UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





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





For the
quarterly period ended June 30,
2009








Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12 b - 2 of the Exchange Act) Yes 
   No 








Commission
File Number: 0-26573





SMARTPAY
EXPRESS, INC.


(Exact
name of Registrant as specified in its charter)








Nevada
                
                20-1204606(State
      or other jurisdiction of incorporation or organization)
                
                (IRS
      Employer Identification
No.)








5th
Floor, Chigo Sales Center


Fenggang
Road, Lishui Town, Nanhai


Guangdong
Province, The People's Republic of China


(Address
of principal executive offices)








(011)
(852) 6873-0043


(Registrant's
telephone number)





Check
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act during the past 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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act:





Large
Accelerated Filer   
   Accelerated Filer    
   Non-accelerated Filer    
   Smaller Reporting Company    




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):      Yes 
   No  





State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date: 1,292,166 shares outstanding as of June 30,
2009.







SMARTPAY
EXPRESS, INC.





Form
10-Q for the period ended June 30, 2009





TABLE
OF CONENTS





PART I - FINANCIAL INFORMATIONITEM
      1 - FINANCIAL STATEMENTSUnaudited
      Condensed Consolidated Statements of Operations for the three-month and
      six-month periods ended June 30, 2009 and 2008
              3Unaudited
      Condensed Consolidated Balance Sheet as of June 30, 2009 and
      Audited Condensed Consolidated Balance Sheet as of December 31,
      2008
              4Unaudited
      Condensed Consolidated Statements of Cash Flows for the six-month periods
      ended June 30, 2009 and 2008
              5Notes
      to the Unaudited Condensed Consolidated Financial
    Statements
              6 -
      10ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
              11-16ITEM
      3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              16ITEM
      4 (A) - CONTROLS AND PROCEDURES
              16ITEM
      4 (A)T – INTERNAL CONTROL OVER FINANCIAL REPORTING
              16PART II - OTHER INFORMATIONITEM
      1 - LEGAL PROCEEDINGS
              17ITEM
      2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
              17ITEM
      3 - DEFAULTS UPON SENIOR SECURITIES
              17ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              17ITEM
      5 - OTHER INFORMATION
              17ITEM
      6 - EXHIBITS AND REPORTS ON FORM 8-K
              17SIGNATURES
              18











2


SMARTPAY EXPRESS, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS




Three
      months ended
                            June
      30,
                          
                          
                          Six
      months ended
                            June
      30,2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008Note
                          
                          
                          US$
                          
                          
                          US$
                          
                          
                          US$
                          
                          
                          US$Continuing
      operationsOperating
      revenueService
      income
                          
                          
                          
                          
                          
                          126,510
                          
                          
                          
                          235,469
                          
                          
                          
                          226,784
                          
                          
                          
                          348,720Sales
      of mobile phones
                          
                          
                          
                          
                          
                          929,785
                          
                          
                          
                          -
                          
                          
                          
                          929,785
                          
                          
                          
                          -Operating
      expensesSubcontracting
      and other charges
                          
                          
                          
                          
                          
                          (33,782
                          )
                          
                          
                          (105,960
                          )
                          
                          
                          (83,783
                          )
                          
                          
                          (152,236
                          )Purchase
      of mobile phones
                          
                          
                          
                          
                          
                          (891,180
                          )
                          
                          
                          -
                          
                          
                          
                          (891,180
                          )
                          
                          
                          -Staff
      costs
                          
                          
                          
                          
                          
                          (86,009
                          )
                          
                          
                          (55,883
                          )
                          
                          
                          (152,378
                          )
                          
                          
                          (123,579
                          )Depreciation
      of property, plant and equipment
                          
                          
                          
                          
                          
                          (3,522
                          )
                          
                          
                          (2,875
                          )
                          
                          
                          (7,020
                          )
                          
                          
                          (5,711
                          )Amortization
      of intangible assets
                          
                          
                          
                          
                          
                          (51,358
                          )
                          
                          
                          (47,841
                          )
                          
                          
                          (102,717
                          )
                          
                          
                          (95,682
                          )Other
      general and administrative expenses
                          
                          
                          
                          
                          
                          (207,209
                          )
                          
                          
                          (187,900
                          )
                          
                          
                          (441,293
                          )
                          
                          
                          (298,348
                          )Loss
      from operations
                          
                          
                          
                          
                          
                          (216,765
                          )
                          
                          
                          (164,990
                          )
                          
                          
                          (521,802
                          )
                          
                          
                          (326,836
                          )Non-operating
      income (expenses)Interest
      income
                          
                          
                          
                          
                          
                          782
                          
                          
                          
                          -
                          
                          
                          
                          1,876
                          
                          
                          
                          766Subsidy
      income
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          27,671
                          
                          
                          
                          -
                          
                          
                          
                          27,671Other
      income
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          385
                          
                          
                          
                          -
                          
                          
                          
                          385Gain
      on disposal of partial interest in a subsidiary
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          259,837Amortization
      of loans from a related party
                          
                          
                          
                          
                          
                          (4,155
                          )
                          
                          
                          (13,119
                          )
                          
                          
                          (16,469
                          )
                          
                          
                          (45,332
                          )Loss
      on partial settlement of loans from a related party
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (24,717
                          )Interest
      expenses
                          
                          6(b)(iv)
                          
                          
                          
                          (16,740
                          )
                          
                          
                          -
                          
                          
                          
                          (16,740
                          )
                          
                          
                          -Compensation
      payment
                          
                          6(b)(iv)
                          
                          
                          
                          (18,118
                          )
                          
                          
                          -
                          
                          
                          
                          (18,118
                          )
                          
                          
                          -Loss
      on early termination of loans from a related party
                          
                          6(b)(iv)
                          
                          
                          
                          (25,974
                          )
                          
                          
                          -
                          
                          
                          
                          (25,974
                          )
                          
                          
                          -Loss
      before income tax
                          
                          
                          
                          
                          
                          (280,970
                          )
                          
                          
                          (150,053
                          )
                          
                          
                          (597,227
                          )
                          
                          
                          (108,226
                          )Income
      tax
                          
                          4
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Loss
      from continuing operations
                          
                          
                          
                          
                          
                          
                          (280,970
                          )
                          
                          
                          (150,053
                          )
                          
                          
                          (597,227
                          )
                          
                          
                          (108,226
                          )Discontinued
      operationsLoss
      from discontinued operations
                          
                          5(a)
                          
                          
                          
                          (5,170
                          )
                          
                          
                          (39,836
                          )
                          
                          
                          (46,086
                          )
                          
                          
                          (60,884
                          )Net
      loss including noncontrolling interests
                          
                          
                          
                          
                          
                          
                          (286,140
                          )
                          
                          
                          (189,889
                          )
                          
                          
                          (643,313
                          )
                          
                          
                          (169,110
                          )Less:
      net loss from continuing operations attributable to noncontrolling
      interests
                          
                          
                          
                          
                          
                          
                          13,674
                          
                          
                          
                          22,132
                          
                          
                          
                          29,902
                          
                          
                          
                          28,534Less:
      net loss from discontinued operations attributable to noncontrolling
      interests
                          
                          
                          
                          
                          
                          
                          2,533
                          
                          
                          
                          19,519
                          
                          
                          
                          22,582
                          
                          
                          
                          29,833Net
      loss attributable to SPYE common stockholders
                          
                          
                          
                          
                          
                          
                          (269,933
                          )
                          
                          
                          (148,238
                          )
                          
                          
                          (590,829
                          )
                          
                          
                          (110,743
                          )Other
      comprehensive income-
      Foreign currency translation
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          27,662
                          
                          
                          
                          15,669
                          
                          
                          
