ThZeal - The Zeal

10-Q/A 1 f10q1213a1_sourcefinancial.htm AMENDMENT TO QUARTERLY REPORT f10q1213a1_sourcefinancial.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2013

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to .

Commission File Number 000-55122

SOURCE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		80-0142655
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

Level6/97 Pacific Highway

North Sydney NSW 2060

Australia

(Address of principal executive offices and zip code)

+61 2 8907-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	o		Accelerated filer	o

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 10, 2014, the Registrant had outstanding 9,811,632 shares of common stock.

EXPLANATORY NOTE

This amendment is being filed to amend Item 1 (Financial Statements), Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 4 (Controls and Procedures) of Part 1 and Item 6 (Exhibits) of Part II to this Report.

On February 24, 2014, we reported that our financial statements for the fiscal years ended June 2013, 2012 and 2011, and certain of our interim financial statements for the fiscal quarters within such years and for the quarters ended September 30, 2013 and December 31, 2013 should not be relied upon and needed to be restated. The restatements were determined to be necessary due to errors in the amounts recognized in revenue and cost of revenue for certain gift card programs and in provisions for income tax and deferred tax assets. We have also taken this opportunity to provide additional disclosures so that our future filings are consistent with prior periods.

SOURCE FINANCIAL, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I	FINANCIAL INFORMATION	1

Item 1.	Financial statements	1
	CONSOLIDATED BALANCE SHEETS	2
	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME	3
	CONSOLIDATED STATEMENT OF STOCKHOLDERS’EQUITY	4
	CONSOLIDATED STATEMENT OF CASH FLOWS	5
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 4.	Controls and Procedures	38

PART II	OTHER INFORMATION	39

Item 6.	Exhibits	39

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to statements regarding projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013 filed on October 15, 2013.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, we undertake no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

PART I FINANCIAL INFORMATION

Item 1. Financial statements

SOURCE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2013 AND JUNE 30, 2013

(UNAUDITED)(RESTATED)

	December 31, 2013		June 30, 2013
ASSETS	(Unaudited)
	(Restated)		(Restated)
CURRENT ASSETS
Cash and cash equivalents	$	6,899,738	$	7,140,539
Trade receivables, net		26,768,591		27,008,840
Inventories		206,180		220,377
Deferred tax asset		268,440		718,767
Other current assets		1,499,491		817,048
Net assets of discontinued operations		247,805		326,425
TOTAL CURRENT ASSETS		35,890,245		36,231,996

NON-CURRENT ASSETS
Intangible assets, net		3,339,148		3,314,413
Deferred tax asset		1,371,271		1,130,454
Property, plant and equipment, net		502,724		569,031
Other assets		-		45,973
Goodwill		67,659		69,057
TOTAL NON-CURRENT ASSETS		5,280,802		5,128,928

TOTAL ASSETS	$	41,171,047	$	41,360,924

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Trade and other payables	$	5,258,287	$	5,247,399
Wholesale loan facility		25,593,086		25,669,388
Cash reserve		2,648,529		2,731,094
Net liabilities of discontinued operations		221,911		3,000
TOTAL CURRENT LIABILITIES		33,721,813		33,650,881

NON-CURRENT LIABILITIES

Shareholder loans		44,731		45,665
TOTAL NON-CURRENT LIABILITIES		44,731		45,665

TOTAL LIABILITIES		33,766,544		33,696,546

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 1,000,000 shares authorized		-		-
Designated as Series B Preferred stock, , $0.01 par value, 5,000 shares authorized, 5,000 issued and outstanding		50		50
Common Stock, $0.001 and $0.1 par value, 50,000,000 shares authorized, 9,811,632 and 9,961,632 shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively		9,812		996,163
Common stock to be issued, 509,000 and 338,368 respectively		509		33,837
Treasury stock		150		-
Additional paid-in capital		15,942,270		14,462,575
Other accumulated comprehensive loss		(1,236,019		(1,079,762	)
Accumulated deficit		(7,312,269		(6,748,485	)
TOTAL STOCKHOLDERS' EQUITY		7,404,503		7,664,378
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	41,171,047	$	41,360,924

The accompanying notes are an integral part of the unaudited consolidated financial statements

SOURCE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(RESTATED)

	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	December 31, 2013 (Restated)			December 31, 2012 (Restated)			December 31, 2013 (Restated)			December 31, 2012 (Restated)
Revenue	$	1,521,818		$	1,237,067		$	2,714,213		$	2,342,316
Cost of revenue		723,508			698,258			1,497,715			1,409,004
Gross profit		798,310			538,809			1,216,498			933,312

Operating Expenses

Compensation expenses		251,521			200,545			369,074			321,402
Research and development expense		109,397			116,724			218,795			236,115
Bad debt expenses		30,259			61,736			251,252			68,686
Occupancy expenses		70,104			59,176			129,176			112,119
Depreciation expense		16,833			18,866			36,907			29,921
General and administration expenses		476,395			100,447			645,671			147,954
Total operating expenses		954,509			557,494			1,650,875			916,197
(Loss) income from operations		(156,199	)		(18,685	)		(434,377	)		17,115

Other Income (Expense)
Interest income		26,383			23,925			53,222			54,093
Research and development grant		111,900			93,483			295,200			186,948
Finance costs		(284	)		-			(284	)		(141	)
Other income		426			(1,199	)		(2,643	)		(6,127	)
Total Other Income		138,425			116,209			345,495			234,773

(Loss) income from continuing operations before income taxes		(17,774	)		97,524			(88,882	)		251,888

Provision for income taxes		128,220			75,263			177,372			167,384

Net (loss) income from continuing operations		(145,994	)		22,261			(266,254	)		84,504

Net loss from discontinued operations		(104,678	)		-			(297,530	)		-

Net (loss) income		(250,672	)		22,261			(563,784	)		84,504

Other comprehensive income
Foreign currency translation		(297,550	)		(61,961	)		(156,257	)		175,839

Comprehensive (loss) income	$	(548,222	)	$	(39,700	)	$	(720,041	)	$	260,343

Net (loss) income per share
Basic and Diluted:
Continuing operations	$	(0.014	)	$	0.004		$	(0.026	)	$	0.016
Discontinued	$	(0.010	)	$	-		$	(0.028	)	$	-
Total	$	(0.024	)	$	0.004		$	(0.054	)	$	0.016

Weighted average number of shares used in computing basic and diluted net (loss) income per share:

Basic		10,470,632			5,300,000			10,449,303			5,300,000
Diluted		10,470,632			5,300,000			10,449,303			5,300,000

The accompanying notes are an integral part of the unaudited consolidated financial statements

SOURCE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’EQUITY

DECEMBER 31, 2013

(UNAUDITED)

(RESTATED)

	Common Stock					Preferred Stock				Treasury		Additional Paid in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount			Shares		Amount		Stock		Capital		Loss			Deficit			Equity
Balance June 30, 2013 (Restated)		10,300,000	$	1,030,000			5,000	$	50	$	-	$	14,462,575	$	(1,079,762	)		(6,748,485	)	$	7,664,378
Issuance of stock options		-		-			-		-		-		115,492		-			-			115,492
Compensation in respect of option and restricted stock granted to employees, directors and third- parties		170,632		17,063			-		-		-		327,611		-			-			344,674
Change in par value of shares		-		(1,036,592	)		-		-		-		1,036,592		-			-			-
Return of stock		-		(150	)		-		-		150		-		-			-			-
Net (loss) income for the six months ended December 31, 2013		-		-			-		-		-		-		(156,257	)		(563,784	)		(720,041	)
Balance December 31, 2013 (Restated)		10,470,632	$	10,321			5,000	$	50	$	150	$	15,942,270	$	(1,236,019	)	$	(7,312,269	)	$	7,404,503

The accompanying notes are an integral part of the unaudited consolidated financial statements

SOURCE FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

	December 31, 2013 (Restated)			December 31, 2012 (Restated)

Net (loss) income	$	(563,784	)	$	84,504
Net (loss) from discontinued operations		(297,530	)		-
Net (loss) income from continuing operations		(266,254	)		84,504

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		357,687			345,507
Stock options and shares issued for compensation		178,356			-

(Increase) decrease in assets:
Trade receivables, net		(316,347	)		32,103
Inventories		10,034			(108,826	)
Deferred tax asset		177,379			167,384
Other assets		(460,933	)		85,329
Increase (decrease) in current liabilities:
Trade payables		187,821			(1,191,086	)
Net cash used in operating activities		(132,257	)		(585,085	)

Cash flows from investing activities
Purchase of property, plant and equipment		(73,053	)		(588,536	)
Development of intangible assets		(322,875	)		-
Net cash used in investing activities		(395,928	)		(588,536	)

Cash flows from financing activities
Wholesale loan facility, net		457,395			531,199
Capital Reserve		(28,096	)		347,921
Shareholder loans, net		-			(71,470	)
Net cash provided by financing activities		429,299			807,650

Net cash (used in) continuing operations		(98,886	)		(365,971	)

Cash flows from discontinued operations
Net cash (used in) operating activities from discontinued operations		(209,381	)		-
Net cash (used in) investing activities from discontinued operations		(5,906	)		-
Net cash provided by financing activities from discontinued operations		150,000			-
Net cash (used in) discontinued operations		(65,287	)		-

Effect of exchange rate changes on cash and cash equivalents		(141,916	)		124,483
Net decrease in cash and cash equivalents		(306,089	)		(241,488	)
Cash and cash equivalents at the beginning of the period - from continuing operations		7,140,539			5,617,025
Cash and cash equivalents at the beginning of the period - from discontinued operations		65,288			-

Cash and cash equivalents at the end of the period	$	6,899,738		$	5,375,537

Supplemental disclosures
Cash paid during the period for:
Income tax payments	$	-		$	-

Interest payments	$	888,684	$	901,130

Supplemental schedule of non-cash financing activities:
Issuance of stock options	$	115,492	$	-
Restricted stock compensation	$	344,674	$	-

The accompanying notes are an integral part of the unaudited consolidated financial statements

SOURCE FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013

(UNAUDITED)

Note 1 – BASIS OF PRESENTATION AND ORGANIZATION (RESTATED)

Basis of Presentation

The accompanying condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“US GAAP”) and with the instructions to Form 10-Q.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited condensed interim consolidated financial statements should be read in conjunction with the audited annual financial statements for the years ended June 30, 2013 and 2012. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended June 30, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited consolidated financial statements should be read in conjunction with the financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended December 31, 2013 are not necessarily indicative of the results that may be expected for the year ending June 30, 2014.

