10-Q 1 smrn10q160331.htm SMARTAG INTERNATIONAL, INC. FORM 10-Q MARCH 31, 2016

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended March 31, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000- 53792

Smartag International, Inc.

(Exact name of registrant issuer as specified in its charter)

Nevada		81-0554149
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3651 Lindell Road Ste D269 Las Vegas, NV 89103
(Address of principal executive offices, including zip code)

Registrant’s phone number, including area code (702) 589-2179

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [x] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).

YES [x] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [ ] Smaller reporting company [x]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

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

Class		Outstanding at May 16, 2016
Common Stock, $.001 par value		31,637,151

INDEX

		Page No.
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	Consolidated condensed Balance Sheets as of March 31, 2016 (unaudited) and September 30, 2015	3
	Consolidated condensed Statements of Operations for the Three and Six Months Ended March 31, 2016 and 2015 (unaudited)	4
	Consolidated condensed Statements of Cash Flows for the Six Months Ended March 31, 2016 and 2015 (unaudited)	5
	Notes to Consolidated condensed Financial Statements (unaudited)	6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4T.	CONTROLS AND PROCEDURES	15
PART II	OTHER INFORMATION	17
ITEM 1	LEGAL PROCEEDINGS	17

ITEM 1A	RISK FACTORS	17

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	17

ITEM 4	(REMOVED AND RESERVED)	17

ITEM 5	OTHER INFORMATION	17

ITEM 6	EXHIBITS	17

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PART I - FINANCIAL INFORMATION

ITEM I — FINANCIAL STATEMENTS

SMARTAG INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

	March 31, 2016			September 30, 2015
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash	$	28,647		$	82,376
Due from EBC		245,065			—
Due from related party		50,000			—
Assets of discontinued operations		—			260,975
Total Current Assets		323,712			343,351

TOTAL ASSETS	$	323,712		$	343,351

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities
Accounts payable and accrued liabilities	$	2,778		$	3,607
Other payable, related party		927,939			810,000
Note payable, related party		150,000			200,000
Secured revolving note payable, related party		192,457			192,457
Current liabilities of discontinued operations		—			187,201
Total Current Liabilities		1,273,174			1,393,265

TOTAL LIABILITIES		1,273,174			1,393,265

STOCKHOLDERS' DEFICIT:
Preferred stock, 25,000,000 shares authorized, no shares issued and outstanding, no rights or privileges designated		—			—
Common Stock, $.001 par value, 500,000,000 shares authorized, 31,637,151 shares issued and outstanding, respectively.		31,637			31,637
Additional Paid-In-Capital		1,903,072			1,713,361
Accumulated Deficit		(2,884,171	)		(2,772,190	)
Total Smartag International, Inc. Stockholders’ Deficit		(949,462	)		(1,027,192	)
Non-controlling interest of discontinued operations		—			(22,722	)
Total Stockholders’ Deficit		(949,462	)		(1,049,914	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	323,712		$	343,351

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

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SMARTAG INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
REVENUES	$	—		$	13,857		$	—		$	13,857
REVENUES - RELATED PARTY		3,500			—			3,500			—
COST OF SALES		—			—			—			—
GROSS PROFIT		3,500			13,857			3,500			13,857
OPERATING EXPENSES:
General and administrative expenses		32,078			87,405			42,403			110,532
LOSS FROM OPERATIONS		(28,578	)		(73,548	)		(38,903	)		(96,675	)
Loss from discontinued operations		(28,854	)		—			(73,078	)		—

NET LOSS	$	(57,432	)	$	(73,548	)	$	(111,981	)	$	(96,675	)
NET LOSS PER SHARE OF COMMON STOCK — Basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
WEIGHTED AVERAGE SHARES OUTSTANDING — Basic and diluted		31,637,151			10,637,151			31,637,151			10,637,151

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

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SMARTAG INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(111,981	)	$	(96,675	)

Changes in operating assets and liabilities:
Other receivable		—			(96,500	)
Accounts receivable		—			(13,858	)
Inventory		(9,835	)		(34,800	)
Accounts payable		434			2,750
Other payable - related party		92,939			730,000
Net cash from provided by (used) in operating activities		(28,443	)		490,917

