Almost Never Films Inc. - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

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

For the Year Ended June 30, 2015

or

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

For the transition period from

Commission File Number: 000-53049

SMACK SPORTSWEAR

(Exact name of registrant as specified in its charter)

(818) 404-5541

(Registrant’s telephone number, including area code)

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 ☒    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 ☒

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 the “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☒    No ☐

The number of shares of registrant’s common stock outstanding as of October 14, 2015 was 22,117,776.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in the price of gold, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

Readers should read this Report in conjunction with our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the SEC.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

This Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by reference to, these agreements, all of which are incorporated herein by reference.

Business Development

SMACK Sportswear (“SMACK or the Company”) was originally incorporated in Nevada in October 2007. Through June 30, 2015, we were a manufacturer and seller of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July 31, 2015 we completed the disposition of certain assets of the Company to William Sigler, a former director of the Company; in connection with said transactions Mr. Sigler resigned and agreed to sell all his shares of common stock in the Company. As a result of the sale of certain inventory from the Company to Mr. Sigler, the Company is now considered a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended).

The Company is now focusing its efforts on seeking a business opportunity. The Company will attempt to locate and negotiate with a business entity for the merger of that target company into the Company. In certain instances, a target company may wish to become a subsidiary of the Company or may wish to contribute assets to the Company rather than merge. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company will provide a method for a foreign or domestic private company to become a reporting (“public”) company whose securities are qualified for trading in the United States secondary market. We are now considered a “blank check” company.

The selection of a business opportunity in which to participate is complex and extremely risky and will be made by management in the exercise of its business judgment. There is no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to our company and shareholders.

Because we have no specific business plan or expertise, our activities are subject to several significant risks. In particular, any business acquisition or participation we pursue will likely be based on the decision of management without the consent, vote, or approval of our shareholders.

Sources of Opportunities

We anticipate that business opportunities may arise from various sources, including officers and directors, professional advisers, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals.

We will seek potential business opportunities from all known sources, but will rely principally on the personal contacts of our officers and directors as well as indirect associations between them and other business and professional people. Although we do not anticipate engaging professional firms specializing in business acquisitions or reorganizations, we may retain such firms if management deems it in our best interests. In some instances, we may publish notices or advertisements seeking a potential business opportunity in financial or trade publications.

Criteria

We will not restrict our search to any particular business, industry or geographical location. We may acquire a business opportunity in any stage of development. This includes opportunities involving “start up” or new companies. In seeking a business venture, management will base their decisions on the business objective of seeking long-term capital appreciation in the real value of our company. We will not be controlled by an attempt to take advantage of an anticipated or perceived appeal of a specific industry, management group, or product.

In analyzing prospective business opportunities, management will consider the following factors:

Generally, our management will analyze all available factors and make a determination based upon a composite of available facts, without relying on any single factor.

Methods of Participation of Acquisition

Management will review specific business and then select the most suitable opportunities based on legal structure or method of participation. Such structures and methods may include, but are not limited to, leases, purchase and sale agreements, licenses, joint ventures, other contractual arrangements, and may involve a reorganization, merger or consolidation transactions. Management may act directly or indirectly through an interest in a partnership, corporation, or other form of organization.

Procedures

As part of the our investigation of business opportunities, officers and directors may meet personally with management and key personnel of the firm sponsoring the business opportunity. We may visit and inspect material facilities, obtain independent analysis or verification of certain information provided, check references of management and key personnel, and conduct other reasonable measures.

We will generally ask to be provided with written materials regarding the business opportunity. These materials may include the following:

Competition

We expect to encounter substantial competition in our efforts to acquire a business opportunity. The primary competition is from other companies organized and funded for similar purposes, small venture capital partnerships and corporations, small business investment companies and wealthy individuals.

Employees

During the year ended June 30, 2015, and at the present time, we have no employees. During the year ended June 30, 2015, we did have up to eight part-time independent contractors. Doug Samuelson is currently our sole officer and director. Mr. Samuelson will devote such time as required to actively seek a business opportunity for the Company.

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this Item 1A.

ITEM 1B. Unresolved Staff Comments

None

ITEM 2. DESCRIPTION OF PROPERTY.

We do not currently own or lease any property. We utilize office space in the residence of our Interim CEO and CFO at no cost. We will not seek other office space until we pursue a viable business opportunity and recognize income.

ITEM 3. LEGAL PROCEEDINGS.

We know of no existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is quoted on the Financial Industry Regulatory Authority’s OTC Bulletin Board under the symbol “SMAK”. The following quotations obtained from Yahoo! Finance reflect the highs and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

The high and low bid prices of our common stock for the previous two fiscal years are as follows:

Transfer Agent

Our transfer agent for our common stock is Empire Stock Transfer, Inc. They are located at 1859 Whitney Mesa Drive, Henderson NV 89014. Tel: 702 818-5898 Fax: 702 974-1444.

Holders of Common Stock

As of October 13, 2015, we have 662 registered shareholders holding 22,117,776 shares of our common stock.

