TGNT 10-Q Quarterly Report Dec. 31, 2013

TOTALIGENT, INC.

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10-Q 1 f10q1213_sourcefinancial.htm QUARTERLY REPORT f10q1213_sourcefinancial.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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 033-26828

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.

SOURCE FINANCIAL, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I	FINANCIAL INFORMATION	2

Item 1.	Financial statements	2
	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	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	30

PART II	OTHER INFORMATION	30

Item 1A.	Risk Factors	30
Item 6.	Exhibits	31

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

ASSETS	December 31, 2013			June 30, 2013
	(Unaudited)			(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		1,081,531			988,860
Property, plant and equipment, net		502,724			569,031
Other assets		-			45,973
Goodwill		67,659			69,057
TOTAL NON-CURRENT ASSETS		4,991,062			4,987,334

TOTAL ASSETS	$	40,881,307		$	41,219,330

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 and 500,000,000 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		(1,200,861	)		(1,052,144	)
Accumulated deficit		(7,637,167	)		(6,917,697	)
TOTAL STOCKHOLDERS' EQUITY		7,114,763			7,522,784

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	40,881,307		$	41,219,330

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)

	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012

Revenue	$	1,581,716		$	1,309,608		$	2,955,168		$	2,616,913
Cost of revenue		783,425			770,794			1,738,669			1,683,600
Gross profit		798,291			538,814			1,216,499			933,313

Operating Expenses

Compensation expenses		251,521			231,954			369,074			386,883
Research and development expense		109,397			118,057			218,795			236,115
Bad debt expenses		30,259			61,736			251,252			68,686
Occupancy expenses		70,123			64,862			132,041			123,489
Depreciation expense		16,813			18,870			36,907			29,921
General and administration expenses		476,376			62,277			642,806			71,621
Total operating expenses		954,489			557,756			1,650,875			916,715
(Loss) income from operations		(156,198	)		(18,942	)		(434,376	)		16,598

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		3,713			-			3,713			-
Total Other Income		141,712			117,408			351,851			240,900

(Loss) income from continuing operations before income taxes		(14,486	)		98,466			(82,525	)		257,498

Provision for income taxes		299,187			90,158			339,416			95,078

Net (loss) income from continuing operations		(313,673	)		8,308			(421,941	)		162,420

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

Net (loss) income		(418,351	)		8,308			(719,471	)		162,420

Other comprehensive income
Foreign currency translation		(287,468	)		(63,565	)		(148,717	)		178,363

Comprehensive (loss) income	$	(705,819	)	$	(55,257	)	$	(868,188	)	$	340,783

Net (loss) income per share
Basic and Diluted:
Continuing operations	$	(0.030	)	$	0.002		$	(0.040	)	$	0.031
Discontinued	$	(0.010	)	$	-		$	(0.028	)	$	-
Total	$	(0.040	)	$	0.002		$	(0.069	)	$	0.031

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)

	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	$	(1,052,144	)	$	(6,917,697	)	$	7,522,784

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		-		-			-		-		-		-		(148,717	)		(719,470	)		(868,187	)

Balance December 31, 2013		10,470,632	$	10,321			5,000	$	50	$	150	$	15,942,270	$	(1,200,861	)	$	(7,637,167	)	$	7,114,763

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)

	FOR THE SIX MONTHS ENDED
	December 31, 2013			December 31, 2012

Net (loss) income	$	(719,470	)	$	162,420
Net (loss) from discontinued operations		(297,530	)		-
Net (loss) income from continuing operations		(421,940	)		162,420

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		333,067			88,950
Other assets		(460,935	)		85,329
Increase (decrease) in current liabilities:
Trade payables		187,821			(1,191,086	)
Net cash (used in) operating activities		(132,257	)		(585,603	)

Cash flows from investing activities
Purchase of property, plant and equipment		(73,053	)		(588,018	)
Development of intangible assets		(322,875	)		-
Net cash (used in) investing activities		(395,928	)		(588,018	)

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	$	6,356		$	95,078
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

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 fiscal year ended June 30, 2013, the Company determined that certain shares that had been authorized for issuance prior to the share exchange on June 30, 2013 and presentation of the stockholders’ equity on the consolidated balance sheet had not been properly accounted for in the Company’s financial statements. Specifically, the number of shares outstanding as of June 30, 2013 was 10,300,000, of which 338,368 is to be issued. The Company de cided to restate the consolidated balance sheet and stockholders’ equity for the fiscal year ended June 30, 2013 which resulted in a change in the opening numbers for the six months ended December 31, 2013.