Cash flows from investing activities:
Long term investment		—			(253,237	)
Disposition of EBC		(286	)		—
Net cash used in investing activities		(286	)		(253,237	)

Cash flows from financing activities:
Advances – related party		25,000			—
Repayment of note payable		(50,000	)		(100,000	)
Net cash provided by (used in) investing activities		(25,000	)		(100,000	)

Net increase (decrease) in cash		(53,729	)		137,680

Cash - beginning balance		82,376			72,388

Cash - ending balance	$	28,647		$	210,068

Supplemental disclosure of cash flows information:
Interest paid	$	—		$	—
Income taxes paid	$	—		$	—

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

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SMARTAG INTERNATIONAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2016

(UNAUDITED)

NOTE 1 – ORGANIZATION

Current Operations and Background

Smartag International, Inc., a Nevada corporation (“Smartag,” “Company,” “we,” “us,” or “our”), was formed as Theca Corporation on March 24, 1999 in Colorado. The Company is in the development stage as defined in Financial Accounting Standards Board Statement No. 7. On November 29, 2004, we merged with Art4Love, Inc., a Delaware corporation, into Art4Love, Inc. a Nevada corporation. On February 109, 2009, Art4Love changed its name to Smartag International, Inc.

Since 2013, Smartag has been actively involved in traceability for manufacturing plants and in the food and beverage industry. Smartag realized a key potential growth area – healthy beverage products which it can source the raw materials which are of low calories but at the same time healthy and natural. The US market was overwhelmed with sodas, flavored water and energy drinks, but in recent years, the demand has been changing towards a healthier alternative.

In July 2015, Smartag entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Essential Beverage Corporation (“EBC”), a Nevada corporation, pursuant to which the Company purchased a 51% interest in EBC for a total consideration of $399,709 and one million shares of the Company’s restricted common stock valued at $23,000. On March 31, 2016, the Company disposed of its interest in EBC to Lock Sen Yow, the Company’s chairman and director, for $50,000.

In November 2015, Smartag signed an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in e-commerce trading on e-Bay, Amazon and Alipay platforms. Using the expertise of SSNST, Smartag will develop the business of e-Commerce trading, procurement, collection and distribution through a new joint venture company in Hong Kong called HongKong Vander Trade Limited (“Vander”) . On January 1, 2016, the Company entered into a revenue sharing agreement with Vander. The Company charged 5% commission on all sales and services generated by Vander’s Ecommerce platform. Mr. Ki and Mr. Cai has significant ownership in Vander. On January 29, 2016, Mr. Ki and Mr. Cai purchased 10,000,000 common shares directly from Smartag Solutions Bhd, the former parent company of Smartag. Therefore, the commission is classified as related party revenue in statement of operations. Management has concluded that these entities should not be consolidated under ASC 810 Consolidations because the Company is not the primary beneficiary of Vander and SSNST.

NOTE 2 – Basis of Presentation and Significant of Accounting Policies

Basis of Presentation and Principles of Consolidation — The unaudited consolidated condensed interim financial statements have been prepared have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Smartag International, Inc. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and notes for the year ended September 30, 2015 included in our Annual Report on Form 10-K. The results of the three and six month periods ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year ending September 30, 2016. All significant intercompany transactions and balances were eliminated in consolidation.

Going Concern - The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the company as a going concern. However, we have an accumulated deficit of $2,884,171 as of March 31, 2016. Our total liabilities exceeded its total assets as of March 31, 2016. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon our continued operations, which in turn is dependent upon our ability to raise additional capital, and obtain financing. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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Use of Estimates — The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents — The Company considers investments with original maturities of 90 days or less to be cash equivalents.

Accounts Receivable - Accounts receivable are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Company has no allowance for doubtful accounts as of March 31, 2016 and September 30, 2015.

Inventory - Inventory is valued at the lower of cost or market. Cost is determined using standard costs, which approximates the first-in, first-out method.

Revenue Recognition - The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery of product has met the criteria established in the arrangement or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. This occurs when the products or services are completed in accordance with the contracts we have with clients. In connection with our products and services arrangements, when we are paid in advance, these amounts are classified as deferred revenue and amortized over the term of the agreement.