Dividends

We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Our directors will determine if and when dividends should be declared and paid in the future based on our financial position at the relevant time. All shares of our common stock are entitled to an equal share of any dividends declared and paid.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

During the year ended June 30, 2015, the Company sold 3,250,000 shares of its common stock. Total gross proceeds were $195,000. The foregoing issuances were deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a) (2) thereof, as a transaction by an issuer not involving a public offering.

ITEM 6. SELECTED FINANCIAL DATA.

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.

The following discussion and analysis of the Company’s financial condition and results of operations is based on the preparation of our financial statements in accordance with U.S. generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.

Plan of Operation

Subsequent to June 30, 2015, the Company ceased its operations relating to the manufacturing and sales of sportswear. During the next 12 months, the Company intends to seek, investigate and, if such investigation warrants, acquire an interest in one or more business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of a publicly held corporation. At this time, the Company has no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company, and the Company has not identified any specific business or company for investigation and evaluation. No member of management or promoter of the Company has had any material discussions with any other company with respect to any acquisition of that company.

The Company will not restrict its search to any specific business, industry or geographical location, and the Company may participate in a business venture of virtually any kind or nature. The discussion of the proposed plan of operation under this caption and throughout this Annual Report is purposefully general and is not meant to be restrictive of the Company's virtually unlimited discretion to search for and enter into potential business opportunities.

The Company will have to obtain funds in one or more private placements to finance the operation of any acquired business. Persons purchasing securities in these placements and other shareholders will likely not have the opportunity to participate in the decision relating to any acquisition. The Company's proposed business is sometimes referred to as a "blind pool" because any investors will entrust their investment monies to the Company's management before they have a chance to analyze any ultimate use to which their money may be put. Consequently, the Company's potential success is heavily dependent on the Company's management, which will have virtually unlimited discretion in searching for and entering into a business opportunity. None of the officers and directors of the Company has had any experience in the proposed business of the Company. There can be no assurance that the Company will be able to raise any funds in private placements. In any private placement, management may purchase shares on the same terms as offered in the private placement.

Management anticipates that it will only participate in one potential business venture. This lack of diversification should be considered a substantial risk in investing in the Company because it will not permit the Company to offset potential losses from one venture against gains from another. The Company may seek a business opportunity with a firm which only recently commenced operations, or a developing company in need of additional funds for expansion into new products or markets, or seeking to develop a new product or service, or an established business which may be experiencing financial or operating difficulties and is in the need for additional capital which is perceived to be easier to raise by a public company. In some instances, a business opportunity may involve the acquisition or merger with a corporation which does not need substantial additional cash but which desires to establish a public trading market for its common stock. The Company may purchase assets and establish wholly owned subsidiaries in various business or purchase existing businesses as subsidiaries.

The Company anticipates that the selection of a business opportunity in which to participate will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, management believes that there are numerous firms seeking the benefits of a publicly traded corporation. Such perceived benefits of a publicly traded corporation may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for the principals of a business, creating a means for providing incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all shareholders, and other factors. Potentially available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

As part of any transaction, the acquired company may require that management or other stockholders of the Company sell all or a portion of their shares to the acquired company, or to the principals of the acquired company. It is anticipated that the sales price of such shares will be lower than the current market price or anticipated market price of the Company's Common Stock. The Company's funds are not expected to be used for purposes of any stock purchase from insiders. The Company shareholders will not be provided the opportunity to approve or consent to such sale. The opportunity to sell all or a portion of their shares in connection with an acquisition may influence management's decision to enter into a specific transaction. However, management believes that since the anticipated sales price will be less than market value, that the potential of a stock sale by management will be a material factor on their decision to enter a specific transaction.

The above description of potential sales of management stock is not based upon any corporate bylaw, shareholder or board resolution, or contract or agreement. No other payments of cash or property are expected to be received by management in connection with any acquisition.

The Company has not formulated any policy regarding the use of consultants or outside advisors, but does not anticipate that it will use the services of such persons.

The Company has, and will continue to have, insufficient capital with which to provide the owners of business opportunities with any significant cash or other assets. However, management believes the Company will offer owners of business opportunities the opportunity to acquire a controlling ownership interest in a public company at substantially less cost than is required to conduct an initial public offering. The owners of the business opportunities will, however, incur significant post-merger or acquisition registration costs in the event they wish to register a portion of their shares for subsequent sale. The Company will also incur significant legal and accounting costs in connection with the acquisition of a business opportunity including the costs of preparing post-effective amendments, Forms 8-K, agreements and related reports and documents nevertheless, the officers and directors of the Company have not conducted market research and are not aware of statistical data which would support the perceived benefits of a merger or acquisition transaction for the owners of a business opportunity.