Restatements

Subsequent to the issuance of the Company's financial statements for the three and six months ended December 31, 2013, the Company determined that certain transactions and presentation in the financial statements had not been accounted for properly in the Company's financial statements. Specifically, the amount of the value available on the card for the consumer in certain gift card and similar programs had been improperly recognized in revenue and cost of revenues. Also, the provision for income tax and deferred tax was incorrectly calculated. The Company also used this opportunity to realign operating expenses and cost of revenue to conform to future financials filed.

The Company has restated its consolidated balance sheet as of December 31, 2013 and fiscal year ended June 30, 2013, consolidated statement of operations and comprehensive (loss) income for the three and six months ended December 31, 2013 and 2012, consolidated statement of stockholders’ equity, consolidated statement of cash flows for the six months ended December 31, 2013 and 2012 to give effect to these changes.

The effects of these restatements and reclassifications are as follows:

BALANCE SHEET	Reported			Adjustments			Restated			Reported			Adjustments			Restated
	Dec 31, 2013			Dec 31, 2013			Dec 31, 2013			June 30, 2013			June 30, 2013			June 30, 2013
ASSETS CURRENT ASSETS
TOTAL CURRENT ASSETS		35,890,245			-			35,890,245			36,231,996			-			36,231,996

NON-CURRENT ASSETS
Intangible assets		3,339,148			-			3,339,148			3,314,413			-			3,314,413
Deferred tax asset		1,081,531			289,740			1,371,271			988,860			141,594			1,130,454
Property, plant and equipment		502,724			-			502,724			569,031			-			569,031
Other assets		-			-			-			45,973			-			45,973
Goodwill		67,659			-			67,659			69,057			-			69,057
TOTAL NON-CURRENT ASSETS		4,991,062			289,740			5,280,802			4,987,334			141,594			5,128,928

TOTAL ASSETS	$	40,881,307		$	289,740		$	41,171,047		$	41,219,330		$	141,594		$	41,360,924

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
TOTAL CURRENT LIABILITIES		33,721,813			-			33,721,813			33,650,881			-			33,650,881

NON-CURRENT LIABILITIES
TOTAL NON-CURRENT LIABILITIES		44,731			-			44,731			45,665			-			45,665

TOTAL LIABILITIES		33,766,544			-			33,766,544			33,696,546			-			33,696,546

EQUITY
Preferred stock		50			-			50			50			-			50
Common stock		9,812			-			9,812			996,163			-			996,163
Common stock to be issued		509			-			509			33,837			-			33,837
Treasury stock		150			-			150			-			-			-
APIC		15,942,270			-			15,942,270			14,462,575			-			14,462,575
Other accumulated comprehensive gain (loss)		(1,200,861	)		(35,158	)		(1,236,019	)		(1,052,144	)		(27,618	)		(1,079,762	)
Accumulated deficit		(7,637,167	)		324,898			(7,312,269	)		(6,917,697	)		169,212			(6,748,485	)
TOTAL EQUITY		7,114,763			289,740			7,404,503			7,522,784			141,594			7,664,378

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	40,881,307		$	289,740		$	41,171,047		$	41,219,330		$	141,594		$	41,360,924

STATEMENTS OF OPERATIONS	Three months ended									Six months ended
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
	Dec 31, 2013			Dec 31, 2013			Dec 31, 2013			Dec 31, 2013			Dec 31, 2013			Dec 31, 2013

Revenue	$	1,581,716		$	(59,898	)	$	1,521,818		$	2,955,168		$	(240,955	)	$	2,714,213
Cost of revenue		783,425			(59,917	)		723,508			1,738,669			(240,954	)		1,497,715
Gross profit		798,291			19			798,310			1,216,499			(1	)		1,216,498

Operating expenses
Compensation expenses		251,521			-			251,521			369,074			-			369,074
Research and development expense		109,397			-			109,397			218,795			-			218,795
Bad debt expenses		30,259			-			30,259			251,252			-			251,252
Occupancy expenses		70,123			(19	)		70,104			132,041			(2,865	)		129,176
Depreciation expense		16,813			20			16,833			36,907			-			36,907
General and administration expenses		476,376			19			476,395			642,806			2,865			645,671
Total operating expenses		954,489			20			954,509			1,650,875			-			1,650,875
(loss) Income from operations		(156,198	)		(1	)		(156,199	)		(434,376	)		(1	)		(434,377	)

Other income / (expense)
Interest income		26,383			-			26,383			53,222			-			53,222
Research and development grant		111,900			-			111,900			295,200			-			295,200
Other (expense) income		3,713			(3,287	)		426			3,713			(6,356	)		(2,643	)
Finance costs		(284	)		-			(284	)		(284	)		-			(284	)
Total other income		141,712			(3,287	)		138,425			351,851			(6,356	)		345,495

(Loss) income from operations before income taxes		(14,486	)		(3,288	)		(17,774	)		(82,525	)		(6,357	)		(88,882	)
Income tax expense		299,187			(170,967	)		128,220			339,416			(162,044	)		177,372
Net (loss) income from continuing operations		(313,673	)		167,679			(145,994	)		(421,941	)		155,687			(266,254	)
Net loss from discontinued operations		(104,678	)		-			(104,678	)		(297,530	)		-			(297,530	)
Net (loss) income		(418,351	)		167,679			(250,672	)		(719,471	)		155,687			(563,784	)
Other comprehensive income		(287,468	)		(10,082	)		(297,550	)		(148,717	)		(7,540	)		(156,257	)
Comprehensive (loss) income	$	(705,819	)	$	157,597		$	(548,222	)	$	(868,188	)	$	148,147		$	(720,041	)

Net (loss) income per share:
Basic and Diluted Continuting operations	$	(0.030	)	$	0.016		$	(0.014	)	$	(0.041	)	$	0.015		$	(0.026	)
Discontinued	$	(0.010	)	$	-		$	(0.010	)	$	(0.028	)	$	-		$	(0.028	)
Total	$	(0.040	)	$	0.016		$	(0.024	)	$	(0.069	)	$	0.015		$	(0.054	)

STATEMENTS OF OPERATIONS

Three months ended

Six months ended

Reported

Adjustments

Restated

Reported

Adjustments

Restated

Dec 31, 2012

Revenue	$	1,309,608		$	(72,541	)	$	1,237,067		$	2,616,913		$	(274,597	)	$	2,342,316
Cost of revenue		770,794			(72,536	)		698,258			1,683,600			(274,596	)		1,409,004
Gross profit		538,814			(5	)		538,809			933,313			(1	)		933,312

Operating expenses
Compensation expenses		231,954			(31,409	)		200,545			386,883			(65,481	)		321,402
Research and development expense		118,057			(1,333	)		116,724			236,115			-			236,115
Bad debt expenses		61,736			-			61,736			68,686			-			68,686
Occupancy expenses		64,862			(5,686	)		59,176			123,489			(11,370	)		112,119
Depreciation expense		18,870			(4	)		18,866			29,921			-			29,921
General and administration expenses		62,277			38,170			100,447			71,621			76,333			147,954
Total operating expenses		557,756			(262	)		557,494			916,715			(518	)		916,197
(loss) Income from operations		(18,942	)		257			(18,685	)		16,598			517			17,115

Other income / (expense)
Interest income		23,925			-			23,925			54,093			-			54,093
Research and development grant		93,483			-			93,483			186,948			-			186,948
Other (expense) income		-			(1,199	)		(1,199	)		(141	)		-			(141	)
Finance costs		-			-			-			-			(6,127	)		(6,127	)
Total other income		117,408			(1,199	)		116,209			240,900			(6,127	)		234,773

(Loss) income from operations before income taxes		98,466			(942	)		97,524			257,498			(5,610	)		251,888
Income tax expense		90,158			(14,895	)		75,263			95,078			72,306			167,384
Net (loss) income from continuing operations		8,308			13,953			22,261			162,420			(77,916	)		84,504
Net loss from discontinued operations		-			-			-			-			-			-
Net (loss) income		8,308			13,953			22,261			162,420			(77,916	)		84,504
Other comprehensive income		(63,565	)		1,604			(61,961	)		178,363			(2,524	)		175,839
Comprehensive (loss) income	$	(55,257	)	$	15,557		$	(39,700	)	$	340,783		$	(80,440	)	$	260,343

Net (loss) income per share:
Basic and Diluted Continuting operations	$	0.002		$	0.003		$	0.004		$	0.031		$	(0.015	)	$	0.016
Discontinued	$	-		$	-		$	-		$	-		$	-		$	-
Total	$	0.002		$	0.003		$	0.004		$	0.031		$	(0.015	)	$	0.016

STATEMENTS OF CASH FLOWS	Reported			Adjustments			Restated			Reported			Adjustments			Restated
	Dec 31, 2013			Dec 31, 2013			Dec 31, 2013			Dec 31, 2012			Dec 31, 2012			Dec 31, 2012

Net income (loss)	$	(719,470	)	$	155,686		$	(563,784	)	$	162,420		$	(77,916	)	$	84,504
Net (loss) from discontinued operations		(297,530	)		-			(297,530	)		-			-			-
Net (loss) income from continuing operations		(421,940	)		155,686			(266,254	)		162,420			(77,916	)		84,504

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation & amortization		357,687			-			357,687			345,507			-			345,507
Stock options and shares issued for compensation		178,356			-			178,356			-			-			-

(Increase) / decrease in assets:
Trade receivables		(316,347	)		-			(316,347	)		32,103			-			32,103
Inventories		10,034			-			10,034			(108,826	)		-			(108,826	)
Deferred tax assets		333,067			(155,686	)		177,381			88,950			78,434			167,384
Other assets		(460,935	)		-			(460,935	)		85,329			-			85,329
Increase / (decrease) in current liabilities:
Trade payables		187,821			-			187,821			(1,191,086	)		-			(1,191,086	)
Net cash used in operating activities		(132,257	)		-			(132,257	)		(585,603	)		518			(585,085	)

CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant and equipment		(73,053	)		-			(73,053	)		(588,018	)		(518	)		(588,536	)
Purchase of subsidiary		(322,875	)		-			(322,875	)		-			-			-
Net cash used in investing activities		(395,928	)		-			(395,928	)		(588,018	)		(518	)		(588,536	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities		429,299			-			429,299			807,650			-			807,650

Net cash (used in) operations		(98,886	)		-			(98,886	)		(365,971	)		-			(365,971	)

Cash flows from discontinued operations
Net cash (used in) discontinued operations		(65,287	)		-			(65,287	)		-			-			-

Effect of exchange rate changes on cash and cash equivalents		(141,916	)		-			(141,916	)		124,483			-			124,483
Net increase in cash and cash equivalents		(306,089	)		-			(306,089	)		(241,488	)		-			(241,488	)
Cash and cash equivalents at the beginning of the period		7,140,539			-			7,140,539			5,617,025			-			5,617,025

Cash and cash equivalents at the end of the period		6,899,738			-			6,899,738			5,375,537			-			5,375,537

SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments	$	6,356		$	(6,356	)	$	-		$	95,078		$	(95,078	)	$	-
Interest payments	$	888,684		$	-		$	888,684		$	901,130		$	-		$	901,130

Note 2 – DISCONTINUED OPERATIONS

In January 2014, management decided to return the ‘Wiki Technology’ entity to Edward DeFeudis and Marco Garibaldi as per the terms of the Share Exchange Agreement (“Share Exchange Agreement”) dated May 30, 2013. The decision was taken because revenue and profitability benchmarks as per the Share Exchange Agreement were unlikely to be met. Revenue and expenses, and gains and losses relating to the discontinued business have been reclassified from the results of continuing operations and are reflected as net loss from discontinued operations in the statement of operations and comprehensive (loss) income.