                          114,893Total
      comprehensive (loss) income
                          
                          
                          
                          
                          
                          
                          (269,933
                          )
                          
                          
                          (120,576
                          )
                          
                          
                          (575,160
                          )
                          
                          
                          4,150Basic
      loss per shareLoss
      per share from continuing operations
                          
                          
                          
                          
                          
                          (20.69)
      cents
                          
                          
                          (12.54)
      cents
                          
                          
                          (43.90)
      cents
                          
                          
                          (7.85)
      centsLoss
      per share from discontinued operations
                          
                          
                          
                          
                          
                          (0.20)
      cents
                          
                          
                          (1.99)
      cents
                          
                          
                          (1.82)
      cents
                          
                          
                          (3.06)
      cents(20.89)
      cents
                          
                          
                          (14.53)
      cents
                          
                          
                          (45.72)
      cents
                          
                          
                          (10.91)
      centsWeighted average number of
      shares of common stock outstanding(Note)
                          
                          
                          
                          
                          
                          
                          1,292,166
                          
                          
                          
                          1,020,000
                          
                          
                          
                          1,292,166
                          
                          
                          
                          1,015,275


Note :
            On
      October 16, 2008, the sole director and the holders of a majority of the
      common shares of SmartPay approved a one-for-fifty reverse stock split of
      common stock of SmartPay. The weighted average number of shares of common
      stock outstanding for the three-month and six-month periods ended June 30,
      2008 have been adjusted retrospectively for the effect of the reverse
      stock split for the purpose of calculation of loss per
    share.








The
financial statements should be read in conjunction with the accompanying
notes.







3




SMARTPAY EXPRESS, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




As
      ofJune
      30, 2009
                              
                              
                              December
      31, 2008ASSETS
                              
                              Note
                              
                              
                              US$
                              
                              
                              US$(Unaudited)Current
      assetsTrade
      receivables from third parties
                              
                              
                              
                              
                              
                              40,800
                              
                              
                              
                              27,261Trade
      receivable from a related party
                              
                              6(b)(i)
                              
                              
                              
                              32,718
                              
                              
                              
                              24,148Prepayments
      and deposits
                              
                              
                              
                              
                              
                              
                              204,144
                              
                              
                              
                              230,106Other
      debtors
                              
                              
                              
                              
                              
                              
                              115,614
                              
                              
                              
                              293,216Amounts
      due from related parties
                              
                              6(b)(ii)
                              
                              
                              
                              29,412
                              
                              
                              
                              94,204Income
      tax recoverable
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              3,774Inventories
                              
                              
                              
                              
                              
                              
                              47,399
                              
                              
                              
                              33,207Cash
      and cash equivalents
                              
                              
                              
                              
                              
                              
                              39,337
                              
                              
                              
                              245,685Bank
      deposits, collateralized
                              
                              
                              7
                              
                              
                              
                              132,353
                              
                              
                              
                              130,435Assets
      held for sale
                              
                              5(b)
                              
                              
                              
                              375,322
                              
                              
                              
                              -Total
      current assets
                              
                              
                              
                              
                              
                              
                              1,017,099
                              
                              
                              
                              1,082,036Property,
      plant and equipment, net
                              
                              
                              
                              
                              
                              
                              59,186
                              
                              
                              
                              87,732Intangible
      assets, net
                              
                              
                              
                              
                              
                              
                              1,425,368
                              
                              
                              
                              1,729,450Interest
      in an associate
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              18,751Total
      assets
                              
                              
                              
                              
                              
                              
                              2,501,653
                              
                              
                              
                              2,917,969LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesTrade
      payables
                              
                              
                              
                              
                              
                              
                              17,236
                              
                              
                              
                              40,718Accrued
      charges and other payables
                              
                              
                              
                              
                              
                              
                              769,627
                              
                              
                              
                              525,502Amounts
      due to related parties
                              
                              6(b)(iii)
                              
                              
                              
                              19,458
                              
                              
                              
                              19,177Temporary
      receipts
                              
                              
                              
                              
                              
                              
                              11,820
                              
                              
                              
                              94,345Loans
      from a related party
                              
                              6(b)(iv)
                              
                              
                              
                              707,353
                              
                              
                              
                              655,274Short-term
      bank loan
                              
                              7
                              
                              
                              
                              125,000
                              
                              
                              
                              123,188Interest
      payable to a related party
                              
                              6(b)(v)
                              
                              
                              
                              14,147
                              
                              
                              
                              -Current
      liabilities held for sale
                              
                              
                              5(b)
                              
                              
                              
                              656
                              
                              
                              
                              -Total
      current liabilities
                              
                              
                              
                              
                              
                              
                              1,665,297
                              
                              
                              
                              1,458,204Commitments
      and contingenciesStockholders'
      equityPreferred
      stock, par value US$0.001 per share; authorized 5,000,000 shares; none
      issued and outstanding as of June 30, 2009 and December 31,
      2008Common
      stock, par value US$0.001 per share; authorized 300,000,000 shares; issued
      and outstanding 1,292,166 shares as of June 30, 2009 and December 31,
      2008
                              
                              
                              
                              
                              
                              
                              1,292
                              
                              
                              
                              1,292Additional
      paid in capital
                              
                              
                              
                              
                              
                              
                              2,009,454
                              
                              
                              
                              2,009,454Dedicated
      reserve
                              
                              
                              
                              
                              
                              
                              319
                              
                              
                              
                              319Accumulated
      losses
                              
                              
                              
                              
                              
                              
                              (1,488,513
                              )
                              
                              
                              (897,684
                              )Accumulated
      other comprehensive income
                              
                              
                              
                              
                              
                              
                              74,053
                              
                              
                              
                              58,384Total
      SPYE stockholders’ equity
                              
                              
                              
                              
                              
                              
                              596,605
                              
                              
                              
                              1,171,765Noncontrolling
      interests
                              
                              
                              
                              
                              
                              
                              239,751
                              
                              
                              
                              288,000Total
      stockholders’ equity
                              
                              
                              
                              
                              
                              
                              836,356
                              
                              
                              
                              1,459,765Total
      liabilities and stockholders' equity
                              
                              
                              
                              
                              
                              
                              2,501,653
                              
                              
                              
                              2,917,969


The financial statements should be
read in conjunction with the accompanying notes.







4




SMARTPAY EXPRESS, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS







Six
      months ended
                  June
      30,2009
                
                
                2008US$
                
                
                US$Cash
      flows from operating activities:Net
      loss including noncontrolling interests
                
                
                (643,313
                )
                
                
                (169,110
                )Adjustments
      to reconcile net income to net cash used in operating
      activities:Depreciation of property, plant
      and equipment
                
                
                7,555
                
                
                
                6,274Amortization
      of intangible assets
                
                
                110,723
                
                
                
                110,598Interest
      income
                
                
                (1,901
                )
                
                
                (1,148
                )Interest
      expense
                
                
                34,858
                
                
                
                -Gain
      on disposal of partial interest in a subsidiary
                
                
                -
                
                
                
                (259,837
                )Amortization
      of loans from a related party
                
                
                16,469
                
                
                
                45,332Loss
      on partial settlement of loans from a related party
                
                
                -
                
                
                
                24,717Loss
      on early termination of loans from a related party
                
                
                25,974
                
                
                
                -Share of result of an
      associate
                
                
                13,465
                
                
                
                3,192Exchange
    difference
                
                
                -
                
                
                
                15,223Changes in working
      capital:Trade
    receivables
                
                
                (21,354
                )
                
                
                13,056Prepayments and
      deposits
                
                
                18,562
                
                
                
                128,332Other debtors
                
                
                178,257
                
                
                