The Company does not intend to make any loans to any prospective merger or acquisition candidates or to unaffiliated third parties.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management 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 evaluates its estimates, including those related to impairment of long-lived assets, including finite lived intangible assets, accrued liabilities, fair value of warrant derivatives and certain expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are summarized in Note 2 of our financial statements. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

Revenue Recognition

The Company recognizes revenue upon shipment of the Company’s products to its customers, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. Title to the Company’s products is transferred to the customer once the product is shipped from the Company’s warehouse. Products are not shipped until there is a purchase agreement signed by the customer with a specified payment arrangement. The Company’s sales are primarily customized, made to order apparel, where after a deposit is made there are no refunds after the customer has committed to the sale through a signed contract. Therefore, the Company has not recorded an allowance for returned products.

Stock-Based Compensation

The Company periodically issues common stock to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock payments to employees by measuring the cost of services received in exchange for equity on the grant date fair value of the awards, with the cost recognized as compensation expense in the Company’s financial statements over the vesting period of the awards. The Company accounts for stock grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

Use of Estimates

The preparation of the condensed financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing our allowances for doubtful accounts, inventory valuations and common stock issued for services, among others. Actual results could differ from these estimates.

Results of Operations for the year ended June 30, 2015 compared to the year ended June 30, 2014

Revenue and Cost of Goods Sold

Revenue for the years ended June 30, 2015 and 2014 was $547,905 and $1,084,206, respectively. The decrease of $536,300 was primarily due to significant management changes made in 2015 and the lack of cash to fund sufficient sales and marketing operations.

Cost of sales for the years ended June 30, 2015 and 2014, was $330,832 and $984,648, respectively. Gross profit for the years ended June 30, 2015 and 2014 was $217,073 and $99,558, respectively. The gross profit increase of $117,515 for the year ended June 30, 2015 was due to the write down of fabric and prior year inventory items during the third and fourth quarters of fiscal 2014, which amounted to approximately $331,000. The total write down of fabric was approximately $115,000 and the total amount of finished products was approximately $216,000.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses decreased by $340,111 to $777,332 for the year ended June 30, 2015, compared to $1,117,443 for the year ended June 30, 2014. The decrease in SG&A expenses was due primarily to a decrease in stock issued for services to officers and former officers of $245,738 and bad debt expense of $41,278.

Other Income and Expense

During the year ended June 30, 2015, the Company had interest expense of $29,962 relating to its notes payable. The Company also received $84,827 of accounts payable settlement income (see Note 9). The interest expense in 2014 also related to the two promissory notes, but also related to the amortization of the debt discount on a convertible note payable. Also during the year ended June 30, 2014, the Company incurred other expenses of $13,500 relating to the loss on conversion of accounts payable to common stock, financing costs of $22,642 and a loss of $66,667 on the conversion of debt to common stock.

Net Loss

Our net loss decreased by $741,094 to $505,394 for the year ended June 30, 2015, compared to a net loss of $1,246,488 for the year ended June 30, 2014. The decrease in net loss was due to the decrease in operating expenses of $340,111, the net decrease in other income (expense) of $283,468 and the increase in gross profit of $117,515.

Liquidity and Capital Resources

Comparison of years ended June 30, 2015 and 2014

As of June 30, 2015, we had no cash, negative working capital of $900,489 and an accumulated deficit of $2,381,624.

As of June 30, 2014, we had $824 in cash, negative working capital of $600,326 and an accumulated deficit of $1,876,230.

Cash flows used in operating activities

During the year ended June 30, 2015, the Company used cash flows in operating activities of $212,024 compared to $191,447 used in the year ended June 30, 2014. The reasons for the increase in cash used in operating activities in the amount of $20,577 was primarily due to the decrease in non-cash items, which totaled to $902,450 in 2014 compared to $77,638 in 2015, offset by the decrease in net loss in 2015 compared to 2014 of $716,094.

Cash flows provided by financing activities

Cash flows from financing activities for the years ended June 30, 2015 and 2014 provided net cash of $211,200 and $189,857, respectively, primarily relating to proceeds from the notes payable. In 2015, the Company also raised $195,000 from the sale of its common stock, while also repaying $3,800 of its notes payable. In 2014, the Company repaid $148,143 of its notes payable.

Going Concern

The accompanying consolidated condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the year ended June 30, 2015, the Company incurred a net loss of $505,394 and cash used in operating activities was $212,024, and as of that date, is delinquent in payments of $271,398 for payroll and sales taxes. As of June 30, 2015, the Company had a working capital deficiency of $900,489 and a shareholders’ deficit of $1,050,489. Furthermore, on July 27, 2015, the Company sold substantially all of its assets and business operations to a former officer. As a result, the Company’s operations since that date have ceased. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. Subsequent to June 30, 2015, the Company raised $47,500 from an investor to pay past obligations and to allow the Company to continue operating in its shell status. Management believes this funding and future funding will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow it to continue looking for opportunities to acquire operating companies or merge with other operational entities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of equity financing.

New Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

In January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items for financial statement presentation purposes. This ASU is effective for fiscal years beginning after December 15, 2015. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

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 or operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Smack Sportswear

We have audited the accompanying consolidated balance sheets of Smack Sportswear, Inc. and Subsidiary (the “Company”) as of June 30, 2015 and 2014 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2015 and 2014 and the consolidated results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a shareholders’ deficiency and has experienced recurring operating losses and negative operating cash flows since inception. In addition, as discussed in Note 9, on July 27, 2015, the Company sold substantially all of its assets and business operations to a former officer. As a result, the Company’s operations since that date have ceased. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that might result from the outcome of this uncertainty.