The assets and liabilities and operating results of the discontinued operation are summarized as follows:

ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS	12/31/2013		6/30/2013
Current assets
Cash and cash equivalents	$	3,312	$	65,288
Other current assets		675		3,678
Total current assets		3,987		68,966
Non Current Assets
Fixed Assets		12,869		9,105
Intellectual property		195,949		198,354
Other assets		35,000		50,000
Total Non Current assets		243,818		257,459
Total Assets		247,805		326,425

Current Liabilities
Trade Creditors		3,000		3,000
Provisions and accruals		3,912
Intercompany liabilities		64,999
Total Current Liabilities		71,911		3,000
Non Current Liabilities
Shareholder loans		150,000
Total Non Current liabilities		150,000		-
Total Liabilities		221,911		3,000

Net Assets	$	25,894	$	323,425

NET RESULT FROM DISCONTINUED OPERATIONS	FOR THE THREE MONTHS ENDED					FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012		12/31/2013			12/31/2012
Revenue	$	1,008		$	-	$	2,647		$	-
Cost of Revenue		48,128			-		70,460			-
Gross Profit (Loss)		(47,120	)		-		(67,813	)		-
Operating Expenses		58,778			-		230,277			-
(Loss) from operations		(105,898	)		-		(298,090	)		-
Other income		1,220			-		560			-
(Loss )before tax		(104,678	)		-		(297,530	)		-
Tax		-			-		-			-
(Loss) after tax	$	(104,678	)	$	-	$	(297,530	)	$	-

The discontinued operations of Wiki Technologies, Inc. were reported in the United States of America segment in our geographic segment information as per Note 16.

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED)

Principles of Consolidation

The consolidated financial statements include the accounts of Source Financial, Inc (“Source”) and its wholly owned subsidiaries Moneytech Limited (“Moneytech”), Moneytech Finance Pty Ltd, mPayments Pty Ltd., Moneytech POS Pty Ltd., Moneytech Services Pty Ltd, Moneytech USA and WikiTechnologies, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation.

Equity Investments

The Company uses the equity method of accounting for investments when the percentage of ownership of the investment is between 20% and 50%. The Company includes the proportionate share of the profit or loss as part of the carrying value of the investment.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.

Exchange (Loss) Gain

During the three and six months ended December 31, 2013 and 2012, the transactions of Moneytech and its wholly owned subsidiaries were denominated in foreign currency and were recorded in Australian dollar (AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.

Foreign Currency Translation and Comprehensive (Loss) Income

The accounts of Moneytech Limited and its wholly owned subsidiaries were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder’s equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.

Reportable Segment

The Company has one reportable segment. The Company’s activities are interrelated and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Cost of Revenue

Cost of revenue includes: programs licensed, operating costs including costs of funds and related product support service centers to drive traffic to our websites, costs incurred to support and maintain products and services, including inventory valuation adjustments, costs associated with the delivery of consulting services, and the amortization of capitalized intangible software costs. Capitalized intangible software costs are amortized over the estimated lives of the products.

Research and Development

Research and development expenses include payroll, employee benefits, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products is generally shortly before the products are put into service. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. Certain research and development costs are eligible for reimbursement by the Australian government. Research and development expense is included as an operating expense and research and development grant income is reported as other income.

Income Taxes

The Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.

At December 31, 2013 and 2012, the Company had not taken any significant uncertain tax positions on its tax returns for 2012 and prior years or in computing its tax provision.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in Australia. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Risks and Uncertainties

The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Cash and Cash Equivalents

Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2013, the Company had $6,899,738 in cash, all of which was on deposit in Australia and not covered by insurance. At June 30, 2013, the Company had $7,140,539 in cash in Australia which was not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Allowance for Doubtful Accounts

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Inventory

Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of December 31, 2013 and June 30, 2013, inventory only consisted of finished goods.

Property, Plant & Equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows:

Computer software	3 to 10 years
Computer hardware	5 to 15 years
Furniture and equipment	3 to 5 years

As of December 31, 2013 and June 30, 2013, Property, Plant & Equipment consisted of the following:

	12/31/2013			6/30/2013
Office equipment	$	35,221		$	35,949
Furniture and fixtures		225,269			229,927
Computers and software		1,282,160			1,282,317
Accumulated Depreciation		(1,039,926	)		(979,162	)
	$	502,724		$	569,031

As of December 31, 2013 and 2012, depreciation expense consisted of the following:

	FOR THE THREE MONTHS ENDED				FOR THE SIX MONTHS ENDED
	12/31/2013		12/31/2012		12/31/2013		12/31/2012
Depreciation, operating	$	16,833	$	18,866	$	36,907	$	29,921
Depreciation, cost of revenue		30,527		26,510		56,576		55,936
Total depreciation expense	$	47,360	$	45,376	$	93,483	$	85,857

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

As of December 31, 2013, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Earnings per Share (EPS)

Basic EPS is computed by dividing income available to common shareholders and equivalents by the weighted average number of common shares and equivalents outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

The following table sets for the computation of basic and diluted earnings per share for the three and six months ended December 31, 2013 and 2012:

	FOR THE THREE MONTHS ENDED					FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012		12/31/2013			12/31/2012
Net (loss) income from continuing operations	$	(145,994	)	$	22,261	$	(266,254	)	$	84,504
Net result from discontinued operations		(104,678	)		-		(297,530	)		-
Net (loss) income	$	(250,672	)	$	22,261	$	(563,784	)	$	84,504

Weighted average number of shares used in computing basic and diluted net (loss) income

Basic		10,470,632			5,300,000		10,449,303			5,300,000
Dilutive effect of stock options		-			-		-			-
Diluted		10,470,632			5,300,000		10,449,303			5,300,000

	FOR THE THREE MONTHS ENDED					FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012		12/31/2013			12/31/2012
Net (loss) income per share Basic and diluted:
Continuing operations	$	(0.014	)	$	0.004	$	(0.026	)	$	0.016
Discontinued	$	(0.010	)	$	-	$	(0.028	)	$	-
Total	$	(0.024	)	$	0.004	$	(0.054	)	$	0.016

The options to purchase up to 62,996 shares of common stock were anti-dilutive during the three and six months ended December 31, 2013.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually as of June 30, or more frequently if events or changes in circumstances indicate that impairment may exist.

Effective October 1, 2011, the Company adopted ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as the basis for determining whether it is necessary to perform the two-step goodwill impairment test. The two-step test first compares the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value is less than the carrying value, the second step is performed to compute the amount of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The adoption did not have a material impact on the consolidated financial statements.

The Company evaluated its goodwill for impairment on December 31, 2013, and concluded there was no impairment as of that date.

Intangible Assets

The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset. Finite-lived intangible assets primarily consist of software development capitalized. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 10 years. No events or changes in circumstances indicate that impairment existed as of December 31, 2013.

Stock-Based Compensation

We recognize all share-based payments to employees and to non-employee directors as compensation for service on our board of directors as compensation expense in the consolidated financial statements based on the fair values of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

For share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date.

Recently Issued Accounting Pronouncements

In July 2013, the FASB issued an accounting standards update intended to provide guidance on the presentation of unrecognized tax benefits, reflecting the manner in which an entity would settle, at the reporting date, any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This accounting standard will be effective for the Company beginning June 1, 2014; early adoption is permitted. The Company has early adopted this guidance and the adoption did not have a material impact on the Company's consolidated financial position or results of operations.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. The Company concluded that it was appropriate to reclassify some if its depreciation expenses as cost of goods sold, which previously was included in operating expenses.

Note 4 – TRADE RECEIVABLES, NET (RESTATED)

Trade receivables consist principally of accounts receivable and trade financing and other financial services to small to medium sized businesses and individuals, principally in Australia. Trade receivables are recorded at the invoiced amount and net of allowances for doubtful accounts. Trade receivables bear interest. The allowance for doubtful accounts represents management’s estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account balances are written off against the allowance when management determines the receivable is uncollectible.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity or parent entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

All trade receivables must be paid within 122 days. Trade receivables not paid in full by this time are considered overdue and once 30 days past due are considered delinquent.

As of December 31, 2013 and June 30, 2013, trade receivables consist of the following:

	12/31/2013			6/30/2013
Trade receivables	$	27,602,077		$	27,740,315
Allowance for bad debt		(833,486	)		(731,475	)
Total trade receivables, net	$	26,768,591		$	27,008,840

Note 5 – OTHER ASSETS

Other assets consist of the following as of December 31, 2013 and June 30, 2013:

Other current assets	12/31/2013		6/30/2013
Research & development grant receivable	$	680,048	$	401,852
Insurance claim receivable		172,572		269,556
Prepayment		76,083		66,922
Deferred compensation		216,811		-
Other assets		353,977		78,718
	$	1,499,491	$	817,048

Other non current assets	12/31/2013		6/30/2013
Prepaid gift card establishment fees	$	-	$	45,973
	$	-	$	45,973

Note 6 – INTANGIBLE ASSETS

Intangible assets consist of the following as of December 31, 2013 and June 30, 2013:

	12/31/2013			6/30/2013
Moneytech and mPayments software	$	5,901,743		$	5,239,641
Accumulated amortization		(2,562,595	)		(1,925,228	)
	$	3,339,148		$	3,314,413

The intangible assets are amortized over 10-12 years. Amortization expense of $264,204 and $259,650 was included in cost of revenues for the six months ended December 31, 2013 and 2012, respectively.