The effect of the restatements are as follows:

	Reported			Restated
CONSOLIDATED BALANCE SHEET	June 30, 2013			June 30, 2013
Preferred stock	$	50		$	50
Common stock		996,164			996,163
Common stock to be issued		-			33,837
Additional paid in capital		14,496,411			14,462,575
Other comprehensive income		(1,052,144	)		(1,052,144	)
Accumulated income/(deficit)		(6,917,697	)		(6,917,697	)
Total Stockholders' Equity	$	7,522,784		$	7,522,784

There was no impact on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Note 2 – 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 (“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 operating results of the discontinued operation are summarized as follows:

	FOR THE THREE MONTHS ENDED					FOR THE SIX MONTHS ENDED
NET RESULT FROM DISCONTINUED OPERATIONS	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 (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	)	$	-

All assets and liabilities of WikiTechnologies, Inc. have been classified as assets/liabilities of discontinued operations in the balance sheet. The carrying amounts of assets and liabilities of discontinued operations are 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

The discontinued operations of Wiki Technologies, Inc. were reported in the United States of America segment in our geographic segment information as per Note 17.

Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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		(1,039,927	)		(979,163	)
	$	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	$	16,813	$	18,867	$	36,907	$	29,921
Depreciation, cost of revenue		29,469		26,510		56,576		55,936
Total depreciation expense	$	46,282	$	45,377	$	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	$	(313,673	)	$	8,308	$	(421,941	)	$	162,420
Net result from discontinued operations		(104,678	)		-		(297,530	)		-
Net (loss) income	$	(418,351	)	$	8,308	$	(719,471	)	$	162,420

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
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	$	(0.030	)	$	0.002	$	(0.040	)	$	0.031
Discontinued	$	(0.010	)	$	-	$	(0.028	)	$	-
Total	$	(0.040	)	$	0.002	$	(0.069	)	$	0.031

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

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 – DEFERRED TAX ASSETS

As of December 31, 2013 and June 30, 2013, the Company had deferred tax assets of $1,436,790 and $1,707,627 respectively. The Company had approximately $4,499,872 as of December 31, 2013 and $5,692,050 as of June 30, 2013 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.

The deferred tax asset as of December 31, 2013 and June 30, 2013 consists of the tax benefit of the NOL carryforward. Management believes that all NOLs will be utilized in the near future and therefore no allowance was provided. Accordingly, the Company as of December 31, 2013 and June 30, 2013 has deferred tax asset of:

	12/31/2013		6/30/2013
Current deferred tax assets	$	268,440	$	718,767
Non current deferred tax assets		1,081,531		988,860
Deferred tax assets	$	1,349,971	$	1,707,627

Note 6 – 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
Deferred payment processing cost	$	-	$	-
Prepaid gift card establishment fees		-		45,973
	$	-	$	45,973

Note 7 – 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		(2,562,596	)		(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 8 – 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 9 – 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 10 – 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, subject to pricing approval. Interest expense charged to cost of revenue related to the loan for the six months ended December 31, 2013 and 2012 was approximately USD $879,015 and USD $900,989, 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 11 – 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 12 – 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 500,000,000 shares of Common Stock authorized, each having a par value of $0.1, 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 returned to treasury because performance criteria relating to the issuance of these shares had not been met.

Note 13 – 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 14 – 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:

Exercise Price		Total Options Outstanding				Weighted Average Remaining Life (Years)				Total Weighted Average Exercise Price				Options Exercisable				Weighted Average Exercise 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 15 – 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 16 – INCOME TAX

As of December 31, 2013, Moneytech had approximately $4,499,872 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. The deferred tax asset as of December 31, 2013 and June 30, 2013 consists of the tax benefit of the NOL carry forward. 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.