                (105,063
                )Inventories
                
                
                (14,423
                )
                
                
                (30,217
                )Trade payables
                
                
                (24,081
                )
                
                
                6,101Accrued charges and other
      payables
                
                
                235,836
                
                
                
                (161,068
                )Temporary
    receipts
                
                
                (82,697
                )
                
                
                (123,523
                )Income tax
      recoverable/payable
                
                
                3,829
                
                
                
                (300
                )Net
      cash used in operating activities
                
                
                (142,241
                )
                
                
                (497,441
                )Cash
      flows from investing activities:Interest income
                
                
                1,901
                
                
                
                1,148Payments for purchase of
      property, plant and equipment
                
                
                (5,830
                )
                
                
                (8,553
                )Payments for purchase of
      intangible assets
                
                
                (29,411
                )
                
                
                -Net advances to related
      parties
                
                
                -
                
                
                
                (20,256
                )Prepayment for a long-term
      investment
                
                
                -
                
                
                
                (50,725
                )Net
      cash used in investing activities
                
                
                (33,340
                )
                
                
                (78,386
                )Cash
      flows from financing activities:Repayments to related
      parties
                
                
                (13,030
                )
                
                
                (41,238
                )Interest paid
                
                
                (20,711
                )
                
                
                -Settlement of loans from a
      related party
                
                
                -
                
                
                
                (240,868
                )Repayment of short-term bank
      loan
                
                
                (125,000
                )
                
                
                -New short-term bank loan
      raised
                
                
                125,000
                
                
                
                -Net
      cash used in financing activities
                
                
                (33,741
                )
                
                
                (282,106
                )Net
      decrease in cash and cash equivalents
                
                
                (209,322
                )
                
                
                (857,933
                )Cash
      and cash equivalents at beginning of period
                
                
                245,685
                
                
                
                1,373,085Effect
      on exchange rate changes
                
                
                3,576
                
                
                
                78,720Cash
      and cash equivalents at end of period,
                  represented by cash and bank
      balances
                
                
                39,939
                
                
                
                593,872Cash
      and cash equivalentsHeld
      for continuing operations
                
                
                39,337
                
                
                
                593,872Held
      for sale
                
                
                602
                
                
                
                -39,939
                
                
                
                593,872






The
financial statements should be read in conjunction with the accompanying
notes.




5


SMARTPAY
EXPRESS, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Period
from January 1, 2009 to June 30, 2009




The
accompanying financial statements present the financial position of the Company
as of June 30, 2009 and December 31, 2008, and its results of operations for the
three-month and six-month periods ended June 30, 2009 and 2008 and cash flows
for the six months ended June 30, 2009 and 2008. All inter-company accounts and
transactions have been eliminated on consolidation.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and six-month periods ended
June 30, 2009 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2009.





The
balance sheet at December 31, 2008 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008.





1.       ORGANIZATION





The
unaudited condensed consolidated financial statements include the accounts of
SmartPay Express, Inc. ("SPYE") (formerly known as Axiom III, Inc. (“AXIO”)) and
its subsidiaries (collectively referred to as the “Company”).





On
October 10, 2007, AXIO entered into a share exchange agreement with, among
others, the shareholders of Eastern Concept Development Limited (“Eastern
Concept”) pursuant to which AXIO acquired 100% of the issued and outstanding
share capital of Eastern Concept in exchange for 35,351,667 shares of common
stock of AXIO, or 70.7% of the total 50,000,000 issued and outstanding shares of
common stock of AXIO after giving effect to the share exchange. On October 18,
2007, AXIO entered into a stock purchase agreement with Northeast Nominee Trust,
the then major shareholder of AXIO, to dispose of its 100% interest in Axiom
First Corporation, the only asset of AXIO just before the share exchange on
October 10, 2007, at a consideration of US$1. Since then, AXIO entirely ceased
its prior business operations.





For
financial reporting purposes, the acquisition of Eastern Concept by AXIO has
been treated as a reverse acquisition whereby Eastern Concept is considered as
the acquirer, i.e. the surviving entity. On this basis, the historical financial
information prior to October 10, 2007 represents that of Eastern
Concept.





SPYE has
five subsidiaries: Eastern Concept, Eastern Concept Corporate Consulting
(Shenzhen) Limited, Guangdong Wanzhi Electron S&T Company Limited (formerly
Foshan Wanzhi Electron S&T Company Limited) (“Wanzhi”), Foshan Information
Technology Company Limited (“Foshan Company”) and Foshan JinCheng Information
Technology Company Limited (“JinCheng”). Except for Eastern Concept which is
incorporated in Hong Kong, all subsidiaries are established in the People’s
Republic of China (the “PRC”).





The
Company entered into an agreement with a third party individual on March 28,
2009 to dispose of its entire 51% equity interests in JinCheng (the “Disposal”)
at a consideration of approximately US$370,000 (see note 5). Up to the date of
this report, the Disposal has not been completed.





The
Company is principally engaged in the provision of smartcard system and other
value-added services in Guangdong province, the PRC. During the three-month
period ended June 30, 2009, the Company carried out a transaction for sale and
purchase of mobile phones with costs and revenue of US$891,180 and US$929,785
respectively. This transaction was introduced by a subcontractor of the Company,
which is a telecom service provider in the PRC. Although such kind of
transactions may continue to occur in the future as a result of the business
relationship with the subcontractor, the Company considers that those
transactions are auxiliary to its core business and they would not become the
Company’s principal activities.





2.
            GOING
      CONCERN CONSIDERATION





The
Company had negative working capital as of June 30, 2009 of US$648,198, which
raises substantial doubt about its ability to continue as a going
concern. Continuation of the Company as a going concern is dependent upon
attaining profitable operations in the future and obtaining adequate finance as
and when required. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.





The
negative working capital position of the Company as of June 30, 2009 was mainly
a result of the loans from a related party of US$707,353. That related party and
two major SPYE stockholders have undertaken to make available adequate funds to
the Company as and when required to maintain the Company as a going
concern.





As a
result, management is confident that the Company will be able to continue as a
going concern.







6


SMARTPAY
EXPRESS, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Period
from January 1, 2009 to June 30, 2009




3.       RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS AND STANDARDS





Adoption
of Recently Issued Accounting Pronouncements





Effective
January 1, 2009, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 141 (revised 2007), “Business Combinations” which requires an
acquirer to measure the identifiable assets acquired, the liabilities assumed
and any noncontrolling interests in the acquiree at their fair values on the
acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. This standard also requires the fair value measurement of
certain other assets and liabilities related to the acquisition such as
contingencies and research and development. The adoption of this Statement does
not have a material effect on the Company's financial statements.





Effective
January 1, 2009, the Company adopted Financial Accounting Standards
Board, Staff Position, referred to as FSP No. EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities”. FSP No. EITF 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share. The adoption of this Statement does not have a
material effect on the Company's financial statements.





Effective
January 1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements. SFAS No. 160 establishes new standards
governing the accounting for and reporting of noncontrolling interests (NCIs) in
partially owned consolidated subsidiaries and the loss of control of
subsidiaries. Certain provisions of this standard indicate, among other things,
that NCIs (previously referred to as minority interests) be treated as a
separate component of equity, not as a liability; that increases and decreases
in the parent’s ownership interest that leave control intact be treated as
equity transactions, rather than as step acquisitions or dilution gains or
losses; and that losses of a partially owned consolidated subsidiary be
allocated to the NCI even when such allocation might result in a deficit
balance. Consolidated net income should include the net income for both the
parent and the noncontrolling interests with disclosure of both amounts on the
consolidated statement of operations. SFAS No. 160 also requires that a retained
noncontrolling interest upon the deconsolidation of a subsidiary be initially
measured at its fair value. SFAS No. 160 is to be applied prospectively as of
the beginning of the fiscal year in which it is initially adopted, except for
the presentation and disclosure requirements which are to be applied
retrospectively for all periods presented. As a result, the condensed
consolidated balance sheets have been adjusted to reflect the reclassification
of noncontrolling interests to equity, the condensed consolidated statements of
operations have been adjusted to include the net income attributable to the
noncontrolling interests. Other than the change in presentation of
noncontrolling interests, the adoption of this Statement is not expected to have
a material effect on the Company's financial statements.