Note 7 – GOODWILL

As of December 31, 2013 and June 30, 2013, the Goodwill was comprised of the following:

	12/31/2013			6/30/2013
Acquisition cost of Moneytech POS Pty Ltd.	$	96,191		$	98,180
Fixed assets received		(53,587	)		(54,695	)
Liability assumed		25,055			25,572
Acquisition cost assigned to goodwill	$	67,659		$	69,057

Note 8 – TRADE AND OTHER PAYABLES

As of December 31, 2013 and June 30, 2013, trade and other payables consist of the following:

	12/31/2013			6/30/2013
Trade payables	$	5,137,073		$	4,848,656
Employee benefits		125,171			279,646
Other liabilities		(3,957	)		119,097
Total payables	$	5,258,287		$	5,247,399

Note 9 – CURRENT LIABILITIES

	12/31/2013		6/30/2013
Wholesale loan facility	$	25,593,086	$	25,669,388
Cash reserve		2,648,529		2,731,094
	$	28,241,615	$	28,400,482

Wholesale Loan Facility

The Company had a secured line of credit under a Receivables Purchase Agreement (“RPA”) with a bank in Sydney Australia for up to AUD$30 million for the Company to use as of December 31, 2013 and June 30, 2013. The line of credit is secured mainly by trade receivables. Interest is charged at the bank’s reserve rate plus an agreed upon margin from the bank. The agreement is renewed annually on an agreed anniversary date, the latest of which was December 31, 2013. In 2014, the facility limit was extended to AUD$40 million and renewed until December 31, 2014. Interest expense charged to cost of revenue related to the loan for the six months ended December 31, 2013 and 2012 was approximately USD $884,770 and USD $901,130, respectively.

Cash Reserve

The Company is required to maintain certain cash reserves with its senior debt provider in accordance with the RPA. The Required Cash Reserve amount may be provided by the Company or its customers and is held in a ‘Cash Reserve Account’ with its senior debt provider in accordance with the RPA’s terms and conditions. The Required Cash Reserve balance is adjusted based on the RPA and the total facility limit provided to the Company by the senior lender.

Note 10 – NON-CURRENT LIABILITY

	12/31/2013		6/30/2013
Shareholders loans	$	44,731	$	45,665
	$	44,731	$	45,665

Shareholders’ Loan

The Company has a loan payable in the amount of AUD$50,000 to a shareholder. The loan is due and payable on September 30, 2014. Interest of 8% is only payable if Moneytech has positive retained earnings at the time of repayment.

Note 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has 1,000,000 undesignated shares of Preferred Stock authorized, each having a par value of $0.01, as of December 31, 2013 and had 10,000,000 undesignated shares of Preferred Stock authorized, each having a par value of $0.01, at June 30, 2013. There were 5,000 shares of Series B Preferred Stock authorized, issued and outstanding as of December 31, 2013 and June 30, 2013 (the “Series B Preferred Shares”). Under the terms of the Series B Preferred Stock Certificate of Designation, the holder(s) of the Series B Preferred Shares have the right, until June 30, 2018, to (A) elect the majority of the Company’s Board of Directors and (B) vote on all other matters to come before the holders of common stock (the “Common Stock”) with each vote per share of Series B Preferred Stock equal to 1,000 shares of Common Stock.

After June 30, 2018, the Series B Preferred Shares shall have no voting rights and shall be redeemable by the Company for the sum of one tenth of a cent ($0.001) per Series B Preferred Share. The Series B Preferred Shares will not have any conversion rights and shall not be entitled to receive any dividends, distributions, or other economic or financial interest in the Company, and in the event of a liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the holders of Class B Preferred Shares will be entitled to receive out of the Company’s assets, whether such assets are capital or surplus, of any nature, the sum of one-tenth of a cent ($0.001) per Series B Preferred Share, after payment to the holders of the Common Stock and the holders of any other series or class of the Company’s equity securities ranking senior to the Common Stock.

Common Stock

The Company has 50,000,000 shares of Common Stock authorized, each having a par value of $0.001, as of December 31, 2013 and had 500,000,000 shares of Common Stock authorized, each having a par value of $0.10, as of June 30, 2013. There were 9,811,632 shares issued and outstanding as of December 31, 2013 and 9,961,632 shares issued and outstanding as of June 30, 2013. The Company has 509,000 and 338,368 shares to be issued as of December 31, 2013 and June 30, 2013, respectively. Each share of Common Stock is entitled to one (1) vote.

On October 3, 2013, the Company amended and restated the certificate of incorporation to decrease the number of authorized shares of Common Stock and Preferred Stock to 50,000,000 and 1,000,000 respectively. The Company also reduced the par value of the Common Stock to $0.001 from $0.10.

On October 29, 2013, 150,000 shares which had previously been issued to contractors were cancelled and returned to treasury because performance criteria relating to the issuance of these shares had not been met.

Note 12 – STOCK COMPENSATION

Restricted shares

On July 23, 2013, the Company entered into a consulting agreement to promote the Company's image in both the industry and capital markets. In connection with the agreements, the Company was to issue 170,632 shares of Common Stock valued at $2.02 (stock price at grant date), and recorded $344,675 as deferred compensation. During the three and six months ended December 31, 2013, the Company amortized $73,065 and $127,863 respectively as stock-based compensation.

	Number of shares
Granted but not issued June 30, 2013		338,368
Issued during six months ended December 31, 2013		-
Granted during six months ended December 31, 2013		170,632
Granted but not issued December 31, 2013		509,000

Note 13 – STOCK OPTIONS

On April 19, 2013, the Company entered into an agreement with a software developer. Upon achievement of certain milestones, the contractor can receive up to 100,000 Performance Based Stock Options at an exercise price of $2.50 per share. The options vest and become exercisable immediately upon grant with a 3 year life. As of December 31, 2013, 13,000 of the Performance Based Stock Options are vested. The FV of the options was calculated using the following assumptions: estimated life of three years, volatility of 351%, risk free interest rate of .35%, and dividend yield of 0%. The grant date FV of options was $249,995.

On July 19, 2013, the Company granted 75,000 Stock Options to each of the three non-employee directors pursuant to the Omnibus Incentive Plan. These Stock Options are exercisable at an exercise price of $2.02 per share. The options vest as to 2,083 shares per non-employee director on September 30, 2013, and as to an additional 2,083 shares each on the last day of each calendar month thereafter through and including August 31, 2016, except that the right to exercise the Options shall vest as to an additional 2,095 shares on the last day of August 31, 2016. The options become exercisable immediately upon vesting and continue in force through June 30, 2020 (the "Expiration Date"), unless sooner terminated as provided herein and in the Plan. The FV of the options was calculated using the following assumptions: estimated life of seven years, volatility of 755 %, risk free interest rate of 2.02%, and dividend yield of 0%. The grant date FV of options was $454,500.

On August 22, 2013, the Company granted 25,000 Stock Options to a contractor. These Stock Options are exercisable at an exercise price of $1.30 per share. The options vested and become exercisable immediately upon granting and continue in force through August 22, 2016 (the "Expiration Date"), unless sooner terminated as provided by the agreement. The FV of the options was calculated using the following assumptions: estimated life of three years, volatility of 843%, risk free interest rate of .82%, and dividend yield of 0%. The grant date FV of options was $32,500.

The Company recorded $45,369 and $115,491 option expense in the three and six months respectively ended December 31, 2013.

The following is a summary of the activity and position as of December 31, 2013.

	Number of
	Stock Options
Outstanding at June 30, 2013		100,000
Granted		250,000
Exercised		-
Expired		-
Outstanding at December 31, 2013		350,000
Exercisable at December 31, 2013		62,996

Options outstanding at December 31, 2013 are as follows:

Weighted

Total

Average

Weighted

Remaining

Average

Total Options

Life

Exercise

Options

Exercise

Exercise Price

Outstanding

(Years)

Price

Exercisable

Price

$1.30 to $2.50

350,000

5.412

1.70

62,996

1.70

The fair value of the equity instruments granted was determined using the closing price on the day the shares were granted in the case of shares issued and using the Black and Scholes option valuation model in the case of share options granted.

Note 14 – RELATED PARTY TRANSACTIONS

During the three and six months ended December 31, 2013 and 2012, the Company paid a company controlled by the President of Moneytech for consulting services $96,782 and $52,977 (three months ended December 31, 2013 and 2012), respectively, and $122,449 and $105,943 (six months ended December 31, 2013 and 2012), respectively.

Note 15 – INCOME TAX (RESTATED)

The following is the income tax expense reflected in the Statement of Operations for the three and six months ended December 31, 2013 and 2012:

INCOME TAX EXPENSE	FOR THE THREE MONTHS ENDED				FOR THE SIX MONTHS ENDED
	12/31/2013		12/31/2012		12/31/2013		12/31/2012
Income tax expense - current	$	-	$	-	$	-	$	-
Income tax expense - deferred		128,220		75,263		177,372		167,384
Total	$	128,220	$	75,263	$	177,372	$	167,384

The following are the components of income before income tax reflected in the Statement of Operations for the three and six months ended December 31, 2013 and 2012:

COMPONENTS OF INCOME BEFORE INCOME TAX	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012			12/31/2013			12/31/2012
(Loss) income from continuing operations	$	(17,774	)	$	97,524		$	(88,882	)	$	251,888
Net loss from discontinued operations		(104,678	)		-			(297,530	)		-
(Loss) income before Income tax	$	(122,452	)	$	97,524		$	(386,412	)	$	251,888
Loss from USA operations	$	(489,315	)	$	-		$	(807,091	)	$	-
Income from Australian operations		366,863			97,524			420,679			251,888
(Loss) income before Income tax	$	128,220		$	75,263		$	177,372		$	167,384
Income tax
Effective tax rate		(104	) %		77	%		(46	) %		66	%

The Company did not have a United States tax paying entity during the three and six months ended December 31, 2012.