Income Taxes — The Company records income taxes in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” The standard requires, among other provisions, an asset and liability approach to recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Goodwill— The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.

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Stock-Based Compensation — The Company records transactions under share based payment arrangements in accordance with the provisions of the FASB ASC Topic 718, “Share Based Payment Arrangements”. The standard requires recognition of the cost of employee services received in exchange for an award of equity instruments in the consolidated financial statements over the period the employee is required to perform the services in exchange for the award. The standard also requires measurement of the cost of employee services received in exchange for an award. The Company is using the modified prospective method allowed under this standard. Accordingly, upon adoption, prior period amounts have not been restated. Under this application, the Company recorded the cumulative effect of compensation expense for the unvested portion of previously granted awards that remain outstanding at the date of adoption and recorded compensation expense for all awards granted after the date of adoption.

The standard provides that income tax effects of share-based payments are recognized in the consolidated financial statements for those awards that will normally result in tax deduction under existing law. Under current U.S. federal tax law, the Company would receive a compensation expense deduction related to non-qualified stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation cost for non-qualified stock options creates a deductible temporary difference which results in a deferred tax asset and a corresponding deferred tax benefit in the income statement. The Company does not recognize a tax benefit for compensation expense related to incentive stock options unless the underlying shares are disposed in a disqualifying disposition.

Net Loss Per Share — The Company computes net loss per share in accordance with FASB ASC Topic 260, “Earnings per Share,” Under the provisions of the standard, basic and diluted net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Common equivalent shares related to stock options and warrants have been excluded from the computation of basic and diluted earnings per share because their effect is anti-dilutive.

Concentration of Credit Risk — Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company maintains its cash with high credit quality financial institutions; at times, such balances with any one financial institution may exceed FDIC insured limits.

Financial Instruments — Our financial instruments consist of cash, accounts payable, and notes payable. The carrying values of cash, accounts payable, and notes payable are representative of their fair values due to their short-term maturities.

Marketable Securities— The Company classifies its marketable equity securities as available-for-sale and carries them at fair market value, with the unrealized gains and losses included in the determination of comprehensive income and reported in stockholders’ equity. Losses that the Company believes are other-than-temporary are realized in the period that the determination is made. As of March 31, 2016 and September 30, 2015, the Company had $25,000 in unrealized losses. None of the investments have been hedged in any manner.

Recently Issued Accounting Pronouncements

The Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and they did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

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NOTE 3 – Discontinued Operations and Business Combinations

During the year ended September 30, 2015, the Company advanced Legendary Liquids LLC, a related party and predecessor of EBC, $96,500 which is being classified as other receivable. The amount due is unsecured and interest free. The purpose of the investment was to partner with beverage company to provide product tracking. During the quarter ended March 31, 2015, the Company entered into a partnership agreement with Essentials Beverage Company (“Essentials”) whereby the Company agreed to contribute Essentials operational funds in exchange for 65% of the revenues generated by Essentials. As of June 30, 2015, the Company had funded Essentials $253,237 and had accounts receivables owed from Essentials amounted to $49,972.

On July 5, 2015, the Company entered into a Purchase Agreement with EBC, pursuant to which the Company purchased a 51% interest in EBC for a total previous consideration due from EBC of $399,709 and one million shares of the Company’s restricted common stock valued at $23,000. At the time of the transaction, the Company deemed the previous consideration of $360,975 as not collectible. The Company recorded goodwill associated with the transaction of $260,975.

The Company has estimated that the fair value of the assets at the date of the purchase in accordance with Accounting Standards Codification 805, “Business Combinations”, as follows:

Assets	$	4,958
Intangible assets		—
Goodwill		260,975
fair value of liabilities assumed		(266,835	)
Non-controlling interest		(22,098	)
Purchase price	$	23,000

Due to the continued cash needs of EBC, the Company sold its 51% controlling interest to Lock Sen Yow, the Company’s chairman and director, a related party for $50,000. Based on the requirements of ASC 810 Consolidation, the Company will no longer present assets and liabilities retained as of the date of deconsolidation. To accomplish this, the results of EBC’s operations are reported in discontinued operations in accordance with ASC 205 Presentation of Financial Statements. The gain on disposal of EBC’s interest of $153,903 is treated as a capital transaction in statement of stockholders’ equity as it was a related party transaction.