Effective
January 1, 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. SFAS
No. 161 seeks qualitative disclosures about the objectives and strategies for
using derivatives; quantitative data about the fair value of, and gains and
losses on, derivative contracts; and details of credit-risk-related contingent
features in hedged positions. SFAS No. 161 also seeks enhanced disclosure around
derivative instruments in financial statements, accounted for under SFAS No.
133, “Accounting for Derivative Instruments and Hedging Activities”, and how
hedges affect an entity’s financial position, financial performance and cash
flows. The adoption of this Statement does not have a material effect on the
Company's financial statements.





Effective
April 1, 2009, the Company adopted three related FASB Staff Positions (“FSP”):
(i) FSP FAS No. 115-2 and FAS No. 124-2, “Recognition of Presentation of
Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”), (ii) FSP FAS
No. 107-1 and Accounting Principles Board Opinion (“APB”) No. 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB
28-1”), and (iii) FSP FAS No. 157-4, “Determining the Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS
157-4”).





FSP FAS
115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in the
GAAP for debt securities to modify the requirement for recognizing
other-than-temporary impairments, change the existing impairment model, and
modify the presentation and frequency of related disclosures. FSP FAS 107-1 and
APB 28-1 require disclosures about fair value of financial instruments for
interim reporting periods as well as in annual financial statements. FSP FAS
157-4 provides additional guidance for estimating fair value in accordance with
SFAS No. 157, “Fair Value Measurements”. The adoption of these Statements does
not have a material effect on the Company's financial statements.





Effective
April 1, 2009, the Company adopted SFAS No. 165, “Subsequent Events” (“SFAS
165”), which establishes standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, i.e., whether that date represents the date the financial statements were
issued or were available to be issued. The adoption of this Statement does not
have a material effect on the Company's financial statements.





In June
2009, the FASB issued the following new accounting standards:





-           SFAS
No. 166, “Accounting for Transfers of Financial Assets - an amendment of FASB
Statement No. 140” (“SFAS 166”). SFAS 166 amends the de-recognition accounting
and disclosure guidance relating to SFAS 140. SFAS 166 eliminates the exemption
from consolidation for qualifying special-purpose entity “(QSPE”), it also
requires a transferor to evaluate all existing QSPE to determine whether it must
be consolidated in accordance with SFAS 167.





-           SFAS
No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which
amends FASB Interpretation No. 46 (revised December 2003) to address the
elimination of the concept of a qualifying special purpose entity. SFAS 167 also
replaces the quantitative-based risks and rewards calculation for determining
which enterprise has a controlling financial interest in a variable interest
entity with an approach focused on identifying which enterprise has the power to
direct the activities of a variable interest entity and the obligation to absorb
losses of the entity or the right to receive benefits from the entity.
Additionally, SFAS 167 provides more timely and useful information about an
enterprise’s involvement with a variable interest entity.





-           SFAS
No. 168, “The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles, a replacement of FASB Statement No.
162” (“SFAS 168”), which establishes the FASB Accounting Standards Codification
as the source of authoritative accounting principles recognized by the FASB to
be applied in the preparation of financial statements in conformity with the
GAAP. SFAS 168 explicitly recognizes rules and interpretive releases of the SEC
under federal securities laws as authoritative generally accepted accounting
principles for SEC registrants.





SFAS 166
and SFAS 167 will be effective for periods beginning after November
15, 2009 and SFAS 168 will be effective for periods ending after
September 15, 2009 with early adoption permitted. The Company has not elected to
early adopt these standards and is evaluating the impact that these standards
will have on the consolidated financial statements.






7




SMARTPAY
EXPRESS, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Period
from January 1, 2009 to June 30, 2009






4.       TAXATION





Entities
that carry on business and derive income in Hong Kong are subject to Hong Kong
profits tax at the rate of 16.5%. Entities that carry on business and derive
income in the PRC are subject to PRC enterprise income tax at the rate of
25%.





No
provision for Hong Kong profits tax and PRC enterprise income tax has been made
as the subsidiaries in Hong Kong and the PRC incurred losses for taxation
purpose during the three-month and six-month periods ended June 30, 2009 and
2008.




5.       DISCONTINUED
OPERATIONS AND ASSETS HELD FOR SALE





As
mentioned in note 1 to the financial statements, the Company entered into an
agreement with a third party individual on March 28, 2009 to dispose of its
entire 51% equity interests in JinCheng at a consideration of approximately
US$370,000. The Disposal is expected to be completed within one year. The
Company concluded that the Disposal met the definition of a discontinued
operation as defined in SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets (“SFAS No. 144”). Accordingly, the results of operations of
these businesses have been reclassified for all periods presented.




(a)
     Discontinued operations





The
results of the discontinued operations for the three-month and six-month periods
ended June 30, 2009 and 2008 are summarized as follows:





Three
      months ended
                  June
      30,
                
                
                Six
      months ended
                  June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008US$
                
                
                US$
                
                
                US$
                
                
                US$(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Service
      income
                
                
                16
                
                
                
                3,102
                
                
                
                29
                
                
                
                8,647Staff
      costs
                
                
                (1,514
                )
                
                
                (20,461
                )
                
                
                (21,254
                )
                
                
                (32,034
                )Depreciation
      of property, plant and equipment
                
                
                (267
                )
                
                
                (563
                )
                
                
                (535
                )
                
                
                (563
                )Amortisation
      of intangible assets
                
                
                -
                
                
                
                (7,458
                )
                
                
                (8,006
                )
                
                
                (14,916
                )Other
      general and administrative expenses
                
                
                (768
                )
                
                
                (11,466
                )
                
                
                (2,880
                )
                
                
                (19,302
                )Interest
      income and other income
                
                
                25
                
                
                
                202
                
                
                
                25
                
                
                
                476Share
      of results of an associate
                
                
                (2,662
                )
                
                
                (3,192
                )
                
                
                (13,465
                )
                
                
                (3,192
                )Loss
      before taxation
                
                
                (5,170
                )
                
                
                (39,836
                )
                
                
                (46,086
                )
                
                
                (60,884
                )Taxation
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Loss
      from discontinued operations, net of tax
                
                
                (5,170
                )
                
                
                (39,836
                )
                
                
                (46,086
                )
                
                
                (60,884
                )







(b)           Assets
and liabilities held for sale





The
Company has also reclassified the major classes of assets and liabilities of
JinCheng as held for sale in the Condensed Consolidated Balance Sheet in
accordance with SFAS 144 as follows:





As
      of June 30, 2009US$(Unaudited)Current
      assetsPrepayments
      and deposits
                
                
                7,585Other
      debtors
                
                
                3,657Amount
      due from an associate
                
                
                80,882Inventories
                
                
                720Cash
      and cash equivalents
                
                
                602Total
      current assets held for sale
                
                
                93,446Non-current
      assetsProperty,
      plant and equipment, net
                
                
                28,111Intangible
      assets, net
                
                
                248,203Interest
      in an associate
                
                
                5,562Total
      non-current assets held for sale
                
                
                281,876Total
      assets held for sale
                
                
                375,322Current
      liabilitiesAccrued
      charges and other payables
                
                
                656Total
      current liabilities held for sale
                
                
                656Total
      liabilities held for sale
                
                
                656Net
      assets held for sale
                
                
                374,666Less:
      Noncontrolling interests
                
                
                (183,586
                )191,080







8





SMARTPAY
EXPRESS, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Period
from January 1, 2009 to June 30, 2009







6.       RELATED
PARTY TRANSACTIONS





In
addition to the transactions / information disclosed elsewhere in
these financial statements, the Company had the following transactions with
related parties.