The following is a reconciliation of the provision for income taxes at the US federal income tax rate to the income taxes reflected in the Statement of Operations for the three and six months ended December 31, 2013 and 2012:

INCOME TAX RATE RECONCILIATION	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012			12/31/2013			12/31/2012
US statutory rates		34	%		34	%		34	%		34	%
Tax rate difference		(4	) %		(4	) %		(4	) %		(4	) %
Research and development		(14	) %		47	%		(13	) %		36	%
USA losses		(120	) %		-	%		(63	) %		-	%
Tax expenses at actual rate		(104	) %		77	%		(46	) %		66	%

The following are the components of deferred tax reflected in the Statement of Operations for the three and six months ended December 31, 2013 and 2012:

COMPONENTS OF DEFERRED TAX EXPENSE	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	12/31/2013			12/31/2012			12/31/2013			12/31/2012
Tax losses carried forward	$	140,643		$	76,687		$	217,176		$	133,141
Doubtful debts reserve		(8,751	)		8,158			(36,133	)		41,107
Accruals		(3,672	)		(9,582	)		(3,671	)		(6,864	)
		128,220			75,263			177,372			167,384

The following are the components of deferred tax reflected in the Balance Sheet as of December 31, 2013 and June 30, 2013:

COMPONENTS OF DEFERRED TAX ASSET	12/31/2013		6/30/2013
Tax losses carried forward	$	1,349,971	$	1,592,888
Doubtful debts reserve		250,046		219,442
Accruals		39,694		36,890
		1,639,711		1,849,221
Deferred tax assets - current	$	268,440	$	718,767
Deferred tax assets - non current		1,371,271		1,130,454
		1,639,711		1,849,221

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the ability to recover the deferred tax assets within the jurisdiction from which they arise, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company began with historical results adjusted for changes in accounting policies and incorporates assumptions including the amount of future pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimate the Company are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company consider three years of cumulative operating income (loss).

As of December 31, 2013, Moneytech had approximately $4,499,904 in net operating loss (“NOL”) carry forward available to offset future taxable income in Australia. The NOLs can be carried forward without expiration in Australia. Management believes that all NOLs will be utilized in the near future and therefore no allowance was made.

As of December 31, 2013, Source had NOL’s of approximately $13 million dollars to offset future taxable income in the US. Federal NOLs can generally be carried forward 20 years. However, under Internal Revenue Code section 382 due to the change in ownership there are certain limitations placed on the NOL carryover and Source may only use approximately $161,500 per year of the available NOL. The deferred tax assets of the US entities at December 31, 2013 were fully reserved. Management believes it is more likely than not that these assets will not be realized in the near future.

Note 16 – GEOGRAPHIC SEGMENT INFORMATION (RESTATED)

As a result of the reverse merger on June 30, 2013 the Company operates in two regions: Australia and United States of America. All inter-company transactions are eliminated in consolidation.

For the three months ended December 31, 2013 and 2012, geographic segment information is as follows:

	Three Months Ended December 31, 2013										Three Months Ended December 31, 2012
	Australia		USA			Elimination		Consolidated			Australia		USA		Elimination		Consolidated
Revenue	$	1,519,644	$	2,174		$	-	$	1,521,818		$	1,237,067	$	-	$	-	$	1,237,067
Cost of Revenue		721,304		2,204			-		723,508			698,258		-		-		698,258
Total Expenses		658,072		296,437			-		954,509			557,494		-		-		557,494
Other Income (Expense)		138,425		-			-		138,425			116,209		-		-		116,209
Net Income (Loss) before tax from continuing operations		278,693		(296,467	)		-		(17,774	)		97,524		-		-		97,524
Discontinued operations		-		(104,678	)		-		(104,678	)		-		-		-		-
Assets		41,037,889		7,154,616			7,021,458		41,171,047			40,702,647		-		-		40,702,647
Debt		33,609,632		553,117			396,205		33,766,544			32,538,169		-		-		32,538,169

For the six months ended December 31, 2013 and 2012, geographic segment information is as follows:

	Six Months Ended December 31, 2013										Six Months Ended December 31, 2012
	Australia		USA			Elimination		Consolidated			Australia		USA		Elimination		Consolidated
Revenue	$	2,712,039	$	2,174		$	-	$	2,714,213		$	2,342,316	$	-	$	-	$	2,342,316
Cost of Revenue		1,495,511		2,204			-		1,497,715			1,409,004		-		-		1,409,004
Total Expenses		1,141,343		509,532			-		1,650,875			916,197		-		-		916,197
Other Income (Expense)		345,495					-		345,495			234,773		-		-		234,773
Net Income (Loss) before tax from continuing operations		420,680		(509,562	)		-		(88,882	)		251,888		-		-		251,888
Discontinued operations		-		(297,530	)		-		(297,530	)		-		-		-		-
Assets		41,037,889		7,154,616			7,021,458		41,171,047			40,702,647		-		-		40,702,647
Debt		33,609,632		553,117			396,205		33,766,544			32,538,169		-		-		32,538,169

Note 17 – EQUITY INVESTMENT (RESTATED)

On January 16, 2013 the Company entered into an agreement whereby it received a 37.5% equity interest in 360 Market Pty. Limited (“360”) in exchange for allowing 360 to utilize certain license rights. There was no exchange of cash or debt for the transaction and it was accounted for on the historical cost basis with a $0 value. The investment is accounted for by the equity method since the Company obtained a 37.5% equity interest. Due to the continuous loss from inception through September 30, 2013 incurred by 360, the Company did not recognize any income or return from the investment as doing so would have created a negative carrying value in the investment account. The Company discontinued using the equity method rather than establish a negative balance. The investment retains a zero balance until subsequent investee profits eliminate all unrealized losses. In addition, 360 has had a negative equity position since inception of the investment thereby precluding any other disclosure regarding our underlying position in the net equity of 360.

Note 18 – COMMITMENTS

The Company leases two offices under renewable operating leases expiring on August 31, 2014 and July 31, 2015. The aggregate monthly rent is approximately USD $11,228. For the three months ended December 31, 2013 and 2012, the rental expense was USD $33,684 and USD $38,805, respectively. For the six months ended December 31, 2013 and 2012, the rental expense was USD $69,283 and USD $71,819, respectively.

Future minimum rental payments required under operating leases as of December 31, 2013 are as follows:

June 30, 2014	$	106,478
2015		12,800
	$	119,278

Note 19 – SUBSEQUENT EVENTS

Management has evaluated events subsequent through February 14, 2014 for transactions and other events that may require adjustment of and/or disclosure in such financial statements and these included:

In January 2014, management decided to return the ‘WikiTechnologies’ entity to Edward DeFeudis and Marco Garibaldi as per the Share Exchange Agreement. The decision was taken because revenue and profitability benchmarks set forth in the Share Exchange Agreement were unlikely to be met. The shares in WikiTechnologies, Inc. will be returned to Edward DeFeudis and Marco Garibaldi. Edward DeFeudis and Marco Garibaldi will give up their right to the 2,240,000 Source Financial, Inc. shares of Common Stock which are held in Escrow on their behalf. These shares will be returned to Treasury. The return agreement has not been finalized.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report and with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2013. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements.

Overview

We provide commercial asset based lending including accounts receivable and trade financing and other financial services to small to medium sized businesses and individuals, principally in Australia through Moneytech and its subsidiaries, with a focus on utilizing leading edge technology to deliver these services. Our services are offered in Australia through our subsidiary, Moneytech Limited and its subsidiaries and, in the United States through our subsidiary, WikiTechnologies, Inc.

On June 30, 2013, we acquired Moneytech in exchange for 5,300,000 shares of our common stock (the “Share Exchange”). As a result of the Share Exchange, Moneytech has become our wholly-owned subsidiary, and the former shareholders of Moneytech own in excess of 50% of our outstanding shares of common stock on a fully diluted basis. In connection with acquisition of Moneytech, we issued 5,000 shares of our Series B Preferred Stock to Hugh Evans, the Chairman and Managing Director of Moneytech. The Series B Shares enable Mr. Evans, until June 30, 2018, to (A) elect the majority of our Board of Directors and (B) vote on all other matters presented to the holders of our common stock (the “Common Shareholders”), with each vote per Series B Share equal to 1,000 shares of common stock. After June 30, 2018, the Series B Shares will have no voting rights and may be redeemed by us for a per share price one tenth of a cent ($0.001).

The Share Exchange was accounted for as a recapitalization of Moneytech effected by a share exchange, where Moneytech is considered the acquirer for accounting and financial reporting purposes. Our net assets and liabilities as of the date of the consummation of the Share Exchange were brought forward at their book value and no goodwill was recognized. Consequently, the historical consolidated financial statements of Moneytech are now the historical financial statements of Source Financial, Inc.

Moneytech commenced operations in 2003 as an Australian based, technology driven, commercial finance company. Moneytech has an AUD$50 million securitized wholesale debt facility (the “Wholesale Facility,” “Receivables Purchase Agreement” or “RPA”) with the structured finance division of one of the four leading Australian banks. Moneytech uses the Wholesale Facility to offer asset based, trade finance or accounts receivable finance and working capital solutions to small and medium enterprises (“SME’s”) throughout Australia. Moneytech has been in operation for over ten years and has operated profitably in five of the last six years.

To distinguish itself from traditional asset based lenders, and to manage and facilitate the advance of money to its customers, Moneytech has developed, operates and maintains its own real time core money transfer platform called The Moneytech Exchange. The Moneytech Exchange stores and tracks every invoice and payment entered into the system and automatically communicates with the major Australian transactional banks to settle thousands of transactions per day, in real time. The Moneytech Exchange is fully automated, real time and online. Human intervention only occurs to manage exceptions and provide necessary transaction approvals or authorizations.

A reorganization of the company structure was effected following the acquisition of Moneytech on June 30, 2013. The following chart reflects our organizational structure as of today.

Our objective is to become a leading provider of commercial lines of credit and financial services, in particular money transfer services, to small and medium businesses in Australia and the United States. We seek to differentiate our services by developing and utilizing leading edge technologies to deliver our services. Moneytech currently provides asset based lines of credit in Australia using funds made available under its Receivables Purchase Facility (“RPA”) with one of the four leading Australian banks. We also provide payment aggregation and processing solutions in Australia. For the immediate future we intend to continue to focus on our asset based lending solutions business in Australia while seeking to expand our money transfer businesses in Australia and the United States. We plan to achieve our growth objectives by signing up new customers for our products in existing markets, expanding the services offered to our customers, entering new international markets, and continuing our research and development efforts to launch new technology driven financial products into both the Australian and United States markets.