/s/ Weinberg and Company, P.A

Los Angeles, California

October 13, 2015

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

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

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

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 1 - ORGANIZATION, OPERATIONS AND BASIS OF ACCOUNTING

Nature of the Business

SMACK Sportswear (“SMACK”) was originally incorporated in Nevada in October 2007. The Company’s primary business activities were the manufacturer and sale of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July 1, 2015, the company has ceased operations and is looking for opportunities to acquire operating companies or merge with other operational entities.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the year ended June 30, 2015, the Company incurred a net loss of $505,934 and cash used in operating activities was $212,024, and as of that date, is delinquent in payments of $271,398 for payroll and sales taxes. As of June 30, 2015, the Company had a working capital deficiency of $900,489 and a shareholders’ deficit of $1,050,489. Furthermore, on July 27, 2015, the Company sold substantially all of its assets and business operations to a former officer. As a result, the Company’s operations since that date have ceased. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. Subsequent to June 30, 2015, the Company raised $47,500 from an investor to pay past obligations and to allow the Company to continue operating in its shell status. Management believes this funding and future funding will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow it to continue looking for opportunities to acquire operating companies or merge with other operational entities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of equity financing.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Team Sports Superstore. All significant intercompany transactions and balances have been eliminated in consolidation.

Stock Split

On February 14, 2015, the Company’s shareholders authorized its Board of Directors to effectuate a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-3 (the “Reverse Stock Split”), which was ultimately declared effective by the Board of Directors as of the close of business on April 14, 2015. As a result of the Reverse Stock Split, every three issued and outstanding shares of the Company’s common stock was changed and converted into one share of common stock. All share related information presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the reduced number of shares resulting from this action.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

The Company recognizes revenue upon shipment of the Company’s products to its customers, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. Management assesses the business environment, the customer's financial condition, historical collection experience, accounts receivable aging and customer disputes to whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sales, the Company does not recognize revenue until collection occurs. Title to the Company’s products is transferred to the customer once the product is shipped from the Company’s warehouse. Products are not shipped until there is a purchase agreement signed by the customer with a specified payment arrangement. The Company’s sales are primarily customized, made to order apparel, where after a deposit is made there are no refunds after the customer has committed to the sale through a signed contract. Therefore, the Company has not recorded an allowance for returned products.

Loss per Share Calculations

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the years ended June 30, 2015 and 2014, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

Concentration of Sales and Accounts Receivable

For the year ended June 30, 2015, the Company sold $274,808 of its products to a company owned by the Company’s former Chief Executive Officer (CEO) and a former member of the Board of Directors (see Note 4). This amount represented approximately 50% of the Company’s sales during that period. There were no other customers with sales representing more than 10% of the Company’s total sales during this period or during the year ended June 30, 2014. At June 30, 2015 and 2014, there were no customers with an accounts receivable balance that represented 10% or more of the Company’s total accounts receivable.

Stock-Based Compensation

The Company periodically issues common stock to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock payments to employees by measuring the cost of services received in exchange for equity on the grant date fair value of the awards, with the cost recognized as compensation expense in the Company’s financial statements over the vesting period of the awards. The Company accounts for stock grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising Costs

The Company expenses all advertising costs as incurred. Advertising costs included within selling, general and administrative expenses were approximately $662 and $31,530 for the years ended June 30, 2015 and 2014, respectively.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing our allowances for doubtful accounts, inventory valuations and common stock issued for services, among others. Actual results could differ from these estimates.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, economic conditions that may affect a customer’s ability to pay and expected default frequency rates. Trade receivables are written off at the point when they are considered uncollectible. Bad debt expense was $30,234 and $71,512 for the years ended June 30, 2015 and 2014, respectively. The allowance for doubtful accounts was $63,953 as of June 30, 2014. There was no allowance for doubtful accounts as of June 30, 2015.

Inventories

Inventories are stated at the lower of cost or market. Cost is computed on a first-in, first-out basis. As of June 30, 2015, the Company had either sold or written-off its entire inventory. As of June 30, 2014, the Company’s total inventory balance of $25,072 was finished goods. The Company provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales.

At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the years ended June 30, 2015 and 2014, the Company recorded a charge of approximately $18,000 and $331,000, respectively, relating to the mark down of inventories to net realizable value at June 30, 2015 and 2014. The mark downs related to inventories that management felt had become obsolete or in excess of future estimated sales of those products over the next year, particularly fabric and prior year products.

Shipping and Handling Costs

The Company’s shipping and handling costs are reported as selling, general and administrative expenses in the consolidated Statements of Operations. These costs primarily relate to outbound freight. The Company classifies amounts billed to customers for shipping fees as revenues.