(a)
                  Name
      and relationship of related partiesName
                  Existing relationships with the
      CompanyLi
      Xing Hao
                  A
      director of Wanzhi and a major stockholder of SPYEGuangdong
      Chigo Air Conditioning Company Limited ("Chigo") *
                  A
      company in which Li Xing Hao has control and beneficial
      interestTang
      Jin Cheng
                  A
      director of JinChengFoshan
      JinCheng Technology Company Limited *
                  Minority
      shareholder of JinChengFoshan
      Shancheng JiaXun Technology Services Centre *
                  Minority
      shareholder of JiaXunFoshan
      KaiEr Information Technology Company Limited ("KaiEr") *
                  An
      associate of
JinCheng





*  The
official names are in Chinese and the English names are translation for
reference only.








(b)
            Balances
      with related parties




(i)        Trade receivable from a
related party




As
      ofJune
      30, 2009
                
                
                December
      31, 2008US$
                
                
                US$(Unaudited)Chigo
                
                
                32,718
                
                
                
                24,148





The
      amount due is unsecured, interest-free and has no fixed repayment
      term.





(ii)        Amounts
due from related parties





As
      ofJune
      30, 2009
                
                
                December
      31, 2008US$
                
                
                US$(Unaudited)Tang
      Jin Cheng
                
                
                14,706
                
                
                
                14,493KaiEr
                
                
                14,706
                
                
                
                79,71129,412
                
                
                
                94,204







9




SMARTPAY
EXPRESS, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Period
from January 1, 2009 to June 30, 2009






6.       RELATED
PARTY TRANSACTIONS (CONTINUED)




(b)
            Balances
      with related parties (Continued)





As
      of June 30, 2009 and December 31, 2008, the amounts due are unsecured,
      interest-free and have no fixed repayment term except for the amount due
      from Tang Jin Cheng which is interest-bearing at US$99 per month and
      repayable on October 31, 2009.




(iii)      Amounts due to related parties


As
      ofMarch
      31, 2009
                
                
                December
      31, 2008US$
                
                
                US$(Unaudited)Chigo
                
                
                3,706
                
                
                
                3,653Li
      Xing Hao
                
                
                15,752
                
                
                
                15,52419,458
                
                
                
                19,177





The
      amounts due are unsecured, interest-free and have no fixed repayment
      term.




(iv) Loans from a related
party





As
      ofJune
      30, 2009
                
                
                December
      31, 2008US$
                
                
                US$(Unaudited)At
      beginning of period/year
                
                
                655,274
                
                
                
                883,562Exchange
      realignment
                
                
                9,636
                
                
                
                51,221Amortization
                
                
                16,469
                
                
                
                70,188Loss
      on early termination
                
                
                25,974
                
                
                
                -Repayments
                
                
                -
                
                
                
                (349,697
                )At
      balance sheet date
                
                
                707,353
                
                
                
                655,274





The
      loans from Li Xing Hao as of December 31, 2008 were unsecured,
      interest-free and repayable in September 2009 (the “Old
      Loans”).   The Old Loans were stated at fair value at
      inception, calculated using a discount rate of 7.56% per annum, and are
      subsequently stated at amortized cost.  On April 30, 2009, the
      Old Loans were early terminated and rearranged to carry a monthly interest
      of 1% and repayable on April 30, 2011, resulted in a loss of
      US$25,974.  In addition, a compensation payment of US$18,118 was
      made to Li Xing Hao for interests during the period of the Old
      Loans..




(v)        Interest
payable to a related party





As
      ofJune
      30, 2009
              
              December
      31, 2008US$
              
              US$(Unaudited)Li
      Xing Hao
              
              14,147
              
              -





The amount due is unsecured,
interest-free and repayable on demand.







(c)
            Summary
      of related party transactions








Three
      months ended
                            June
      30,
                          
                          
                          Six
      months ended
                            June
      30,2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008US$
                          
                          
                          US$
                          
                          
                          US$
                          
                          
                          US$(Unaudited)
                          
                          
                          (Unaudited)
                          
                          
                          (Unaudited)
                          
                          
                          (Unaudited)Service
      income from Chigo
                          
                          
                          27,703
                          
                          
                          
                          30,480
                          
                          
                          
                          53,762
                          
                          
                          
                          46,499Service
      income from Foshan JinCheng Technology Company Limited
                          
                          
                          -
                          
                          
                          
                          3,102
                          
                          
                          
                          -
                          
                          
                          
                          8,647Interest
      expenses to Li Xing Hao (note 6 (b)(iv))
                          
                          
                          16,740
                          
                          
                          
                          -
                          
                          
                          
                          16,740
                          
                          
                          
                          -Compensation
      payment to Li Xing Hao (note 6 (b)(iv))
                          
                          
                          18,118
                          
                          
                          
                          -
                          
                          
                          
                          18,118
                          
                          
                          
                          -





7.       SHORT-TERM
BANK LOAN





The bank
loan as of December 31, 2008 was collateralized by the Company’s bank deposit of
US$130,435, interest-bearing at 6.3% per annum and fully repaid in January 2009.
During the six months ended June 30, 2009, a new bank loan was drawn down, which
is collateralized by the Company’s bank deposit of US$132,353, interest-bearing
at 5.84% per annum and repayable in January 2010.








8.       SUBSEQUENT
EVENTS REVIEW





The
Company has evaluated subsequent events up to August 14, 2009 which is the date
that these unaudited condensed consolidated financial statements were approved
and authorized for issue by the sole director.







10


ITEM
2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
discussion contains forward-looking statements. The reader should understand
that several factors govern whether any forward-looking statement contained
herein will be or can be achieved. Any one of those factors could cause actual
results to differ materially from those projected herein. These forward-looking
statements include plans and objectives of management for future operations,
including plans and objectives relating to the products and the future economic
performance of the company. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions, future business decisions, and the time and money required to
successfully complete development projects, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
company. Although the company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of those
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in any of the forward-looking statements
contained herein will be realized. Based on actual experience and business
development, the company may alter its marketing, capital expenditure plans or
other budgets, which may in turn affect the company's results of operations. In
light of the significant uncertainties inherent in the forward-looking
statements included therein, the inclusion of any such statement should not be
regarded as a representation by the company or any other person that the
objectives or plans of the company will be achieved.





OVERVIEW





We were
incorporated in the State of Nevada in June 2004 to engage in any lawful
undertaking.  We were a development stage company indirectly owning
one apartment building in Chicopee, Massachusetts until we merged with Eastern
Concept Development Limited.  Pursuant to a share exchange agreement,
dated October 10, 2007, the shareholders of Eastern Concept Development Limited
exchanged all of its share capital for 35,351,667 shares of Common Stock of
SPYE, or 70.7% of the total then 50,000,000 issued and outstanding shares of
common stock of SPYE after giving effect to the share
exchange.  Subsequently, on December 18, 2007, we filed and mailed a
Definitive Information Statement on Schedule 14C for the adoption of the
Company's name of SmartPay Express, Inc. and the increase of our authorized
capital to 300,000,000 shares of common stock, whereby the authorized capital
shares of preferred stock remained the same at 5,000,000 shares. On November 21,
2008, we completed the one-for-fifty reverse stock split. As a result of the
reverse stock split, the total number of our outstanding shares was reduced
from 64,607,460 to 1,292,166.