Discontinued operations

In January 2014, management decided to return the ‘Wiki Technologies’ entity to Edward DeFeudis and Marco Garibaldi as per the Share Exchange Agreement. The decision was taken because revenue and profitability benchmarks set in the Share Exchange Agreement were unlikely to be met. On February 14, 2014, pursuant to a Settlement Agreement, the outstanding shares of Wiki Technologies, Inc. were returned to Edward DeFeudis and Marco Garibaldi, and Edward DeFeudis and Marco Garibaldi relinquished their right to the 2,240,000 shares of our Common Stock held in escrow on their behalf, of which 2,130,000 shares was returned to us for cancellation. The agreement has not been finalized.

Net income attributable to our shareholders, and the associated return on equity, are the primary metrics by which we judge the performance of our business. Accordingly, we closely monitor the primary drivers of net income:

●

Net financing income - We track the split between the interest income, finance charges and fee income earned on our assets and the interest, finance charges and fees incurred on our Wholesale Facility, and continually monitor the components of our yield and our cost of funds. In addition, we monitor external rate trends, including the Reserve Bank of Australia cash rate.

●

Net bad debt losses - Other than our cost of funds- interest expense and related fees- the largest driver of business profitability is the minimization of bad debts. Each asset based line of credit is priced based on an industry and individual customer risk profile developed by us. Delinquencies negatively impact our business performance. Our profitability is directly connected to our net credit losses; therefore, we closely analyze credit performance and seek to limit our exposure when feasible through the purchase of credit insurance. Our target customer is a business that has financing requirements (in terms of size and time to funding) that make them poor candidates for loans from larger Australian commercial banks. Our lending criteria have, to date, resulted in a relatively low level of overdue and delinquent balances and correspondingly low levels of bad debt. We extend Credit for a maximum of 122 days. Amounts outstanding beyond their due date are considered overdue and amount overdue for more than 30 days are considered delinquent. We monitor credit quality within our portfolio by observing trends in “average collection periods” “Days Sales Outstanding,” delinquent balances as a percentage of our portfolio and single obligor concentration limits and expect our bad debt to be approximately 0.15% of amounts funded. We assess the recoverability of each delinquent balance when determining the required amount of bad debt reserve.

●

Costs and expenses - We assess our operational efficiency using our cost-to-income ratio. We perform extensive analysis to determine whether observed fluctuations in cost and expense levels indicate a trend or are the nonrecurring impact of large projects. Our cost and expense analysis also includes a loan- and portfolio-level review of origination and servicing costs to assist us in assessing profitability by pool and vintage. Portfolio volume and rate of turnover determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor new business volume and business growth.

The accounts of Moneytech and its wholly owned subsidiaries are maintained, and its consolidated financial statements are expressed, in Australian dollars. Such financial statements were translated into United States Dollars with the Australian Dollar as the functional currency to prepare the consolidated financial statements included in this Report. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder’s equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.

Results of Operations

Three months ended December 31, 2013 and 2012

The following discussion of our results of operations constitutes management’s review of the factors that affected our financial and operating performance for the three months ended December 31, 2013 (“Q2 2014”) and 2012 (“Q2 2013”). This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report.

Set forth below are certain items from our operating statements for the three months ended December 31, 2013 and 2012:

	Quarter Ended December 31, 2013			Quarter Ended December 31, 2012		Dollar Increase (Decrease)			Percentage Increase (Decrease)
Revenue	$	1,521,818		$	1,237,067	$	284,751			23	%
Confirmed capital and credit express		1,339,497			1,085,528		253,970			23	%
Interest revenue		948,979			611,234		337,745			55	%
Fees		384,316			471,697		(87,381	)		(19	)%
Other revenue		6,203			2,597		3,606			139	%
Payment services		109,848			131,198		(21,350	)		(16	)%
Giftcard program revenue		31,617			90,363		(58,746	)		(65	)%
Other revenue		78,231			40,835		37,396			92	%
Other revenue		72,472			20,341		52,132			256	%
360FX customer referral		24,741			15,625		9,116			58	%
Foreign exchange		47,745			94		47,651			50,544	%
Other revenue		(14	)		4,622		(4,635	)		(100	)%
Cost of revenue		723,508			698,258		25,250			4	%
Confirmed capital and credit express		525,953			535,746		(9,793	)		(2	)%
Interest expense		419,168			444,300		(25,131	)		(6	)%
Insurance		38,570			31,149		7,421			24	%
Account Issuing Expenses		51,009			54,617		(3,608	)		(7	)%
Other		17,206			5,680		11,526			203	%
Payment services		34,067			4,410		29,657			672	%
Gift card expenses		4,120			3,244		876			27	%
Other		29,947			1,166		28,781			-
Depreciation and amortisation		163,488			156,348		7,141			5	%

Other cost of revenue	-	1,755	(1,755	)	-

Gross profit	798,310	538,809	259,501		48	%

Operating Expenses
Compensation expenses	251,521	200,545	50,976		25	%
Research and development expense	109,397	116,724	(7,327	)	(6	)%
Bad debt expenses	30,259	61,736	(31,477	)	(51	)%
Occupancy expenses	70,104	59,176	10,928		18	%
Depreciation expense	16,833	18,866	(2,033	)	(11	)%

General and administration expenses		476,395			100,447			375,948			374	%
(Loss) income from operations		(156,199	)		(18,685	)		(137,514	)		736	%

Other income		138,425			116,209			22,216			19	%

(Loss) income before income tax		(17,774	)		97,524			(115,298	)		(118	)%

Income tax expense		128,220			75,263			52,957			70	%

Net (loss) income from continuing operations		(145,994	)		22,261			(168,255	)		(756	)%

Net result from discontinued operations		(104,678	)		-			(104,678	)	NA

Net (loss) income	$	(250,672	)	$	22,261		$	(272,933	)		(1,226	)%

Revenue

Consolidated revenue from continuing operations for Q2 2014 was approximately $1,521,818, an increase of $284,751 or 23% from our consolidated revenue from continuing operations for Q2 2013 of $1,237,067. Excluding differences attributable to changes in foreign exchange rates, revenue increased 38%. Excluding differences attributable to changes in foreign exchange rates, the increase is primarily the result of an increase in Confirmed Capital and Credit Express revenue (34%), an increase in other revenues (5%) and a decrease in payment services revenues (1%). Excluding differences attributable to changes in foreign exchange rates, the Confirmed Capital and Credit Express revenue increase is mainly attributable to settled penalties associated with the default of one Confirmed Capital customer (24%). Lines of credit we funded decreased slightly from approximately AUD$62 million during Q2 2013 to AUD$59 million during Q2 2014. The increase in other revenues is primarily attributable to activity with 360 Markets Foreign exchange business. The decrease in Payment Services revenues is mainly attributable to a decrease in gift cards revenues.

Cost of Revenue; Gross Profit

Revenue from continuing operations, which is composed principally of the interest, fees and insurance we pay related to our RPA and the amortization expense of capitalized research and development costs was $723,508 in Q2 2014, an increase of $25,250 or 4% from our cost of revenue of $698,258 for Q2 2013. Excluding differences attributable to changes in foreign exchange rates, costs of revenue increased 16%. Excluding differences attributable to changes in foreign exchange rates, the increase is primarily the result of increases in Confirmed Capital and Credit Express costs (7%), increases in Payment services costs (5%) and increases in amortization of intangibles (4%). Excluding differences attributable to changes in foreign exchange rates, the Confirmed Capital and Credit Express cost increase is mainly attributable to an increase in interest expense, an increase in insurance costs and an increase in fees associated with accounts. The payment services cost increase is mainly attributable to an increase in costs at MPOS and mPay and the increase in amortization is attributable to increased investment in intangibles. MPOS and mPay are subsidiaries of Moneytech which provide money transfer services in Australia.

Our profit from continuing operations, increased $259,501 from $538,809 in Q2 2013 to $798,310 in Q2 2014. This was primarily because net interest revenues and fee revenue in the Confirmed Capital and Credit Express business increased. Net interest revenue increased primarily because net interest margins increased as a result of a lag in decreasing the interest rates charged to our customers as the rate of interest charged under the RPA decreased and because increased rates of interest were charged on the default of a Confirmed Capital customer.

Operating Expenses; Bad Debt Expense; Income from Operations

Apart from the costs under our RPA, the other significant factor in determining our overall profitability is our operating expenses, in particular our bad debt expense. Our bad debt expense for Q2 2014 was $30,259, representing a decrease of $31,477 from bad debt expense of $61,736 for Q2 2013. We regularly evaluate the credit quality of our customers and this decrease is attributable to changes in the specific assessment of several customer balances in line with our credit and collections policy.

The percentage of delinquent balances in our portfolio was 2.00% and 1.60% as of December 31, 2013 and 2012 respectively. The percentage of delinquent balances in our portfolio averaged 1.97% and 1.63% in the three months ended December 31, 2013 and 2012 respectively. The average collection period in our portfolio increased from 41 days to 55 days during the three months ended December 31, 2013 and from 48 to 58 days during the three months ended December 31, 2012. Bad debts as a percentage of amount funded was 0.06% and 0.13% in the three months ended December 31, 2013 and 2012 respectively.

Our total operating expenses from continuing operations (other than bad debt) increased by $428,492 or 86% from $495,758 in Q2 2013 to $924,250 in Q2 2014. This increase is primarily reflected by the inclusion of costs associated with operating in the United States including the issuance of restricted stock and options to employees, consultants and non-employee directors of the company ($110,934 or 22%) and other professional services ($252,310 or 51%).

Other Income; Provision for income taxes; net (loss) income

To date, our other expense (income) has consisted of financing costs other than those incurred under the RPA, offset by interest income on the cash reserves we are required to maintain under the RPA, and research and development grants received from the Australian government. In Q2 2014 we accrued AUD $120,000 for research grants we expect to receive later this year from the Australian government.

The research and development grant payment is determined according to criteria set by the Australian government. Grant processing and payment takes place annually and requires the filing of the Australian tax return prior to finalization and payment. It is not a return of tax. The company works with Ernst and Young in preparing the claim and the payment expected is accrued as income when the grant criteria are met.

Our net loss from continuing operations before tax for Q2 2014 was $17,774, as opposed to net income of $97,524 for Q2 2013. As a result of $128,220 in taxes incurred in Q2 2014, we incurred a net loss after tax for Q2 2014 of $145,994, as compared to net income after tax for Q2 2013 of $22,261. No tax benefit has been recognized for the losses incurred in the United States because management believes it more likely than not that these assets will not be realized in the near future. Operations in Australia remain profitable while operations in the United States are not yet profitable. This is primarily attributable to the Wiki business not meeting targets and the subsequent decision to discontinue these operations.