Summarized operating results for the discontinuation of operations is as follows:

Fair value of consideration	$	50,000
Carrying value of non-controlling interest		(58,530	)
		(8,530	)
Less: carrying value of former subsidiary's net assets		(162,433	)
Gain on disposal of EBC's interest	$	153,903
Loss from discontinued operation from October 1, 2015 to March 31, 2016	$	(73,078	)

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The Company analyzed the carrying value of EBC’s net assets on the deconsolidation date, determined amount is $(423,409) including the following,

Cash	$	286
Inventory		9,834
Goodwill		260,975
Accounts payable and accrued liabilities		(48,631	)
Accrued liability		(105,000	)
Accrued liability – related party		(34,833	)
Due to Smartag		(245,065	)
Carrying value of former subsidiary's net assets	$	(162,434	)

The Company anticipates that it will have no involvement with the management of EBC and that EBC will not be a related party going forward after the deconsolidation. The Company expects the $245,065 to be paid back and recorded it as a receivable as of March 31, 2016.

Major line items constituting net loss of the discontinued operations of EBC are as follows for the periods from October 1, 2015 through March 31, 2016 (deconsolidation):

Revenues	$	23,606
Cost of sales		10,027
Gross profit		13,579
Selling , general and administrative expenses		86,657
Loss from discontinued operation from October 1, 2015 to March 31, 2016	$	(73,078	)

NOTE 4 – Other Payable - Related Party

During the year ended September 30, 2015, the Company received $810,000 advances from related parties which the terms were still being negotiated and currently were recorded under other payable. $730,000 was from a related entity to a former director and $80,000 was received from Chee Song Yap. The two parties entered into 0% interest notes which are to be repaid by September 30, 2016.

During the six months ended March 31, 2016, the Company received $92,939 advances from SSNST, a related party, which was a temporary advance and expected to be repaid as soon as practical. Additionally, the Company received $25,000 from Lock Sen Yow.

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NOTE 5 – Note Payable – Related Party

Secured Note

On March 17, 2009, we entered into a Secured Revolving Promissory Note (the “Secured Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority stockholder of the Company. Under the terms of the Note, Smartag Solutions Bhd, agreed to advance to the Company, from time to time and at the request of the Company, amounts up to an aggregate of $200,000 until September 30, 2014. All advances shall be paid on or before September 30, 2016 and this advance has an interest rate of 0% per annum. As of March 31, 2016, Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness of Smartag and is secured by substantially all of the assets of Smartag. The Secured Note shall be repaid on or before September 30, 2016.

Loan Agreement

NOTE 6 – Stockholder’s Deficit

As of September 30, 2015, there were authorized 500,000,000 shares of common stock, par value $0.001 per share and 25,000,000 shares of preferred stock, par value $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought.

On July 5, 2015, the Company authorized the issuance of 1,000,000 shares to EBC in partial consideration of 51% of EBC. The Company placed a value of $23,000 for these shares. The Company is discussing with EBC shareholders on how to disperse these shares. These shares have not yet been issued.

On August 19, 2015, the Company issued 13,500,000 shares of restricted common stock to its director, Chee Song Yap, and recorded stock compensation expense of $310,500. Additionally, on August 19, 2015, the Company issued 7,500,000 shares of restricted common stock to unrelated parties for services and recorded stock compensation expense of $172,500.

There are currently 31,637,151 shares of common stock issued and outstanding and zero shares of preferred stock issued and outstanding.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, 2015 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30, 2015 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

Overview

Smartag International, Inc. specializes in traceability and mobile payments. We provide food traceability, RFID solutions, near field communications, track and trace services and micro payment services.

