein Cohen has agreed to provide certain consulting services to the Company. As compensation under the agreement, the Company agreed to issue 1,000,000 restricted shares of common stock. The agreement expires on August 14, 2011. On September 14, 2009, the Company issued 1,000,000 restricted shares of common stock at a fair value of $425,000 to Cohen for services to be provided over two year periods. As at June 30, 2011, $26,563 is included in prepaid expenses and will be recognized over the remaining term of the consulting agreement.

b) On September 22, 2009, the Company entered into a compensation agreement with AMG Group Inc. ("AMG') wherein AMG has agreed to provide certain consulting services to the company. The agreement expires on September 22, 2011.

In consideration of the consulting services provided by AMG, the Company hereby agrees to pay AMG the compensation as follows:

     i) asset acquisition, merger, or other value acquisition or disposition (the "Event") - the Company will pay within 30 days of closing of such an Event an amount equal to, at AMG' election, 5% in cash or 10% in common stock with the stock priced at the weighted average stock price for the year, on the stated value of the Event or, failing contractual value, the fair market value of the Event;

     ii) card issuers or internet users - the Company will pay to AMG an amount of 10% of cash flow received by the Company (less direct third party costs) from bank, and any other business paying the Company based on card use or internet use of the Company's products for the first five years and 5% thereafter for an additional five years. For the first institution of in excess of one million cards signed, the Company will pay AMG one million common shares of the Company;

     iii) the Company shall pay AMG a monthly fee of $5,000 starting July 1, 2010 and pre-approved expenses.

On March 31, 2010, the agreement was terminated and AMG waived the payable of $45,000

c) On November 15, 2009, the Company entered into a consulting agreement with Eileen Duperron wherein Eileen Duperron has agreed to provide certain consulting services to the Company. As compensation under the agreement, the Company agreed to issue 40,000 restricted common shares at a fair value of $19,000. The agreement expired on May 15, 2010. At June 30, 2010, $19,000 was recognized as consulting expense.

d) On November 15, 2009, the Company entered into a consulting agreement with Kim Baker wherein Kim Baker has agreed to provide certain consulting services to the Company. As compensation under the agreement, the Company agreed to issue 50,000 restricted common shares at a fair value of $23,750. The agreement expired on May 15, 2010. At June 30, 2010, $23,750 was recognized as consulting expense.

e) On November 15, 2009, the Company entered into a consulting agreement with Intentional and Purposeful Living wherein Intentional and Purposeful Living has agreed to provide certain consulting services to the company. As compensation under the agreement, the Company agreed to issue 50,000 restricted common shares at a fair value of $23,750. The agreement expired on May 15, 2010. At June 30, 2010, $23,750 was recognized as consulting expense.

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8.

INCOME TAXES

                                                                                 

 As of June 30, 2011

 Deferred tax assets:

        Net operating tax carry forwards                               $   293,928

        Tax rate                                                                              34%

     Gross deferred tax assets                                                    99,935

     Valuation allowance                                                         (99,935)

                                                                                            

     Net deferred tax assets                                                  $            0

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.

As of June 30, 2010, the Company has net operating loss carry forwards of approximately $293,928. Net operating loss carry forwards expires twenty years from the date the loss was incurred.

9.

SUBSEQUENT EVENTS

a) On June 22, 2012 the Company entered into a share purchase agreement, with Ukabobs LLC (doing business as imobile Interactive) (“Ukabobs”), a New Jersey limited liability company and the selling equity members of Ukabobs (the "Selling Members"), to acquire from the Selling  Members, 100% of their outstanding ownership interest in Ukabobs.

As consideration for this purchase, the Company has agreed to pay a cash purchase price of $300,000 and to issue 8,800,000 shares of its common stock on closing, subject to certain conditions being met.

To date these conditions have not been met and the transaction has not yet been completed.

b) Pursuant to a common stock private placement subscription agreement dated April 23, 2012, the Company has received gross proceeds in trust to date of $50,000 from a subscriber for the issuance of 500,000 units. The issue price of each unit is $0.10. Each unit consists of one common share in the capital of the Company and one common share purchase warrant. Each warrant will entitle the holder to purchase one common share in the capital stock of the Company. The warrants will be exercisable for nine months following closing at $0.30 per share. The closing date, which is at the discretion of the Company, has not yet been determined. Accordingly, the units, shares and warrants have not yet been issued.

c) On September 19, 2012 the Company entered into a patent license agreement with Assured Mobile Technologies LLC., a Nevada limited liability corporation (“Assured”). Pursuant to the license agreement the Company acquired a 20 year, exclusive worldwide license to exploit the patented technology entitled "A System and Method for Verifying a User's Identity in Electronic Transactions." The patented verification technology is an electronic method and system for verifying the identity of a user by a verifier in the course of an electronic transaction.

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In consideration of the license agreement, the Company has agreed to pay to Assured an aggregate cash payment of $300,000, payable as follows:

i) $100 upon execution of the license agreement;

ii) $10,000 by December 19, 2012;

iii) $40,000 by March 19, 2013; and

iv) $249,900 by September 19, 2013.

As additional consideration, the Company will issue to Assured 8,500,000 common shares in its capital stock within 30 days of September 19, 2012 (the “effective date”). This license will also be subject to a royalty payable to Assured equal to 2.5% of any gross sales made by the Company in respect of the technology.

By a license agreement amendment dated October 17, 2012, the Company and Assured mutually agreed to extend the effective date 90 days, or earlier if mutually agreed upon, from the date of the original agreement of September 19, 2012.

d) Pursuant to a private placement subscription agreement, on November 9, 2012 the Company received $50,000 for the issuance of 500,000 units @ $0.10 per unit. Each unit consists of one share of common stock in the capital of the Company, and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common stock in the capital of the Company for a period of 18 months at a price per warrant of $0.30.