Net loss from discontinued operations.

In January 2014, management decided to return the ‘Wiki Technologies’ entity to Edward DeFeudis and Marco Garibaldi set forth in the terms of the Share Exchange Agreement. The decision was taken because revenue and profitability benchmarks as per the Share Exchange Agreement were unlikely to be met. Revenue and expenses, and gains and losses relating to the discontinued business have been reclassified from the results of continuing operations and are reflected as net loss from discontinued operations.

Revenue $1,008, Cost of Revenue ($48,128), Operating expenses ($58,778) and Other income $1,220 contributed to the net loss of $104,678. Operating expenses were lower in Q2 2014 as compared to Q1 2014 because the business paid only essential items.

Other comprehensive income.

Our other comprehensive income consists of gains and losses in net asset value that occurs when movements in foreign exchange rates occur. These gains or losses are primarily as a result of changes in the AUD/USD exchange rate. We cannot and do not attempt to predict movements in these exchange rates. The changes in net asset value occur because our net assets and operational activity are principally in Australian Dollars. We do not hedge the foreign exchange rate exposure. As operations in the United States expand the impact of foreign exchange rates on our results of operations will decrease.

The average AUD/USD exchange rates were 1 to 1.0387 and 1 to 0.9287 in Q2 2013 and Q2 2014, respectively.

Six months ended December 31, 2013 and 2012

The following discussion of our results of operations constitutes management’s review of the factors that affected our financial and operating performance for the six months ended December 31, 2013 (“First Half 2014”) and 2012 (“First Half 2013”). This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report.

Set forth below are certain items from our operating statements for the six months ended December 31, 2013 and 2012:

Six Months

Ended

December

31, 2013

Six Months

Ended

December

31, 2012

Dollar

Increase

(Decrease)

Percentage

Increase

(Decrease)

Revenue	$	2,714,213		$	2,342,316		$	371,897		16	%
Confirmed capital and credit express		2,399,867			2,096,162			303,705		14	%
Interest revenue		1,616,379			1,232,607			383,772		31	%
Fees		719,585			859,868			(140,283	)	(16	)%
Other revenue		63,903			3,687			60,216		1,633	%
Payment services		213,607			212,953			654		0	%
Giftcard program revenue		54,315			117,597			(63,282	)	(54	)%
Other revenue		159,293			95,356			63,937		67	%
Other revenue		100,739			33,201			67,538		203	%
360FX customer referral		52,355			29,128			23,228		80	%
Foreign exchange		48,895			768			48,127		6,266	%
Other revenue		(511	)		3,306			(3,817	)	(115	)%
Cost of revenue		1,497,715			1,409,004			88,711		6	%
Confirmed capital and credit express		1,126,803			1,094,386			32,417		3	%
Interest expense		884,769			900,988			(16,219	)	(2	)%
Insurance		76,641			96,400			(19,758	)	(20	)%
Account Issuing Expenses		87,158			90,608			(3,449	)	(4	)%
Other		78,235			6,392			71,843		1,124	%
Payment services		50,131			(2,724	)		52,855		(1,941	)%
Gift card expenses		10,280			(3,890	)		14,170		(364	)%
Other		39,851			1,166			38,684		-
Depreciation and amortisation		320,780			315,586			5,194		2	%
Other cost of revenue		-			1,755			(1,755	)	-

Gross profit		1,216,498			933,312			283,186		30	%

Operating expenses
Compensation expenses	369,074	321,402	47,672		15	%
Research and development expense	218,795	236,115	(17,320	)	(7	)%
Bad debt expenses	251,252	68,686	182,566		266	%
Occupancy expenses	129,176	112,119	17,057		15	%
Depreciation expense	36,907	29,921	6,986		23	%

General and administration expenses		645,671			147,954		497,717			336	%
(Loss) income from operations		(434,377	)		17,115		(451,492	)		(2,638	)%

Other income		345,495			234,773		110,722			47	%

(Loss) income before income tax		(88,882	)		251,888		(340,770	)		(135	)%

Income tax expense		177,372			167,384		9,988			6	%

Net (loss) income from continuing operations		(266,254	)		84,504		(350,758	)		(415	)%

Net result from discontinued operations		(297,530	)		-		(297,530	)	NA

Net (loss) income	$	(563,784	)	$	84,504	$	(648,288	)		(767	)%

Revenue

Consolidated revenue from continuing operations for the First Half 2014 were approximately $2,714,213, an increase of $371,897 or 16% from our consolidated revenue from continuing operations for the First Half 2013 of $2,342,3216. Excluding differences attributable to changes in foreign exchange rates, revenue increased 30%. Excluding differences attributable to changes in foreign exchange rates, the increase resulted primarily from an increase in Confirmed Capital and Credit Express revenue (26%), an increase in other revenue (3%) and an increase in payment services revenue (1%). Excluding differences attributable to changes in foreign exchange rates, the Confirmed Capital and Credit Express revenue increase is mainly attributable to an increase in interest revenue (25%) and an increase in fees charged to new customers to set up their accounts (3%). Excluding differences attributable to changes in foreign exchange rates, Confirmed Capital and Credit Express revenue was 11% higher in total as a result of settled penalties associated with the default of one Confirmed Capital customer. The remainder of the increase in interest revenue primarily results from an increase in the lines of credit we funded from approximately AUD$122 million during the First Half 2013 to AUD$133 million during the First Half 2014. The other revenue increase is primarily attributable to increases in referrals of Moneytech’s customers to the 360 Markets Foreign Exchange business. The payment services revenue increase is mainly attributable to a decrease in gift cards revenue and an increase in revenues at MPOS and mPay. MPOS and mPay are subsidiaries of Moneytech which provide money transfer services in Australia.

Cost of Revenue; Gross Profit

Our cost of revenue from continuing operations, which is composed principally of the interest, fees and insurance we pay related to our RPA and the amortization expense of capitalized research and development costs, was $1,497,715 in the First Half 2014, an increase of $88,711 or 6% from our cost of revenue of $1,409,004 for the First Half 2013. Excluding differences attributable to changes in foreign exchange rates, costs of sales increased 20%. Excluding differences attributable to changes in foreign exchange rates, the increase is primarily the result of increases in Confirmed Capital and Credit Express costs (12%), increases in payment services costs (4%) and increases in amortization of intangibles (3%). Excluding differences attributable to changes in foreign exchange rates, the Confirmed Capital and Credit Express cost increase is mainly attributable to an increase in interest expense (7%), an in increase in costs associated with setting up the accounts of new customers (6%), a decrease in insurance costs (1%) and an increase in fees associated with existing accounts (1%). The increase in our interest expense primarily results from the growth in the volume of credit lines funded in the current period. The payment services cost increase is mainly attributable to an increase in costs at Mpos and mPay and the increase in amortization is attributable to increased investment in intangibles.

Our profit from continuing operations, increased $283,186 from $933,313 in the First Half 2013 to $1,216,498 in the First Half 2014. This was primarily because net interest revenues and fee revenues in the Confirmed Capital and Credit Express business increased. Net interest revenues increased primarily because lines of credit funded increased, because net interest margins increased as a result of a lag in decreasing the interest rates charged to our customers as the rate of interest charged under the RPA decreased and because increased rates of interest were charged on the default of a Confirmed Capital customer.

Operating Expenses; Bad Debt Expense; Income from Operations

Apart from the costs under our RPA, the other significant factor in determining our overall profitability is our operating expenses, in particular our bad debt expense. Our bad debt expense for the First Half 2014 was $251,252, representing an increase of $182,566 from bad debt expense of $68,686 for the First Half 2013.

The percentage of delinquent balances in our portfolio was 2.00% and 1.60% as of December 31, 2013 and 2012 respectively. The percentage of delinquent balances in our portfolio averaged 1.97% and 1.70% in the six months ended December 31, 2013 and 2012 respectively. The average collection period in our portfolio increased from 45 days to 55 days during the six months ended December 31, 2013 and from 47 to 58 days during the six months ended December 31, 2012. Bad debts as a percentage of amount funded was 0.23% and 0.07% in the six months ended December 31, 2013 and 2012 respectively.

Our total operating expenses from continuing operations (other than bad debt) increased by $552,112 or 65% from $847,511 in the First Half 2013 to $1,399,623 in the First Half 2014. This increase is primarily reflected by the inclusion of costs associated with operating in the United States including the issuance of restricted stock and options to employees, consultants and non-employee directors of the company ($178,356 or 21%) and other professional services ($304,885 or 36%).

Other Income; Provision for income taxes; net (loss) income

To date, our other expense (income) has consisted of financing costs other than those incurred under the RPA, offset by interest income on the cash reserves we are required to maintain under the RPA, and research and development grants received from the Australian government. In the First Half 2014 we accrued AUD $320,000 for research grants we expect to receive later this year from the Australian government.

Our net loss from continuing operations before tax for the First Half 2014 was $88,882, as opposed to net income of $251,888 for First Half 2013. As a result of $177,323 in taxes incurred in the First Half 2014, we incurred a net loss after tax for the First Half 2014 of $266,254, as compared to net income after tax for the First Half 2013 of $84,504. No tax benefit has been recognised for the losses incurred in the United States because management believes it more likely than not that these assets will not be realized in the near future. Operations in Australia (Moneytech) remain profitable while operations in the United States (Source) are not yet profitable. This is primarily attributable to the WikiTechnologies business not meeting targets and the subsequent decision to discontinue these operations.

Net loss from discontinued operations.

In January 2014, management decided to return the ‘Wiki Technologies’ entity to Edward DeFeudis and Marco Garibaldi as per the terms of the Share Exchange Agreement. The decision was taken because revenue and profitability benchmarks as per the Share Exchange Agreement were unlikely to be met. Revenue and expenses, and gains and losses relating to the discontinued business have been reclassified from the results of continuing operations and are reflected as net loss from discontinued operations.

Revenue $2,647, Cost of Revenue ($70,460), Operating expenses ($230,277) and Other income $560 contributed to the net loss of $297,530.

Other comprehensive income.

Our other comprehensive income consists of gains and losses in net asset value that occur when movements in foreign exchange rates occur. These gains or losses are primarily as a result of changes in the AUD/USD exchange rate. We cannot and do not attempt to predict movements in these exchange rates. The changes in net asset value occur because our net assets and operational activity are principally in Australian Dollars. We do not hedge the foreign exchange rate exposure. As operations in the United States expand the impact of foreign exchange rates on our results of operations will decrease.