Amongst the list of accomplishments of the Smartag Group of companies include:

Smartag provides innovative solutions and services to various industries in the private and government sectors through Internet and Mobility applications technologies to deliver our products and services to homes and businesses. It has mainly concentrated in recent years to be a front-runner in offering cross-border traceability solutions and in the process has ventured into the distribution of beverage business in the United States as well as e-Commerce on eBay, Amazon and Alibaba platforms.
Fully developed Smartrack™ EPCIS (Electronic Product Code Information Services), which culminated in the company receiving the ‘Best of e-Logistics Merit Award’ for Smartrack™ at the MSC Malaysia APICTA Awards 2010, and Merit Winner under the category of e-Logistics and Supply Chain Management at the Asia Pacific ICT Alliance Awards 2010. Smartrack™ is also the first in Asia Pacific, and the second in the world to pass all nine (9) conformance test branches conducted by MET Laboratories Inc. on behalf of GS1 International whereupon Smartrack™ was subsequently awarded with the EPC Global Software Certification Mark. This allows us to link up multiple supply chain logistics company systems together safely into one traceability system using RFID and Bar Codes.

Developed comprehensive Food Traceability solution from Farm to table, using GPS, Internet and mobility technologies. The solution is suitable for products like Palm Oil, Frozen meat, high value herbs and health care products.

Since 2013, Smartag has been actively involved in traceability for the food and beverage industry. Smartag realized a key potential growth area – healthy beverage products which it can source the raw materials which are of low calories but at the same time healthy and natural. The US market was overwhelmed with sodas, flavored water and energy drinks, but in recent years, the demand has been changing towards a healthier alternative.

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In November 2015, Smartag signed an agreement with Bobby Tang Siu Ki and Yang Ye Cai, the co-owners and founders of Shenzhen Shen Nan Shun Technology Co. Ltd (“SSNST”), a company based in Shenzhen, China which is involved in e-commerce trading on e-Bay, Amazon and Alipay platforms. SSNST has been in the business of e-Commerce for the past 5 years and have consistently been one of the top suppliers of a range of products including electronic items and toys on eBay and Amazon. As a result of this agreement, Smartag will be able to use its inherent technology and logistics presence in the United States to offer additional products such as LED lighting, outdoor sports equipment, beauty products and cosmetics, vehicles accessories and bicycles on the well establisgehd e-Commerce platforms. The agreement with HongKong Vander Trade Limited, also controlled by Bobby Tang Siu Ki and Yang Ye Cai, shall enable Smartag to enter into the e-Commerce business which eventually shall combine the usage of its own track & trace solutions to increase efficiency of the supply chain for online purchases whilst at the same time enable SSNST to further increase its range of products .

Results of Operations

Comparison of the three months ended March 31, 2016 and 2015

Revenues

For the three months ended March 31, 2016 and 2015, the Company recorded revenue of $3,500 and $13,857 of respectively. The decrease was due to our disposal of our beverage business.

Cost of Sales

Cost of sales was $0 for the three months ended March 31, 2016 and 2015, respectively. The lack of cost of sales was due performance being handled by a third party.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $32,078 and $87,405 for the three months ended March 31, 2016 and 2015, respectively. The decrease of $55,327 was due primarily to the reduction of professional fees and travel.

Loss from Discontinued Operations

Loss from discontinued operations related to EBC were $28,854 and $0 for the three months ended March 31, 2016 and 2015, respectively.

Comparison of the six months ended March 31, 2016 and 2015

Revenues

For the six months ended March 31, 2016 and 2015, the Company recorded revenue of $3,500 and $13,857 of respectively. The decrease was due to the disposal of our beverage business.

Cost of Sales

Cost of sales was $0 for the six months ended March 31, 2016 and 2015, respectively. The lack of cost of sales was due to performance being handled by a third party.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $42,403 and $110,532 for the six months ended March 31, 2016 and 2015, respectively. The decrease of $68,128 was due primarily to the payment of professional fees and travel.

Loss from Discontinued Operations

Loss from discontinued operations related to EBC were $73,078 and $0 for the six months ended March 31, 2016 and 2015, respectively.

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Liquidity and Capital Resources

The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the three months ended March 31, 2016 and 2015:

	Six Months Ended December 31,
	2016			2015
Operating Activities	$	(28,443	)	$	490,917
Investing Activities		(286	)		(257,237	)
Financing Activities		(25,000	)		(100,000	)
Net Effect on Cash	$	(53,729	)	$	137,680

In the six months ending March 31, 2016, the Company incurred a net loss of $111,981, an increase in accrued liabilities of $92,939, increase in inventory of $9,835 and a decrease in accounts payable of $434. In the six months ending March 31, 2015, the Company incurred a net loss of $96,675, an increase in inventory of $34,800, accounts receivable of $13,858 and an increase of other receivable amounting $96,500. This was offset by an increase in accounts related party payable of $2,750 and other payable of $730,000.