ITEM 9.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

There have been no occurrences requiring response to this item.

ITEM 9A – CONTROLS AND PROCEDURES

Disclosure Controls and procedures

 

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this annual report.  Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.  Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective.

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Management’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed 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.

 

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2011 using the criteria set forth by the Committee of Sponsoring Organizations of the Tread way Commission in Internal Control — Integrated Framework.  Based on this assessment, management has concluded that, as of June 30, 2011, the Company’s internal control over financial reporting was effective 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 based on such criteria.

 

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

For the year ended June 30, 2011, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9 B – OTHER INFORMATION

There are no matters required to be reported upon under this Item.

  

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PART 111

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below is certain information concerning each of our directors and executive officers of our Company as at June 30, 2011:

Name and Address	Position	Age
Tony Cinotti (*)	Director, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer	59

(*)	Member of the Audit Committee.

(1)	Tony Cinotti was appointed a Director on November 30, 2009.

 

Each of the director names above will serve until the next Annual Meeting of Stockholders or until their successors is duly elected and has qualified.  Director is elected for a one year term at the Annual General Meeting of Stockholders.   Director will hold his positions at the pleasure of the Board of Directors, absent any employment agreement, of which none currently exist or is contemplated.  There is no arrangement or understanding between any of our director or officer and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the directors of our Board of Directors. There are also no arrangements, agreements or understanding between non-management stockholders that may directly or indirectly participate in or influence the management of our affairs.

Historical Backgrounds of Our Director

Tony Cinotti has over 35 years experience in the Financial Industry. He began his career with Kuhn Loeb & Company managing all systems and data center operations. He continued his career with Morgan Stanley and managed Equity and Government Trading as well as Broker Commissions and Management and Planning systems. Upon leaving Morgan Stanley he founded DP Sciences Inc., which provided Management and Systems consulting to the financial community. The company was contracted to build and manage systems and data centers for various financial clients. DP Sciences was also a service organization processing over 97% of all Equity IPO's (Initial Public Offerings) for over 30 clients. Tony also owned seats on The New York Futures Exchange and was a registered Floor Broker. He was the co-inventor on two method patents for processing transactions on 3G phones. Tony has a Bachelors degree in Management from Baruch College.

Tony Cinotti was instrumental in bringing the iMobile Interactive and VerifySmart alliance to fruition. iMobile currently interfaces with almost every phone company in the world.

 

Our Audit Committee

 

On November 30, 2009 our Board of Directors appointed Tony Cinotti to our Audit Committee and on the same dated adopted an Audit Committee Charter.  Tony Cinotti cannot be considered an “audit committee financial expert” as defined in Item 407 of Sarbanes-Oxley Act of 2002.  The Audit Committee Members will have to search and find an individual who meets these requirements.   This has not occurred.

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Our Audit Committee Charter requires that its members monitor the following:

 

●		the integrity of the financial statement of our Company;
●		the compliance by our Company with legal and regulatory requirements;
●		the independence and performance of our Company’s external auditors;
●		make regular reports to our Board of Directors;
●		review the annual financial statements, independence of auditors and fees to be paid to the independent auditors; and
●		report to our Board of Directors on legal, accounting and management matters.

Apart from the Audit Committee, our Company does not have any other Board committees.

Family Relationships between our Directors

There are no family relationships among our current or former directors or officers.

Significant Employees

We have no significant employees other than Tony Cinotti, our sole officer and director.  We currently rely on part-time, third party contractors to provide management, accounting and legal services on an as needed basis.  We anticipate that, as our business develops, we will engage additional contractors on a part-time or full-time basis.   

Conflicts of Interest

We have adopted a Code of Ethics that applies to, among other persons, our company’s principal executive officers and senior financial executives, as well as persons performing similar functions. As adopted, our Code of Ethics sets forth written policies to promote:

·

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

·

full, fair, accurate, timely and understandable disclosure in all reports and documents that the Corporation files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Corporation that are within the Senior Officer’s area of responsibility;

·

compliance with applicable governmental laws, rules and regulations; and

·

the prompt internal reporting of violations of the Code.

Other Directorships

Tony Cinotti does not serve as a director of any other company trading on the OTCBB or any other public market.  This might not be the case in the future but as at the date of this prospectus they are not officers or directors of any other public company.

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Involvement in Certain Legal Proceedings

To the knowledge of our Company, during the past five years, none of our directors or executive officers:

(1)

has filed a petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by the court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filings, or any corporation or business association of which he was an executive officer at or within the last two year before the time of such filing;

(2)	was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3)	was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:

(i)

acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person  regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii)           engaging in any type of business practice; or

(iii)	engaging in any activities in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4)	was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under paragraph (3) (i) above, or to be associated with persons engaged in any such activities; or

(5)	was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated.

(6)	was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

Promoters and Control Persons

Tony Cinotti is considered the promoter of our Company, within the meaning of such terms under the Securities Act of 1933, as amended, since he was instrumental in seeking out other investors to participate in the private placement of stock equity in the Company.   He is also a control person since he owns Nil of our issued common shares. There are no other promoters involved with our Company.

 

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ITEM 11.      EXECUTIVE COMPENSATION

 

The following table sets forth the compensation paid by our Company from May 31, 2006 (date of inception) to June 30, 2011, for each of our officers and directors.   This information includes dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.   The compensation discussed addresses all compensation awarded to, earned by, or paid to named executive officers.

Summary Compensation Table