Income Taxes

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Customer Deposits

In many of its customer agreements, the Company requires its customers pay a 50 percent deposit upon signing the agreement. At June 30, 2015, there was $8,500 in outstanding customer deposits. There were no customer deposits at June 30, 2014.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

As of June 30, 2015, the balances reported for cash, accounts receivable, accounts payable and accrued expenses approximate their fair value because of their short maturities. Certain accounts and note payable are at agreed values. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

In January 2015, the FASB issued ASU No. 2015-01, which eliminates the concept of extraordinary items for financial statement presentation purposes. This ASU is effective for fiscal years beginning after December 15, 2015. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or liquidity.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 3 - NOTES PAYABLE - RELATED PARTIES

Notes payable and other debt to related parties consist of the following as of June 30, 2015 and 2014:

For the years ended June 30, 2015 and 2014, the Company incurred $29,962 and $9,722, respectively, of interest expense relating to the unsecured promissory notes. The total amount of accrued interest payable relating to those notes at June 30, 2015 and 2014 was $39,684 and $9,722, respectively, and is included in accounts payable and accrued expenses.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 4 – DUE TO FORMER OFFICER

Release Agreement with Former CEO

In September 2014 (the Effective Date), the Company entered into a mutual release agreement with its former CEO under which the CEO agreed to resign his position and the Company agreed to pay the former officer $3,000 per month commencing as of the Effective Date and ended on February 28, 2015. The Parties agreed that the Company’s accrued and unpaid salary obligation owed to the former officer as of the Effective Date was $130,000 and is net of any and all other offsetting obligations owed by the former officer to the Company. Fifty percent of the accrued salary ($65,000) will be converted into the Company’s common stock at any time from the effective date. The conversion price shall be the lower of $0.06 or the same conversion price as the current note holders (see Note 3). In the event that the former CEO is not able to exercise the above accrued salary conversation rights by December 31, 2014, the amount of any such accrued salary obligation will be paid in cash in full by no later than January 15, 2016.

The remaining fifty percent of the accrued salary obligation ($65,000) will be paid by the Company through cash payment(s) to be made at the earlier of (i) the date of the Company’s closing of the next round of financing (debt or equity) of at least $400,000, in which case the entire then-remaining unpaid portion of $65,000 shall be repaid, or (ii) in the event that the financing does not occur by February 28, 2015 and to the extent that the financing has not occurred subsequent to that date, through payments of $3,000 per month commencing on March 1, 2015 and continuing on a monthly basis thereafter until repayment is completed.

In exchange for the mutual release agreement, the Company is required to pay the former CEO $3,000 a month commencing on the effective date and ending on February 28, 2015.

Any and all obligations not paid by the Company per the agreement (and exclusive of the accrued salary obligation), as well as loans by the former CEO to the Company, which total $21,000 as of the Effective Date, shall be repaid by the Company by January 31, 2015 or earlier based on the occurrence of certain events.

As of June 30, 2014, the Company owed $121,000 to the former officer under the mutual release agreement. During the year ended June 30, 2015, the Company accrued an additional $11,900 under the former CEO’s mutual release agreement. As of June 30, 2015, a total of $132,900 was owed under the agreement and is reflected as Amounts Due to Former Officer on the accompanying June 30, 2015 consolidated Balance Sheet.

Concurrently to the mutual release agreement, the former officer entered into an independent sales agent/team dealer agreement with the Company to sell the Company’s products. During the year ended June 30, 2015, the Company sold $274,808 of product to the former CEO’s new company. The independent sales agent/team dealer agreement was terminated in April 2015.

Asset Purchase and Mutual Release Agreements with Former CEO

In July 2015, the Company entered into an Asset Purchase agreement with the former CEO (see Note 9). Under the agreement, the Company completed the disposition of certain assets of the Company to the former CEO. The purchase price of the assets sold was $132,900, which was paid by the cancellation of indebtedness owed by the Company to the former CEO. The Company and the former CEO also entered into mutual release agreements that released each party from any and all claims, liabilities and indebtedness owed to the other. As of that date, the former CEO also resigned as a Director of the Company.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 5 – AMOUNTS DUE TO RELATED PARTIES

As of June 30, 2014, the Company owed $2,200 to an officer for loans to the Company. During the year ended June 30, 2015, the Company fully paid the balance owed to the officer for the personal loans. As of June 30, 2015 and 2014, the Company owed the officer $88,000 and $23,500, respectively, relating to unpaid compensation and this amount is reflected in Amounts Due to Related Parties on the accompanying June 30, 2015 and 2014 consolidated Balance Sheets.

During the year ended June 30, 2015, the Company also accrued $25,000 of compensation to a former officer and Director. This amount is reflected in Amounts Due to Related Parties on the accompanying June 30, 2015 consolidated Balance Sheet.