Through
its indirectly wholly-owned subsidiary, Guangdong Wanzhi Electron S&T
Co., Ltd. ("Foshan"), SPYE is principally engaged in providing smart card
payment systems and related value-added services mainly in the
Guangdong Province of the People's Republic of China.  We are an
operator of All-in-One Municipal Service Cards ("AIOMS Card").  The
AIOMS Card has a built-in microchip containing an electronic purse and other
applications which can accurately record the holder's transaction
details.  Examples of the usages of AIOMS Cards include, but are not
limited to, the following:  VIP shopping cards, prepaid phone cards,
municipal travel cards, student cards, corporate employee cards and lottery
sales cards. We have opened a branch in the city of Foshan, in
Guangdong Province, and have signed contracts to open additional branches
in other major cities in China. The Company currently has 3 card equipment
and software development staff members, 4 industrial service integration and
management personnel, 15 business and customer service personnel.







11


RESULTS OF
OPERATIONS





The
following table shows the financial data of the condensed consolidated
statements of operations of the Company and its subsidiaries for the three-month
and six-month periods ended June 30, 2009 and 2008.  The data
should be read in conjunction with the consolidated financial statements of the
Company and related notes thereto.





Three
      months ended
                              June
      30,
                            
                            
                            Six
      months ended
                              June
      30,2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008US$
                            
                            
                            US$
                            
                            
                            US$
                            
                            
                            US$Continuing
      operationsOperating
      revenueService
      income
                            
                            
                            
                            
                            
                            126,510
                            
                            
                            
                            235,469
                            
                            
                            
                            226,784
                            
                            
                            
                            348,720Sales
      of mobile phones
                            
                            
                            
                            
                            
                            929,785
                            
                            
                            
                            -
                            
                            
                            
                            929,785
                            
                            
                            
                            -Operating
      expensesSubcontracting
      and other charges
                            
                            
                            
                            
                            
                            (33,782
                            )
                            
                            
                            (105,960
                            )
                            
                            
                            (83,783
                            )
                            
                            
                            (152,236
                            )Purchase
      of mobile phones
                            
                            
                            
                            
                            
                            (891,180
                            )
                            
                            
                            -
                            
                            
                            
                            (891,180
                            )
                            
                            
                            -Staff
      costs
                            
                            
                            
                            
                            
                            (86,009
                            )
                            
                            
                            (55,883
                            )
                            
                            
                            (152,378
                            )
                            
                            
                            (123,579
                            )Depreciation
      of property, plant and equipment
                            
                            
                            
                            
                            
                            (3,522
                            )
                            
                            
                            (2,875
                            )
                            
                            
                            (7,020
                            )
                            
                            
                            (5,711
                            )Amortization
      of intangible assets
                            
                            
                            
                            
                            
                            (51,358
                            )
                            
                            
                            (47,841
                            )
                            
                            
                            (102,717
                            )
                            
                            
                            (95,682
                            )Other
      general and administrative expenses
                            
                            
                            
                            
                            
                            (207,209
                            )
                            
                            
                            (187,900
                            )
                            
                            
                            (441,293
                            )
                            
                            
                            (298,348
                            )Loss
      from operations
                            
                            
                            
                            
                            
                            (216,765
                            )
                            
                            
                            (164,990
                            )
                            
                            
                            (521,802
                            )
                            
                            
                            (326,836
                            )Non-operating
      income (expenses)Interest
      income
                            
                            
                            
                            
                            
                            782
                            
                            
                            
                            -
                            
                            
                            
                            1,876
                            
                            
                            
                            766Subsidy
      income
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            27,671
                            
                            
                            
                            -
                            
                            
                            
                            27,671Other
      income
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            385
                            
                            
                            
                            -
                            
                            
                            
                            385Gain
      on disposal of partial interest in a subsidiary
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            259,837Amortization
      of loans from a related party
                            
                            
                            
                            
                            
                            (4,155
                            )
                            
                            
                            (13,119
                            )
                            
                            
                            (16,469
                            )
                            
                            
                            (45,332
                            )Loss
      on partial settlement of loans from a related party
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (24,717
                            )Interest
      expenses
                            
                            
                            
                            
                            
                            (16,740
                            )
                            
                            
                            -
                            
                            
                            
                            (16,740
                            )
                            
                            
                            -Compensation
      payment
                            
                            
                            
                            
                            
                            (18,118
                            )
                            
                            
                            -
                            
                            
                            
                            (18,118
                            )
                            
                            
                            -Loss
      on early termination of loans from a related party
                            
                            
                            
                            
                            
                            (25,974
                            )
                            
                            
                            -
                            
                            
                            
                            (25,974
                            )
                            
                            
                            -Loss
      before income tax
                            
                            
                            
                            
                            
                            (280,970
                            )
                            
                            
                            (150,053
                            )
                            
                            
                            (597,227
                            )
                            
                            
                            (108,226
                            )Income
      tax
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Loss
      from continuing operations
                            
                            
                            
                            
                            
                            
                            (280,970
                            )
                            
                            
                            (150,053
                            )
                            
                            
                            (597,227
                            )
                            
                            
                            (108,226
                            )Discontinued
      operationsLoss
      from discontinued operations
                            
                            
                            
                            
                            
                            
                            (5,170
                            )
                            
                            
                            (39,836
                            )
                            
                            
                            (46,086
                            )
                            
                            
                            (60,884
                            )Net
      loss including noncontrolling interests
                            
                            
                            
                            
                            
                            
                            (286,140
                            )
                            
                            
                            (189,889
                            )
                            
                            
                            (643,313
                            )
                            
                            
                            (169,110
                            )Less:
      net loss from continuing operations attributable to noncontrolling
      interests
                            
                            
                            
                            
                            
                            
                            13,674
                            
                            
                            
                            22,132
                            
                            
                            
                            29,902
                            
                            
                            
                            28,534Less:
      net loss from discontinued operations attributable to noncontrolling
      interests
                            
                            
                            
                            
                            
                            
                            2,533
                            
                            
                            
                            19,519
                            
                            
                            
                            22,582
                            
                            
                            
                            29,833Net
      loss attributable to SPYE common stockholders
                            
                            
                            
                            
                            
                            
                            (269,933
                            )
                            
                            
                            (148,238
                            )
                            
                            
                            (590,829
                            )
                            
                            
                            (110,743
                            )Other
      comprehensive income-
      Foreign currency translation
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            27,662
                            
                            
                            
                            15,669
                            
                            
                            
                            114,893Total
      comprehensive (loss) income
                            
                            
                            
                            
                            
                            
                            (269,933
                            )
                            
                            
                            (120,576
                            )
                            
                            
                            (575,160
                            )
                            
                            
                            4,150







12




THREE-MONTH
PERIOD ENDED JUNE 30, 2009 COMPARED TO THREE-MONTH PERIOD ENDED JUNE 30,
2008.




OPERATING
REVENUE





Since
inception in June 2007, the Company has been engaged in the provision of
smartcard payment system and related value-added services primarily in Guangdong
province, the PRC.  The Company generated a total of approximately
$126,510 service income as operating revenue for the three-month period
ended June 30, 2009, as compared to approximately $235,469 for the
three-month period ended June 30, 2008, a decrease of 46.27%. Approximately 80%
was generated from the Nanhai project and schools smartcard system for
the period ended June 30, 2009, as compared to 70% for the period
ended June 30, 2008. The decrease was due to the suspension of service
for change of mode of business. In the past, the Company collected proceeds from
students directly and paid subcontracting and other charges to service
providers. Commencing from this quarter, the subcontractor collects service
fees from the students and pays the Company for its entitlement. At present,
there are approximately 20,000 students in Nanhai city who are using our
services. We anticipate that more operating revenues would be generated as we
expand our services to students in other cities including Shenzhen, Chaozhou,
Maoming and Qingyuan within Guangdong province.