The components of income before income taxes are as follows:

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	$	(14,486	)	$	98,466		$	(82,525	)	$	257,498
Net loss from discontinued operations		(104,678	)		-			(297,530	)		-
(Loss) income before Income tax		(119,164	)		98,466			(380,055	)		257,498

Loss from USA operations		(489,318	)		-			(807,091	)		-
Income from Australian operations		370,154			98,466			427,036			257,498
(Loss) income before Income tax		(119,164	)		98,466			(380,055	)		257,498

Income tax		299,187			90,158			339,416			95,078
Effective tax rate		(251	)%		92	%		(89	)%		37	%

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 Statements of Operations and Comprehensive (Loss) Income for the three and six months ended December 31, 2013 and 2012, respectively:

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		299,187		90,158		339,416		95,078
Total	$	299,187	$	90,158	$	339,416	$	95,078

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 expenditure		(19	)%		(7	)%		(8	)%		(5	)%
Amortisation of Intangibles		(67	)%		38	%		(21	)%		29	%
USA losses		(123	)%		-	%		(64	)%		-	%
Other expenses (benefits)		(72	)%		30	%		(27	)%		(17	)%
Tax expenses at actual rate		(251	)%		92	%		(89	)%		37	%

Note 17 – GEOGRAPHIC SEGMENT INFORMATION

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	$	1,579,542	$	3,182		$	-	$	1,582,724		$	1,309,608	$	-	$	-	$	1,309,608
Cost of Revenue		802,152		50,332			-		852,484			770,794		-		-		770,794
Total Expenses		548,948		443,389			-		992,337			557,756		-		-		557,756
Other Income		141,711		1,221			-		142,932			117,408		-		-		117,408
Net Income (Loss) before tax		370,154		(489,318	)		-		(119,164	)		98,466		-		-		98,466
Assets		40,748,149		7,154,616			7,021,458		40,881,307			40,892,232		-		-		40,892,232
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	$	2,952,994	$	4,821		$	-	$	2,957,815		$	2,616,913	$	-	$	-	$	2,616,913
Cost of Revenue		1,736,465		72,664			-		1,809,129			1,683,600		-		-		1,683,600
Total Expenses		1,141,343		739,809			-		1,881,152			916,715		-		-		916,715
Other Income		351,850		561			-		352,411			240,900		-		-		240,900
Net Income (Loss) before tax		427,036		(807,091	)		-		(380,055	)		257,498		-		-		257,498
Assets		40,748,149		7,154,616			7,021,458		40,881,307			40,892,232		-		-		40,892,232
Debt		33,609,632		553,117			396,205		33,766,544			32,538,169		-		-		32,538,169

Note 18 – EQUITY INVESTMENT

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. The investment is accounted for by the equity method. For the period from inception to December 31, 2013, 360 incurred a loss and the Company therefore did not recognize any income or return from the investment.

Note 19 – 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 20 – 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 ‘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 forth in the Share Exchange Agreement were unlikely to be met. The shares in Wiki Technologies, 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, of which 2,140,000 shares will be returned to us for cancellation.

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

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 industry and individual customer risk profile. Increases in 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.

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:

	THREE MONTHS ENDED						Dollar			Percentage
	December 31, 2013			December 31, 2012			Increase (Decrease)			Increase (Decrease)

Revenue		1,581,716			1,309,608			272,108			21	%
Cost of revenue		783,425			770,794			12,631			2	%
Gross profit		798,291			538,814			259,477			48	%

Compensation expenses		251,521			231,954			19,567			8	%
Research and development expense		109,397			118,057			(8,660	)		(7	)%
Bad debt expenses		30,259			61,736			(31,477	)		(51	)%
Occupancy expenses		70,123			64,862			5,261			8	%
Depreciation expense		16,813			18,870			(2,057	)		(11	)%
General and administration expenses		476,376			62,277			414,099			665	%
Income (loss) from operations		(156,198	)		(18,942	)		(137,256	)		725	%

Other income		141,712			117,408			24,304			21	%

Income before income tax		(14,486	)		98,466			(112,952	)		(115	)%

Income tax expense		299,187			90,158			209,029			232	%

Net (loss) income from continuing operations		(313,673	)		8,308			(321,981	)		(3,876	)%