NOTE 6 - CAPITAL STOCK

Common Stock Issued to Former Officers

In December 2012, the Company entered into an employment agreement with an officer with a term of three years. Under the agreement, the officer was entitled to receive up to 1,000,000 shares of the Company’s common stock, subject to vesting at rate of 166,667 shares on a semi-annual basis, commencing June 30, 2013. The officer resigned in March 2014. During the year ended June 30, 2014, the Company issued 333,333 shares of common stock to the former officer valued at $160,000. The remaining 666,667 shares of common stock were forfeited upon resignation of the Officer. The Company also accrued a total of $18,000 as part of the former officer’s termination agreement, which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet as of June 30, 2014.

During the year ended June 30, 2014, the Company issued 266,667 shares of common stock to a former officer for services valued at $40,000. The shares issued were valued at the trading price at the date of the agreement.

On December 29, 2014, the Company entered into a settlement and mutual release agreement (the “Agreement”) with its former CFO to settle the claims filed by the former CFO. Under the agreement, among others, the Company issued a total of 208,333 shares common stock valued at $50,000. The Agreement also required the former CFO to return for cancellation the 333,333 shares of common stock previously issued to the former CFO. Accordingly, the Company recorded an adjustment to reduce its common stock outstanding as of June 30, 2015.

Common Stock Issued for Services

During the year ended June 30, 2014, the Company issued 40,000 shares of common stock valued at $73,200 to its legal counsel for services provided to the Company.

In April 2014, the Company entered into an agreement with its Chief Financial Officer under which the officer could earn up to 166,667 shares of the Company’s common stock upon reaching certain milestones, specific to the completion of the Company’s quarterly SEC filings. The officer can also earn 16,667 shares per quarter upon reaching certain milestones, also specific to the timely filing of the Company’s quarterly SEC filings. During the year ended June 30, 2014, the officer met the milestones and earned a total of 58,333 shares, which were valued at $10,500 and are included in the accompanying consolidated statement of operations for the year ended June 30, 2014. During the year ended June 30, 2015, the Company issued 233,333 shares of its common stock to its Chief Financial Officer (CFO) under the terms of his service agreement valued at $37,500.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 6 - CAPITAL STOCK (continued)

Common Stock Issued for Services (continued)

On July 21, 2014, the Company entered into a service agreement with Mr. Christopher Jenks to serve as a member of the Board of Directors for one year. As compensation, Mr. Jenks was to receive up to 250,000 shares of its common stock valued at $15,000. The stock vests 66,667 shares on December 1, 2014; 66,667 shares on March 1, 2015; and 116,666 shares on August 15, 2015. Mr. Jenks was subsequently appointed as the Company’s Chief Executive Officer (CEO) until February 13, 2015, when he resigned. During the year ended June 30, 2015, 133,333 shares valued at $9,731 vested and were issued to Mr. Jenks for his services. In June 2015, Mr. Jenks resigned as a Director of the Company. As of June 30, 2015, no amount of the award remained unvested.

Sale of Common Stock

During the year ended June 30, 2015, the Company sold 3,250,000 shares of its common stock at the price of $0.06 per share through a private placement memorandum. Gross proceeds from the issuance were $195,000. In connection with the financing, 833,333 shares were sold to the Company’s former Chief Executive Officer (CEO) for cash at $0.06 per share. The market value of the stock at issuance was $0.09 per share. The difference in price of $25,000 between the market value of the stock and the cash value was recorded as additional compensation to the CEO during the year ended June 30, 2015.

Other Issuances

During the year ended June 30, 2014, the Company issued 150,000 shares to a former officer valued at $22,500 upon conversion of $9,000 accounts payable owed to the officer. The shares issued were valued at the trading price at the conversion date. As a result, the Company recorded a loss on conversion of accounts payable of $13,500 which has been included in the accompanying consolidated statement of operations for the year ended June 30, 2014.

During the year ended June 30, 2014, the Company issued 4,444,444 shares of common stock, with market value of $266,667 (or at $0.02 per share), for the settlement of convertible notes payable in the aggregate principal amount of $200,000. As a result, the Company recorded a loss of $66,667 which has been reflected on the accompanying consolidated statement of operations for the year ended June 30, 2014.

Effective July 2013, the Company entered into a convertible note payable agreement in the principal amount of $53,000. The note had an interest rate of 8 percent and was due on March 19, 2014. Per the agreement, if the note was not repaid by March 19, 2014, the note would convert into shares of the Company’s common stock at a conversion rate of 58 percent of the market price of the average of the three lowest closing prices of the common stock for the ten trading days prior to the date of conversion. As the conversion price of the note was less than the market price of the Company’s common stock at the date of issuance, the Company determined that the note contained a beneficial conversion feature of $ $38,380, which was reflected as additional paid-in capital. The note’s beneficial conversion feature was considered as debt discount and was being amortized over the life of the note. In February 2014, the note was paid off and all remaining unamortized note discount was recorded as interest expense.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 6 - CAPITAL STOCK (continued)

Other Issuances (continued)

In February 2014, the Company entered into an agreement with its former President and former Director under which the Company agreed to pay him a monthly salary of $7,500. As part of the agreement, the Company’s former CEO agreed to issue the President 166,667 shares of common stock from his personal holdings upon signing of the agreement. The fair value of those shares at the date of grant was $20,000 which the Company accounted for as additional compensation expense and as additional paid in capital contributed by the former CEO in the financial statements for the year ended June 30, 2014. The former CEO also agreed to issue the President an additional 166,667 shares of common stock when corporate mission statement and standard operating procedures are developed and implemented within 180 days from February 2014. The President developed and implemented the mission statements and standard operating procedures timely. As a result, the former CEO issued 166,667 shares to the President from his personal holdings. The fair value of those shares at grant date was $10,000 which the Company accounted for as additional compensation expense and as additional paid in capital contributed by the former CEO in the accompanying consolidated financial statements for the year ended June 30, 2015.