In the six months ending March 31, 2016, the Company repaid $50,000 of its note payable to Smartag Solutions Bhd.,a related party, and received advances of $117,939 from SSNT and Lock Sen Yow, related parties.

Going Concern Uncertainties

We have sufficient working capital currently and may secure additional working capital through loans or sales of common stock. Nevertheless our auditor has issued a "going concern" qualification as part of his opinion in the Audit Report for the year ended September 30, 2015, and our unaudited financial statements for the quarter ended March 31, 2016 include a "going concern" footnote contingent on us to be able to raise working capital to grow our operations.

Commitments and Contractual Obligations

On March 17, 2009, we entered into a Revolving Promissory Note (the “Secured Note”) with Smartag Solutions Bhd, a Malaysian corporation, the majority stockholder of the Company. Under the terms of the Note, Smartag Solutions Bhd., agreed to advance to the Company, from time to time and at the request of the Company, amounts up to an aggregate of $200,000 until September 30, 2015. All advances shall be paid on or before September 30, 2016 and interest shall accrue from the date of any advances on any principal amount withdrawn, and on accrued and unpaid interest thereon, at the rate of zero percent (0%) per annum, compounded annually. As of March 31, 2016, Smartag Solutions Bhd advanced us $192,457. The Secured Note ranks senior to all current and future indebtedness of Smartag and is secured by substantially all of the assets of Smartag.

On September 19, 2013, we entered into a Loan Agreement (“Loan Agreement”) with SSB. Under the terms of the agreement, SSB loaned the Company $200,000 (“Loan”). On May 16, 2014, the SSB increased the Loan to $300,000. The Loan shall be repaid on or before September 30, 2016 and this loan has an interest rate of 0% interest per annum. , but however subject to SSB fulfilling the condition to transfer the traceability technology to complete the North American operations including the Electronic Product Code Information System (EPCIS). The Company repaid $50,000 of the Loan in the three months ended March 31, 2016 but further repayment shall be on condition towards completion of the technology traceability transfer and the EPCIS.

During the six months ended March 31, 2016, the Company received $117,939 advances from SSNT and Lock Sen Yow, related parties, which was a temporary advance and expected to be repaid as soon as practical.

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Off-Balance Sheet Arrangements

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

Recently Issued Accounting Pronouncements

Refer to the notes to the financial statements for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.

Critical Accounting Policies

Our financial statements were prepared in conformity with U.S. generally accepted accounting principles. As such, management is required to make certain estimates, judgments and assumptions that they believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the periods presented. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition -

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery of product has met the criteria established in the arrangement or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. This occurs when the products or services are completed in accordance with the contracts we have with clients. In connection with our products and services arrangements, when we are paid in advance, these amounts are classified as deferred revenue and amortized over the term of the agreement.

Item 3 Quantitative and Qualitative Disclosures About Market Risk.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item

Item 4 Controls and Procedures.

Evaluation of Disclosure Controls and Procedures: We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures", as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2016, that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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Management's Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The internal controls for the Company are provided by executive management's review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

Based on this assessment, management has concluded that as of March 31, 2016, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting: There were no changes in our internal control over financial reporting during the quarter ending March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

To the best knowledge of our sole officer and director, the Company is not a party to any legal proceeding or litigation.

Item 1A. Risk Factors.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. See the Company's Annual Report on Form 10-K for the period ending September 30, 2015 which identifies and discloses certain risks and uncertainties including, without limitation, those "Risk Factors" included in Item 1A of the Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 5. Other Information.

None.

ITEM 6.	Exhibits
	31	Certification of President pursuant to Exchange Act Rule 13a-14 and 15d-14.

	32	Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

SMARTAG INTERNATIONAL, INC.

Date: May 16, 2016

/ s/ Lock Sen Yow

Lock Sen Yow

Title: Chief Executive Officer, President and Chief Financial Officer

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