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

Net (loss) income		(418,351	)		8,308			(426,659	)		(5,136	)%

Revenue

Consolidated revenue from continuing operations for Q2 2014 were approximately $1,581,716, an increase of $272,108 or 21% from our consolidated revenue from continuing operations for Q2 2013 of $1,309,608. Excluding differences attributable to changes in foreign exchange rates, revenue increased 36%. The increase resulted primarily from an increase in Confirmed Capital and Credit Express revenue (36%) and a decrease in payment services revenue (1%). The revenue from Confirmed Capital and Credit Express represented approximately 79% of our consolidated revenue for Q2 2014. The Confirmed Capital and Credit Express revenue increase is mainly attributable to an increase in interest revenue (35%) and an increase in fees (1%). Confirmed Capital and Credit Express revenue was 24% higher in total because of fees associated with the default of one Confirmed Capital customer which has been settled. Lines of credit we funded decreased slightly from approximately AUD$62 million during Q2 2013 to AUD$59 million during Q2 2014. The payment services revenues decrease is mainly attributable to a decrease in gift cards revenues (4%) and an increase in revenues at MPOS and mPay (4%). MPOS and mPay are subsidiaries of Moneytech which provide money transfer services, in Australia.

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 $783,425 in Q2 2014, an increase of $12,574 or 2% from our cost of revenue of $770,794 for Q2 2013. Excluding differences attributable to changes in foreign exchange rates, costs of sales increased 14%. The increase is primarily the result of increases in Confirmed Capital and Credit Express costs (6%), increases in payment services costs (4%) and increases in amortization of intangibles (5%). The Confirmed Capital and Credit Express cost increase is mainly attributable to an increase in interest expense (3%), an increase in insurance costs (2%) and an increase in fees associated with 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 (5%).

Our gross margin from continuing operations, increased $259,477 from $538,814 in Q2 2013 to $798,291 in Q2 2014. This was primarily because net interest revenus and fee revenue in the Confirmed Capital and Credit Express business increased. Net interest revenue 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. Fee revenue was also higher because of fees charged as a result of the Confirmed Capital customer default.

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.

Our total operating expenses from continuing operations (other than bad debt) increased by $428,211 or 86% from $496,020 in Q2 2013 to $924,231 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.

Our net loss from continuing operations before tax for Q2 2014 was $14,486, as opposed to net income of $98,466 for Q2 2013. As a result of $299,187 in taxes incurred in Q2 2014, we incurred a net loss after tax for Q2 2014 of $313,673, as compared to net income after tax for Q2 2013 of $8,308. 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 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 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 1.0387 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					Dollar			Percentage
	December 31, 2013			December 31, 2012		Increase (Decrease)			Increase (Decrease)

Revenue		2,955,168			2,616,913		338,255			13	%
Costs of revenue		1,738,669			1,683,600		55,069			3	%
Gross profit		1,216,499			933,313		283,186			30	%

Compensation expenses		369,074			386,883		(17,809	)		(5	)%
Research and development expense		218,795			236,115		(17,320	)		(7	)%
Bad debt expenses		251,252			68,686		182,566			266	%
Occupancy expenses		132,041			123,489		8,552			7	%
Depreciation expense		36,907			29,921		6,986			23	%
General and administration expenses		642,806			71,621		571,185			798	%
Income (loss) from operations		(434,376	)		16,598		(450,974	)		(2,717	)%

Other income		351,851			240,900		110,951			46	%

Income before income tax		(82,525	)		257,498		(340,023	)		(132	)%

Income tax expense		339,416			95,078		244,338			257	%

Net (loss) income from continuing operations		(421,941	)		162,420		(584,361	)		(360	)%