SUBCONTRACTING
AND OTHER CHARGES




Subcontracting
and other charges decreased 68.12% to approximately $33,782 for the period
ended June 30, 2009, as compared to approximately $105,960 for the period ended
June 30, 2008.




A significant portion of these charges, approximately
97.93% and 81.80% for the periods ended June 30, 2009 and 2008,
respectively, was related to the Nanhai project and schools smartcard
system. The
decrease was a result of the decrease in operating revenue from the Nanhai
project and schools smartcard system.




STAFF
COSTS




The
total staff costs for the period ended June 30, 2009 approximated $86,009 as
compared to $55,883 for the period end June 30, 2008, an increase of
53.91%. Currently, the Company employs 3 card equipment and software
development staff members, 4 industrial service integration and management
personnel, 15 business and customer service personnel.




DEPRECIATION
EXPENSES




Depreciation
expenses for the period ended June 30, 2009 amounted to $3,522, as
compared to $2,875 for the period ended June 30, 2008, an increase of
22.5%.  These expenses were related to the depreciation charged on
office equipment and computers.




AMORTIZATION
OF INTANGIBLE ASSETS




Amortization
charges of intangible assets for the period ended June 30, 2009
approximated $51,358, as compared to $47,841 for the period ended June 30, 2008,
an increase of 7.35%.  These amortization charges were resulted from
the operating rights of the Nanhai project, in addition to computer software
relating to the Nanhai project. As of June 30, 2009, the carrying value of the
operating right of the Nanhai project was approximately $1,110,142 and the
carrying value of the intangible asset of the computer software was
approximately $285,814.




OTHER
GENERAL AND ADMINISTRATIVE EXPENSES





Other
general and administrative expenses for the period ended June 30, 2009 were
$207,209, as compared to $187,900 for the period ended June 30, 2008, an
increase of 10.28%. The increase in other general and administrative
expenses was mainly due to expenses incurred to expand our services to
other cities within Guangdong Province.




INTEREST
INCOME




Interest
income for the period ended June 30, 2009 was $782, as compared to $Nil for the
period ended June 30, 2008. This income was the interest earned on cash in
bank deposit.





AMORIZATION
OF LOANS FROM A RELATED PARTY




Amorization
of loans from a related party for the period ended June 30, 2009 was $4,155, as
compared to $13,119 for the period ended June 30, 2008, a decrease of
68.33%. The decrease was mainly attributable to the decrease in the carrying
amount of the loans as a result of partial settlements made during the year
ended December 31, 2008 and the rearrangement of loans from a related party on
April 30, 2009


INCOME
TAXES





The
Company is subject to PRC Enterprise Income Taxes ("EIT") on an entity basis on
income arising in and derived from the PRC. The applicable EIT rate is 25% in
year 2009 and 2008.





Since the
Company's PRC established subsidiaries incurred a loss for the period ended June
30, 2009, no provision for EIT has been made.





NET
LOSS





The
Company incurred a net loss of $269,933 for the period ended June 30,
2009, as compared to a net loss of $148,238 for the same period in 2008, an
increase of 82.09%. The increase in net loss was primarily due to decrease in
service income and additional staff costs and expenses as explained
above.





DISCONTINUED
OPERATIONS OF THE JINCHENG PROJECT




The
proposed disposal of JinCheng and the relevant discontinued operations and
assets and liabilities held for sales which are separately disclosed in the
notes to our financial statements.







13


SIX-MONTH
PERIOD ENDED JUNE 30, 2009 COMPARED TO SIX-MONTH PERIOD ENDED JUNE 30,
2008.




OPERATING
REVENUE





The
Company generated a total of approximately $226,784 service income as operating
revenue for the six-month period ended June 30, 2009, as compared to
approximately $348,720 for the six-month period ended June 30, 2008, a decrease
of 34.97%. Approximately 70% was generated from the Nanhai project and
schools smartcard system for the six-month period ended June 30,
2009, as compared to70% for the same period ended June 30, 2008. The
decrease was due to the suspension of service for change of mode of
business. In the past, the Company collected proceeds from students directly and
paid subcontracting and other charges to service providers.  Commencing
from this quarter, the subcontractor collects service fees from the students and
pays the Company for its entitlement. At present, there are approximately 20,000
students in Nanhai city who are using our services. We anticipate that more
operating revenues would be generated as we expand our services to students in
other cities including Shenzhen, Chaozhou, Maoming and Qingyuan within Guangdong
province.





The
Company is principally engaged in the provision of smartcard system and other
value-added services in Guangdong province, the PRC. During the six-month period
ended June 30, 2009, the Company carried out a transaction for sale and purchase
of mobile phones with costs and revenue of US$891,180 and US$929,785
respectively. This transaction was introduced by a subcontractor of the Company,
which is a telecom service provider in the PRC. Although such kind of
transactions may continue to occur in the future as a result of the business
relationship with the subcontractor, the Company considers that those
transactions are auxiliary to its core business and they would not become the
Company’s principal activities.





SUBCONTRACTING
AND OTHER CHARGES





Subcontracting
and other charges decreased 44.97% to approximately $83,783 for the
six-month period ended June 30, 2009, as compared to approximately $152,236
for the six-month period ended June 30, 2008.





A significant
portion of these charges, approximately 95.98% and 83.93% for the period
ended June 30, 2009 and 2008, respectively, was related to the Nanhai
project and schools smartcard system. The decrease was a result of the
decrease in operating revenue from the Nanhai project and schools smartcard
system.




STAFF
COSTS




The total
staff costs for the six-month period ended June 30, 2009 approximated $152,378
as compared to $123,579 for the six-month period end June 30, 2008, an increase
of 23.3%. Currently, the Company employs 3 card equipment and software
development staff members, 4 industrial service integration and management
personnel, 15 business and customer service personnel.





DEPRECIATION
EXPENSES





Depreciation
expenses for the six-month period ended June 30, 2009 amounted to
$7,020, as compared to $5,711 for the six-month period ended June 30, 2008,
an increase of 22.92%.  These expenses were related to the
depreciation charged on office equipment and computers.





AMORTIZATION
OF INTANGIBLE ASSETS





Amortization charges of intangible
assets for the six-month period ended June 30, 2009 approximated $102,717,
as compared to $95,682 for the six-month period ended June 30, 2008, an increase
of 7.35%.  These amortization charges were resulted from the operating
rights of the Nanhai project, in addition to computer software relating to the
Nanhai project. As of June 30, 2009, the carrying value of the
operating right of the Nanhai project was approximately
$1,110,142and the
carrying value of the intangible asset of the computer software was
approximately $285,814.





OTHER
GENERAL AND ADMINISTRATIVE EXPENSES





Other
general and administrative expenses for the six-month period ended June 30,
2009 were $441,293, as compared to $298,348 for the six-month period
ended June 30, 2008, an increase of 47.91%. The significant increase in
other general and administrative expenses was mainly due to additional
consulting and professional fees that we paid for in connection with
our filing obligations as a reporting company which have negatively
impacted our ability to attain profitable operations and expenses incurred to
expand our services to other cities within Guangdong Province.




INTEREST
INCOME




Interest
income for the six-month period ended June 30, 2009 was $1,876, as compared to
$766 for the six-month period ended June 30, 2008, an increase of
144.91%. This income was the interest earned on cash in bank deposits. The
increase in interest income was because interests received from the bank for two
depoists after their expiration dates.