Preferred Stock

The Company has two series of preferred stock. The Series A Voting preferred stock consists of 2,000,000 authorized shares, par value $0.001. The holders of the Series A Voting preferred stock are not entitled to receive any dividends and do not have any liquidation rights. The holders of Series A Voting preferred stock shall be entitled to (a) notice of any meeting of the shareholders of the Company; and (b) have the power to vote each share at any shareholder meeting, where each share of Series A Voting preferred stock carries the weight of 20 votes for each share of common stock.

At June 30, 2015 and 2014, the Company had 4,000,000 undesignated authorized preferred shares of which there are no shares issued or outstanding. The designation of these shares has yet to be determined by the Board of Directors.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Operating Lease

Through June 30, 2015, the Company leased its office and warehouse space in Torrance, California under a non-cancelable operating lease that expired on June 30, 2015. The minimum lease payment was $4,289 per month. The Company did not renew the lease and is currently utilizing office space in the residence of our Interim CEO and CFO at no cost. The Company does not plan to seek new office space until we pursue a viable business opportunity and recognize income.

Rent expense, which is classified in selling, general and administrative expenses, was $51,468 for the years ended June 30, 2015 and 2014.

Legal Matters

The Company is, from time to time, involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary course of business. Reserves are established for specific liabilities in connection with legal actions when they can be deemed probable and estimable. These matters are not expected to have a material adverse effect upon the Company’s financial condition.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 8 - INCOME TAXES

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

Total income taxes differ from expected income taxes (computed by applying the U.S. federal corporate tax rate of 34%) for the years ended June 30, 2015 and 2014 as follows:

The Company’s effective tax rate differs from the statutory rate primarily as a result of the full valuation allowance on the Company’s deferred taxes as of June 30, 2015 and 2014.

The Company’s net deferred taxes include the following significant components as of June 30, 2015 and 2014:

The Company’s deferred tax assets and liabilities represent the tax effects of taxable temporary differences between book and tax reporting. The temporary differences arise from unused net operating loss carryforwards. The Company recorded a full valuation allowance against its net deferred tax assets at June 30, 2015 and 2014. Based upon management’s assessment of all available evidence, the Company has concluded that it is more likely than not that the net deferred tax assets will not be realized.

As of June 30, 2015, the Company has U.S. federal and state income tax net operating loss carryforwards of approximately $2.4 million that may be applied against future taxable income and that begin to expire in the year 2033.

The Company files tax returns in the United States and California. Management has evaluated its tax positions and believes that there are no adjustments or disclosures of possible additional tax liabilities for the year ended June 30, 2015. The amount that may ultimately have to be recognized, in the event that the Company’s tax returns are examined by a taxing authority, may differ from management’s estimate.

At June 30, 2015, the Company has no material unrecognized tax positions. For the years ended June 30, 2015 and 2014, the Company did not recognize any interest or penalties for uncertain tax positions. There are also no accrued interest and penalties at June 30, 2015 and 2014. The Company is currently not under examination by the United States Internal Revenue service or any other state, city or local jurisdiction. As such, the Company is subject to the standard statutes of limitations by the relevant tax authorities for federal and state purposes. The Company’s federal and state income tax returns are subject to examination by taxing authorities for the years 2010 through 2015.

SMACK SPORTSWEAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

NOTE 9 - SUBSEQUENT EVENTS

On July 27, 2015, the Company entered into an Asset Purchase agreement with William Sigler, a former officer and a director of the Company. Under the agreement, the Company completed the disposition of certain assets of the Company to Mr. Sigler. The purchase price of the assets sold to Mr. Sigler was $132,900, which was paid by the cancellation of indebtedness owed by the Company to Mr. Sigler. The Company and Mr. Sigler also executed and delivered mutual release agreements that released each party from any and all claims, liabilities and indebtedness owed to the other. As of that date, Mr. Sigler also resigned as a director of the Company. As a result of Mr. Sigler resigning as a director of the Company, Mr. Doug Samuelson is the sole officer and director of the Company.

In connection with such divestiture, Mr. Sigler also agreed to sell all his shares of common stock in the Company (6,824,336 shares, or approximately 31%) for an aggregate purchase price of $90,000. These sales will be made in four equal tranches, payable by an unidentified buyer in cash on or prior to August 30, 2015, October 1, 2015, January 2, 2016 and April 1, 2016. If a buyer is not identified and/or the sale is not consummated by any of said dates, Mr. Sigler has no further obligation to sell his shares. Mr. Sigler agreed not to sell, dispose of or transfer his shares in the Company other as provided above.