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

Net (loss) income		(719,471	)		162,420		(881,891	)		(543	)%

Revenue

Consolidated revenue from continuing operations for the First Half 2014 were approximately $2,955,168, an increase of $338,255 or 13% from our consolidated revenue from continuing operations for the First Half 2013 of $2,616,913. Excluding differences attributable to changes in foreign exchange rates, revenue increased 27%. The increase resulted primarily from an increase in Confirmed Capital and Credit Express revenue (23%) and an increase in payment services revenue (1%). The revenue from Confirmed Capital and Credit Express represented approximately 75% of our consolidated revenue for the First Half 2014. The Confirmed Capital and Credit Express revenue increase is mainly attributable to an increase in interest revenue (22%) and an increase in fees charged to new customers to set up their accounts (3%). Confirmed Capital and Credit Express revenue was 12% higher in total because of fees associated with the default of one Confirmed Capital customer which has been settled. 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 payment services revenue increase is mainly attributable to a decrease in gift cards revenue (2%) and an increase in revenuesat MPOS and mPay (7%). 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 $1,738,669 in the First Half 2014, an increase of $55,069 or 3% from our cost of sales of $1,683,600 for the First Half 2013. Excluding differences attributable to changes in foreign exchange rates, costs of sales increased 16%. The increase is primarily the result of increases in Confirmed Capital and Credit Express costs (10%), increases in payment services costs (3%) and increases in amortization of intangibles (3%). The Confirmed Capital and Credit Express cost increase is mainly attributable to an increase in interest expense (6%), an in increase in costs associated with setting up the accounts of new customers (4%), 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 .

Our gross margin from continuing operations, increased $283,186 from $933,313 in the First Half 2013 to $1,216,499 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. Fee revenue was also higher because of fees charged as a result of the Confirmed Capital customer default.

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. We regularly evaluate the credit quality of our customers and this increase is primarily attributable to the provision for a new matter in Q1 2014 in line with specific assessment of customer balances in line with our credit and collections policy.

Our total operating expenses from continuing operations (other than bad debt) increased by $551,594 or 65% from $848,028 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 $82,525, as opposed to net income of $257,498 for First Half 2013. As a result of $339,416 in taxes incurred in the First Half 2014, we incurred a net loss after tax for the First Half 2014 of $421,941, as compared to net income after tax for the First Half 2013 of $162,420. 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.

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		40,881,307		41,219,330

Wholesale Loan Facility		25,593,086		25,669,388
Total Liabilities		33,766,544		33,696,546

TOTAL EQUITY		7,114,763		7,522,784

Liquidity and Capital Resources

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	)		(585,603	)
Net cash (used in) investing activities		(395,928	)		(588,018	)
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 $421,940 plus $289,683 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, reflecting an increase in credit lines provided and other items which used $69,987. 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 $585,601 of net cash in our operating activities. This reflects our net income of $162,421 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 $97,556. 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 $588,018 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 $241,486.

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 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable as the Company is a smaller reporting company

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 the disclosure controls and procedures are effective.

b)	Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A. Risk Factors

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in "Risk Factors" in our Annual Report on Form 10-K for fiscal year ended June 30, 2013, filed with the Securities and Exchange Commission on October 15, 2013 which are incorporated by reference into this report.

Item 6. Exhibits

The following exhibits are filed herewith:

Exhibit Number		Document

31.1		Certifications 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		Certifications 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		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

1 01.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation
101.DEF*		XBRL Taxonomy Extension Definition
101.LAB*		XBRL Taxonomy Extension Label
101.PRE*		XBRL Taxonomy Extension Presentation

* In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

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

	SOURCE FINANCIAL, INC.

February 14, 2014	By:	/s/ Hugh Evans
		Hugh Evans Chief Executive Officer (Principal Executive Officer)

February 14, 2014	By:	/s/ Brian M. Pullar
		Brian M. Pullar Chief Financial Officer (Principal Financial and Accounting Officer)

TABLE OF CONTENTS

Part I Financial Information Item 1. Financial Statements Note 1 Basis Of Presentation and Organization Note 2 Discontinued Operations Note 3 Summary Of Significant Accounting Policies Note 4 Trade Receivables, Net Note 5 Deferred Tax Assets Note 6 Other Assets Note 7 Intangible Assets Note 8 Goodwill Note 9 Trade and Other Payables Note 10 Current Liabilities Note 11 Non-current Liability Note 12 Stockholders Equity Note 13 Stock Compensation Note 14 Stock Options Note 15 Related Party Transactions Note 16 Income Tax Note 17 Geographic Segment Information Note 18 Equity Investment Note 19 Commitments Note 20 Subsequent Events Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Item 1A. Risk Factors Item 6. Exhibits

TGNT 10-Q Quarter ended Dec. 31, 2013