The average AUD/USD exchange rates were 1 to 1.0386 and 1 to 0.9225 in the First Half 2013 and the First Half 2014, respectively.

Comparison of Balance Sheet Data as at December 31, 2013 and June 30, 2013

Set forth below are certain items from our Consolidated Balance Sheet at December 31, 2013 and June 30, 2013:

	December 31, 2013		June 30, 2013
Cash and cash equivalents	$	6,899,738		7,140,539
Trade Receivables		26,768,591		27,008,840
Total Assets		41,171,047		41,360,924

Wholesale Loan Facility	$	25,593,086		25,669,388

Total Liabilities		33,766,544		33,696,546

Total Equity	$	7,404,503		7,664,378

Set forth below are certain items from our Statement of Cash Flows for the three and six months ended December 31, 2013 and 2012:

	SIX MONTHS ENDED
	December 31, 2013			December 31, 2012
Net cash (used in) operating activities		(132,257	)		(585,085	)
Net cash (used in) investing activities		(395,928	)		(588,536	)
Net cash provided by financing activities		429,299			807,650
Net cash (used in) discontinued operations		(65,287	)		-
Exchange rate effect on cash		(141,916	)		124,483
Net cash (outflow)		(306,089	)		(241,488	)

Cash (Used in) Operating Activities

During the six months ended December 31, 2013, we used approximately $132,257 of net cash in our operating activities. This reflects our net loss from continuing operations of $266,254 plus $133,997 provided by changes in operating assets and liabilities and adjustments for non-cash items. Cash provided by working capital items was primarily impacted by an increase in trade receivables of $316,347 and other assets of $460,933. Trade receivables increased due to an increase in credit lines provided and other assets increased mainly due to increases in grants receivable. Adjustments for non-cash items consisted of depreciation and amortization in the amount of $357,687 and stock options and shares issued for compensation of $178,356.

During the six months ended December 31, 2012, we used approximately $585,086 of net cash in our operating activities. This reflects our net income of $84,504 less cash used by changes in operating assets and liabilities and adjustments for non-cash items. Cash used by working capital items and other activities was primarily impacted by a decrease in trade payables of $1,191,086, reflecting a decrease in buyer payments and sellers liabilities and other items providing $175,989. Adjustments for non-cash items consisted entirely of depreciation and amortization $345,507.

Cash (Used) in Investing Activities

During the six months ended December 31, 2013, net cash used in investing activities of $395,928 was primarily impacted by $322,875 in capitalized costs incurred on the development of intangible assets. Principally software related to The Moneytech Exchange and mPay.

During the six months ended December 31, 2012, net cash used in investing activities of $588,536 primarily reflects capitalized costs incurred on the development of intangible assets, principally software related incurred in the development of The Moneytech Exchange.

Cash Provided by Financing Activities

During the six months ended December 31, 2013, net cash provided by financing activities of $429,299 primarily reflects an increase in our borrowings under the Wholesale Loan Facility of $457,395. Withdrawals from our capital reserve accounts by our customers of $28,096 account for the difference.

During the six months ended December 31, 2012 net cash provided by financing activities of $807,650 primarily reflects an increase in our borrowings under the Wholesale Loan Facility of $531,199. Contributions to our capital reserve accounts by from our customers of $347,921 and loans repaid of $71,470 account for the difference.

Cash (Used in) discontinued operations

During the six months ended December 31, 2013, net cash used in discontinued operations of $65,287 primarily reflects the losses made by the Wiki business of $297,530 offset by adjustments for non-cash items and changes in operating assets and liabilities providing $88,149 and net cash provided by financing activities of $150,000. Net cash used by investing activities of $5,906 accounts for the difference.

Net cash (outflow)

During the six months ended December 31, 2013, net cash decreased by $306,089 as compared to the six months ended June 30, 2013, where net cash decreased by $241,489.

Our ability to offer asset based credit lines is determined by the amount of our capital and the amount of funds we can borrow. We require a significant amount of liquidity to offer our asset based credit lines and our rate of growth and profitability will, for the foreseeable future, largely be determined by our ability to raise equity or borrow funds with which to purchase receivables and the effective cost of such funds.

Credit Facility

In 2005 we entered into a Receivables Purchase Agreement (the “Wholesale Facility” or the “RPA”) with one of the “Big Four” Australian Banks which has been renewed annually each year thereafter. Pursuant to this Agreement we electronically offer eligible receivables to our lender for purchase on a nightly basis. These offerings are then settled by the lender on a daily basis. The funds we receive upon settlement are automatically and electronically delivered to our customers. Our gross profit is represented by the difference between what we charge our customers in interest, finance charges and fees and what we pay to our lender. Our borrowing limit under the RPA is AUD$50 million, subject to interim agreed upon limits determined by various tests and covenants. As at December 31, 2013 our borrowing capacity was limited to AUD $30 million and the total amount drawn against the facility was $25,593,086. The agreement is renewed annually on an agreed anniversary date, the latest of which was December 31, 2013. In 2014, the facility interim agreed upon limit has been extended to AUD$40 million and renewed until December 31, 2014, subject to pricing approval.

We pay an interest rate on all borrowed monies under the RPA which is directly linked to the Reserve Bank of Australia cash-rate, a utilization fee charged on monies available to be borrowed but not utilized, an annual line fee and fees for electronically accessing the facility. The Facility contains a number of covenants relating to our financial performance and performance of our receivables portfolio including but not limited to net profit targets, maximum dilution ratios, concentration limits, maximum delinquency ratios and cash reserve requirements. As of the date hereof we are in compliance with all covenants imposed by the RPA.

We, in turn, provide our customers with funds provided by the RPA. We charge each of our clients, interest at a rate above that charged by our lender and seek to have our clients pay a fee corresponding to each of the fees charged to us in respect of their loans. To the extent that the RPA requires that we deposit monies into an account to partially secure repayment of our loans, we seek to have those funds advanced by our customers as a condition of their credit lines. The cash reserve we are required to maintain pursuant to the RPA is included under Cash and cash equivalents on our balance sheet.

Commitments for Capital Expenditures

We do not have any commitments for capital expenditures.

The design and technical development of The Moneytech Exchange is completed and it is operational. Although we will continue to upgrade and add additional functionality to The Moneytech Exchange and will need to add additional personnel as we grow, the rate of growth of these expenses should be less than the rate of growth of our revenue. Further, we anticipate that as we expand our portfolio and increase the number of services we offer, the rate of growth in the lines of credit we service and in our revenues will exceed the rate of growth in our operating expenses. There are a number of reasons for this, the most significant being that most of the expense involved with any debtor/obligor is incurred when the relationship is established. In the absence of a default or other triggering event, so long as a debtor/obligor is online, it generates revenue for us with little impact on our operating expenses.

In addition to the upgrade and addition of functionality to The Moneytech Exchange, we will also incur expenditure on research and development of our payments services platform and functionality.

Off Balance Sheet Items

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Critical Accounting Policies

Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes, and the impact of changes in currency exchange rates. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in Note 3 to our consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial statements and our management’s discussion and analysis.

Allowance for Doubtful Accounts

Revenue Recognition

Concentration of Credit Risk

Cost of Revenue

Cost of revenue includes; programs licensed; operating costs including costs of funds and related product support service centers to drive traffic to our websites, costs incurred to support and maintain products and services, including inventory valuation adjustments; costs associated with the delivery of consulting services; and the amortization of capitalized intangible software costs. Capitalized intangible software costs are amortized over the estimated lives of the products.

Exchange (Loss) Gain

During the three months and six months ended December 31, 2013 and 2012, the transactions of Moneytech and its wholly owned subsidiaries were denominated in foreign currency and were recorded in Australian dollar (AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.

Foreign Currency Translation and Comprehensive (Loss) Income

The accounts of Moneytech and its wholly owned subsidiaries were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder’s equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.

Item 4. Controls and Procedures

a)	Disclosure controls and procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f) as of the end of the period covered by this Report and have concluded that due to material weaknesses in our internal control over financial reporting as described below, our disclosure controls and procedures, as of the end of the period covered by this report, were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and would be accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the ineffectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as a result of the material weaknesses in our internal control over financial reporting, management believes that (i) this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this Report and (ii) the consolidated financial statements, and other financial information, included in this Report fairly present in all material respects in accordance with generally accepted accounting principles ("GAAP") our financial condition, results of operations and cash flows as of, and for, the dates and periods presented.

b)	Management’s Remediation Initiatives

Prior to the consummation of the Share Exchange Agreement whereby we acquired Moneytech Limited, our Australian subsidiary, the accounting staff at Moneytech was adequate to perform the financial reporting obligations imposed upon it as a private company. In the opinion of management, however, the financial staff at Moneytech was not sufficient to deal with the reporting obligations imposed as a result of its transformation to a public company. The inadequacies of the financial staff resulted from a lack of sufficient personnel, which caused Moneytech to rely upon temporary employees and outside consultants, and the lack of familiarity of such persons with the obligations imposed upon a public company and US Generally Accepted Accounting Principles. Since consummation of the Share Exchange Agreement, our management has worked, and continues to work, to strengthen our internal control over financial reporting. We are committed to ensuring that such controls are operating effectively.

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls over financial reporting, we hired a new CFO who has familiarity with US GAAP and who has installed new procedures to correct the material weaknesses and deficiencies in our reporting systems. The CFO has already implemented controls that will improve our internal control and documentation related to our accounting policies and practices to identify, document and periodically assess whether all key judgments, conventions and estimates used conform to accounting principles generally accepted in the United States. We are committed to remediating the material weaknesses that existed at the end of the period covered by this Report and believe that as a result of the actions we have taken, our internal controls over financial reporting are now effective and, consequently, our disclosure controls and procedures are now effective.

As our business grows in size and complexity, we will continue to actively identify, develop and implement additional measures to materially improve and strengthen our internal control over financial reporting and ensure that they remain effective.

c)	Changes in Controls

Except for the changes in our accounting staff and procedures described above, there have been no changes in our internal control over financial reporting since the end of the period covered by this report that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 6. Exhibits

The following exhibits are filed herewith:

Exhibit Number		Document

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	SOURCE FINANCIAL, INC.

April 30, 2014	By:	/s/ Hugh Evans
		Hugh Evans Chief Executive Officer (Principal Executive Officer)

April 30, 2014	By:	/s/ Brian M. Pullar
		Brian M. Pullar Chief Financial Officer (Principal Financial and Accounting Officer)