In August and September 2015, the Company entered into settlement and release agreements with certain of its vendors. Under the agreements, the vendors agreed to accept reduced payment amounts from the total amount the Company owed them. The Company also entered into a settlement and release agreement with an individual the Company had a loan payable to (see Note 3). The total amount of forgiveness of accounts payable was $69,220 and $15,607 for the forgiveness of the loan payable. The aggregate amount of the forgiveness was $84,827 and is included in Other Income and Expense on the consolidated Statement of Operations as of June 30, 2015 as the Company believes the settlements represented the fair value of the liabilities as of that date. The Company has also offered other of its vendors to enter into settlement agreements, but they currently have not signed an agreement.

In August 2015, the Company entered into a Promissory Note agreement with an individual in which the Company can borrow up to $47,650. In August, the Company borrowed $47,500 under the agreement. The Note accrues interest at 10% per annum and is due on August 12, 2016. All unpaid principal and interest is due as of that date.

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

The Company has had no disagreements with its certified public accountants with respect to accounting practices or procedures or financial disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Interim Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management, with the participation of the Interim Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Interim Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the “material weaknesses” described below under “Management's Report on Internal Control over Financial Reporting,” which are in the process of being remediated as described below under “Management Plan to Remediate Material Weaknesses.”

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2015. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of June 30, 2015.

A “material weakness” is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this annual report on Form 10-K, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:

1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and

2) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the year ended June 30, 2015. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B – OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors

As of October 13, 2015, we have one director. The name, age and appointment details are as follows:

Executive Officers

As of October 13, 2015, we have one Executive Officer. His name, age and appointment details are as follows:

Business Experience

The following is a brief account of the education and business experience for at least the past five years of our director and our executive officer, indicating his business experience, principal occupation during the period, and the name and principal business of the organization by which they were employed.

Doug Samuelson, Interim Chief Executive Officer and Chief Financial Officer

Doug Samuelson has his CPA license in California and has over 10 years of experience working for public accounting firms and over 10 years of experience as a CFO, Director and Controller of both private and publicly traded companies. Most recently, Doug was the CFO for two years at Medacta USA, an orthopedic distributor located in Camarillo, California. Before that, he had his own consulting practice, working as a contract CFO and assisting public companies with their Sarbanes-Oxley (SOX) compliance. From 2005 to 2010, he worked for JH Cohn LLP in their audit and consulting groups in Woodland Hills, California, primarily working with publicly traded companies with their SOX compliance, but also providing technical accounting and financial reporting guidance to those companies. He also managed audits for privately held companies. From 2002 to 2005, he worked for the RAND Corporation in Los Angeles, California, as a Director of Accounting. From 1998 to 2002, he worked for Spirent Communications as their Director of Accounting in Calabasas, California. From 1992 to 1998, he worked for Arthur Andersen LLP in their audit practice in Los Angeles, California.

Doug has his Bachelor of Science degree in Accounting from the University of Utah and his Master of Science degree in Computer Science from the California State University, Northridge.

Involvement in Certain Legal Proceedings

Our director and executive officer and control persons have not been involved in any of the following events during the past five years:

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table summarizes the compensation of our executive officers, directors and President during the fiscal years ended June 30, 2015 and 2014. No other officers or directors received annual compensation in excess of $100,000 during the fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following tables set forth certain information concerning the number of shares of our common stock known by us to be owned beneficially as of October 13, 2015: (i) each person (including any group) that owns more than 5% of any class of the voting securities of our company; (ii) each director and officer of our company; and (iii) directors and officers as a group. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares shown.

Security ownership of Management

⁽¹⁾ Based upon 22,117,776 issued and outstanding shares of common stock as of October 13, 2015.

⁽²⁾ William Sigler holds 5,118,252 shares of common stock.

⁽³⁾ Doug Samuelson is due 291,666 shares as of June 30, 2015 per his Employment Agreement (not yet issued). Mr. Samuelson is currently the Company’s only Officer and Director.

⁽⁴⁾ Chris Jenks is due 833,333 shares from his $50,000 investment in October 2014. He also had purchased 133,334 shares prior to June 30, 2014. During the year ended June 30, 2015, he is due 133,333 shares per his employment agreement (not yet issued).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

During our last fiscal year and except as disclosed below, none of the following persons has had any direct or indirect material interest in any transaction worth more than $120,000 to which our company was or is a party, or in any proposed transaction to which our company proposes to be a party:

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The following table sets forth the fees billed to the Company for professional services rendered by the Company's independent registered public accounting firm, for the years ended June 30, 2014 and June 30, 2013:

Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements and reviews of our interim consolidated financial statements included in quarterly reports.

Tax Fees. Weinberg & Company, CPAs did not provide us with professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

Item. 15. EXHIBITS

* Filed herewith.

** This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

*** Furnished herewith.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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