AMORIZATION
OF LOANS FROM A RELATED PARTY




Amorization
of loans from a related party for the six-month period ended June 30, 2009 was
$16,469, as compared to $45,332 for the six-month period ended June 30,
2008, a decrease of 63.67%. The decrease was mainly attributable to the decrease
in the carrying amount of the loans as a result of partial settlements made
during the year ended December 31, 2008 and the rearrangement of loans from a
related party on April 30, 2009.




INCOME
TAXES





The
Company is subject to PRC Enterprise Income Taxes ("EIT") on an entity basis on
income arising in and derived from the PRC. The applicable EIT rate is 25% in
year 2009 and 2008.





Since the
Company's PRC established subsidiaries incurred a loss for the period ended June
30, 2009, no provision for EIT has been made.





NET
LOSS





The
Company incurred a net loss of $590,829 for the six-month period
ended June 30, 2009, as compared to a net loss of $110,743 for the same
six-month period in 2008. The increase in net loss was primarily due to decrease
in service income, additional staff costs and expenses as explained above and
additional consulting and professional fees that were incurred in
connection with our filing obligations as a reporting company, which have
negatively impacted our ability to attain profitable
operations.





LIQUIDITY
AND CAPITAL RESOURCES





As
of June 30, 2009, cash and cash equivalents totaled
$39,337.  This cash position was the result of a combination of net
cash used in financing activities in the amount of $33,741, net cash used in
operating activities in the amount of $142,241, and net cash used in investing
activities of $33,340. The cash used in financing activities was primarily
due to the repayment to a related party and interest payment. The net cash
used in operating activities was mainly due to the loss incurred during the
period. The net cash used in investing activities was the cash used in the
purchase of intangible assets..




DISCONTINUED
OPERATIONS OF THE JINCHENG PROJECT





The
proposed disposal of JinCheng and the relevant discontinued operations and
assets and liabilities held for sales which are separately disclosed in the
notes to our financial statements.







14


CRITICAL
ACCOUNTING POLICIES





In
response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policy," the Company identified the most
critical accounting principals upon which its financial status depends. The
Company determined that those critical accounting principles are related to the
use of estimates, revenue recognition, income tax and impairment of intangibles
and other long-lived assets. The Company presents these accounting policies in
the relevant sections in this management's discussion and analysis, including
the Recently Issued Accounting Pronouncements discussed below.





In
presenting our financial statements in conformity with generally accepted
accounting principles, we are required to make estimates and assumptions that
affect the amounts reported therein. Several of the estimates and assumptions we
are required to make relate to matters that are inherently uncertain as they
pertain to future events. However, events that are outside of our control cannot
be predicted and, as such, they cannot be contemplated in evaluating such
estimates and assumptions. If there is a significant unfavourable change to
current conditions, it could result in a material adverse impact to our
consolidated results of operations, financial position and liquidity. We believe
that the estimates and assumptions we used when preparing our financial
statements were the most appropriate at that time. Presented below are those
accounting policies that we believe require subjective and complex judgments
that could potentially affect reported results. However, the majority of our
businesses operate in environments where we pay a fee for a service
performed, and therefore the results of the majority of our recurring operations
are recorded in our financial statements using accounting policies that are not
particularly subjective, nor complex.




Valuation
of Long-Lived Assets





We review
our long-lived assets for impairment, including property, plant and equipment,
and identifiable intangibles with definite lives, whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of our long-lived assets, we evaluate
the probability that future undiscounted net cash flows will be greater than the
carrying amount of our assets. Impairment is measured based on the
difference between the carrying amount of our assets and their estimated fair
value.





Allowance
for Doubtful Accounts





We
perform ongoing credit evaluations of our customers and adjust credit limits
based upon customer payment history and current creditworthiness. We
continuously monitor collections and payments from our customers and maintain a
provision for estimated credit losses based upon our historical experience and
any specific customer collection issues that have been identified. While such
credit losses have historically been within our expectations and the
provisions established, we cannot guarantee that we will continue to experience
credit loss rates similar to those we have experienced in the past. Measurement
of such losses requires consideration of historical loss experience, including
the need to adjust for current conditions, and judgments about the probable
effects of relevant observable data, including present economic conditions such
as delinquency rates and financial health of specific customers.




Off-Balance
Sheet Arrangements





The
Company has not entered into any financial guarantees or other commitments to
guarantee the payment obligations of any third parties. The Company has not
entered into any derivative contracts that are indexed to the Company's shares
and classified as shareholder's equity or that are not reflected in the
Company's financial statements. Furthermore, the Company does not have any
retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity.
The Company does not have any variable interest in any unconsolidated entity
that provides financing, liquidity, market risk or credit support to the Company
or engages in leasing, hedging or research and development services with the
Company.





Inflation





The
Company believes that inflation has not had a material effect on its operations
to date.





Income
Taxes





Provision
for income and other taxes has been made in accordance with the tax rates and
laws in effect in the PRC.




Income
tax is computed on the basis of pre-tax income. Deferred taxes are provided
using the liability method for all significant temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and net operating loss carry forwards. The
tax consequences of those differences are classified as current or
non-current based on the classification of the related assets or liabilities in
the financial statements.




Revenue
Recognition





The
Company generally recognizes service revenues when persuasive evidence of an
arrangement exists, services are rendered, the fee is fixed or determinable, and
collectibility is probable. Service revenues are recognized net of
discounts.









15





ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





In the
normal course of business, operations of the Company are exposed to fluctuations
in interest rates. These fluctuations can vary the costs of financing and
investing yields. In view of the financing arrangements
during the first six months of 2009, the Company is not currently subject
to significant market risk.





ITEM
4(A) - CONTROLS AND PROCEDURES





The Chief
Executive Officer and Chief Financial Officer (the principal executive officer
and principal financial officer, respectively) of the Company have concluded,
based on their evaluation as of June 30, 2009, that the design and
operation of the Company's "disclosure controls and procedures" (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange
Act")) are effective to ensure that information required to be disclosed in the
reports filed or submitted by the Company under the Exchange Act is accumulated,
recorded, processed, summarized and reported to the management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding whether or not disclosure is required.





During
the quarter ended June 30, 2009, there were no changes in the internal controls
of the Company over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, the internal controls of the Company over financial
reporting.





ITEM
4(A)T – INTERNAL CONTROL OVER FINANCIAL REPORTING





(a)       The
Company's management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Management conducted an
evaluation of the effectiveness of the Company's internal control over financial
reporting based on the criteria set forth in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management has concluded that the
Company's internal control over financial reporting was effective as of June 30,
2009.





(b)       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.





(c)        There
were no changes in the Company's internal controls over financial reporting,
known to the chief executive officer or the chief financial officer that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.







16





PART
II - OTHER INFORMATION





ITEM
1 - LEGAL PROCEEDINGS





None.





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




None.





ITEM
3 - DEFAULTS UPON SENIOR SECURITIES





None.





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





None.





ITEM
5 - OTHER INFORMATION





None.





ITEM
6 - EXHIBITS





31.1
              Certification
      of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities Exchange Act of 193431.2
              Certification
      of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities Exchange Act of 193432.1
              Certification
      of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
              Certification
      of the Company's Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002








17


SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





August
      14, 2009
            Smartpay
      Express, Inc.By:
            /s/
      Ping TangPing
      TangChairman
      and Chief Executive Officer









August
      14, 2009
            Smartpay
      Express, Inc.By:
            /s/
      Zheng WangZheng
      WangInterim Chief
      Financial Officer








18