10-K 1 v363889_10k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: September 30, 2013

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from N/A to N/A

Commission file number: 000-27145

THE SPENDSMART PAYMENTS COMPANY

(Exact Name of Registrant as Specified in its Charter)

Colorado			33-0756798
(State or jurisdiction of incorporation			(I.R.S. Employer Identification No.)
or organization)

2680 Berkshire Parkway, Suite 130
Des Moines Iowa			50325
(Address and of principal executive offices)			(Zip Code)

(858) 677-0080

(Issuer’s telephone number, including area code)

Common Stock, par value $0.001 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ¨ No x

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 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 if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b(2) of the Exchange Act. (Check one).

Large accelerated filer ¨

Accelerated filer o

Non-accelerated filer ¨⁽¹⁾

Smaller reporting company x

⁽¹⁾Do not check if a smaller reporting company

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

The aggregate market value of the voting and non-voting common equity on March 31, 2013 held by non-affiliates of the registrant (based on the average bid and asked price of such stock on such date of $5.25) was approximately $40,745,570. Shares of common stock held by each officer of the Company (or of its wholly-owned subsidiary) and director and by each person who owns 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. Without acknowledging that any individual director of registrant is an affiliate, all directors have been included as affiliates with respect to shares owned by them.

At December 17, 2013, there were 10,398,527 shares outstanding of the issuer’s common stock, par value $0.001 per share.

THE SPENDSMART PAYMENTS COMPANY

FORM 10-K

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS

PART I

Item 1 - Business	3
Item 1A - Risk Factors	6
Item 2 - Properties	14
Item 3 - Legal Proceedings	14
Item 4 - Mine Safety Disclosures	14

PART II

Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6 - Selected Financial Data	16
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A - Quantitative and Qualitative Disclosures about Market Risk
Item 8 - Financial Statements and Supplementary Data	22
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	43
Item 9A - Controls and Procedures	43
Item 9B - Other Information	43

PART III

Item 10 - Directors, Executive Officers and Corporate Governance	44
Item 11 - Executive Compensation	50
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13 - Certain Relationships and Related Transactions, and Director Independence	50
Item 14 - Principal Accountant Fees and Services	51

PART IV

Item 15 - Exhibits, Financial Statement Schedules	53

Signatures	55

FORWARD LOOKING STATEMENTS

In addition to historical information, this Annual Report on Form 10-K may contain statements relating to future results of The SpendSmart Payments Company (including certain projections and business trends) that are “forward-looking statements.” Our actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, without limitation, statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements of the Company to be materially different from any future results or achievements of the Company expressed or implied by such forward-looking statements. Such factors include, among others, those set forth herein and those detailed from time to time in our other Securities and Exchange Commission (“SEC”) filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Also, there can be no assurance that the Company will be able to raise sufficient capital to continue as a going concern.

Item 1 - Business

As used in this annual report, the terms "we", "us", "our", “The SpendSmart Payments Company”, and the "Company" means The SpendSmart Payments Company, a Colorado corporation, its wholly-owned subsidiary The SpendSmart Payments Company, a California corporation or their management.

Current Business & Strategy

Our mission is to bring value added products and payments and mobile marketing solutions to consumers, merchants, businesses and government organizations. We are developing a number of payment solution options to serve the needs of a wide range of demographic groups and business verticals both in the U.S. and internationally. Our currently contemplated acquisition of substantially all of the assets of Intellectual Capital Management, Inc., d/b/a SMS Masterminds, a Nevada corporation (“SMS Masterminds”), as disclosed in our prior Current Report on Form 8-K filed with the SEC, will enhance our product suite which may include the SpendSmart MasterCard Teen Prepaid Card, the prepaid program manager (where SpendSmart Manages prepaid card programs for 3^rdparties) and card management platform, Mobile App enhancements, mobile marketing, and merchant kiosk, and a financial literacy resource center. While we have executed an agreement with SMS Masterminds as of the date hereof such acquisition has not occurred. There is no guarantee that we will be able to consummate the SMS Masterminds acquisition.

Our business strategy consists of delivering and managing:

(i)

Payment products

Pre-Paid Debit Cards serving various market segments and consumer demographics

(ii)

Payment platform

Pre-paid program manager

Card management platform

(iii)

Enhancement services

Other services that we can sell

(iv)

Mobile marketing and loyalty platforms

Merchant funded rewards

Cardholder loyalty

Mobile marketing for merchants and to cardholders

Mobile Apps

We plan to pursue these strategies across a broad range of consumer, business, for-profit and non-profit organization, and government/municipal sectors. In addition, we have partnered with various groups to develop strategic affinity/co-brand opportunities. We expect to continue such partnership programs with various global for-profit and non-profit organizations. We have also pursued an aggressive marketing and advertising strategy, including a celebrity endorsement program.

Our SpendSmart MasterCard Teen Prepaid Card has been selected, among many possible products, by MasterCard, as the tween/teen gift solution in the MasterCard 2013 Holiday Gift Guide “Master the Season.” We believe our SpendSmart Prepaid Card program, program manager platform and mobile apps will translate into other market segments including general purpose and loyalty cards, gift cards and senior cards.

As a new business line in addition to our card programs, we are positioned to serve as a program manager for third-party prepaid programs across a wide range of consumer, business, for-profit and non-profit organizations, government verticals and other demographic segments. Our products and platform are currently being marketed to small and mid-sized community banks and credit unions that do not have the product development capabilities or resources to build or market their own specialized prepaid program offerings.

SMS Masterminds Contemplated Acquisition

As discussed above, we have entered into an agreement to acquire substantially all of the assets of SMS Masterminds. SMS Masterminds is a turnkey mobile loyalty solution focused on mobile marketing for small and medium sized businesses. SMS Mastermind’s business is composed of multiple revenue components including set up fees and recurring license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile commerce services. The value of the proposed SMS Masterminds acquisition is, in part, to provide us with a merchant revenue stream as well as offer SMS customers, licensees and merchants our pre-paid and loyalty card programs.. Upon the consummation of the acquisition, we plan to build up our existing customer base by aggressively marketing our prepaid cards and loyalty card programs to SMS Masterminds’ current customer base. We also plan to work with SMS Masterminds’ current merchant/licensee base to encourage specific loyalty programs which will be marketed in tandem with our prepaid cards; as well as selling our card programs into local organizations and businesses. Finally, we expect to offer a “SpendSmart Network” to all merchant partners which will support all product lines and additional products and feature functionality that is expected to be developed to expand the capabilities of the SpendSmart Network.

Partnerships and Co-Marketing Opportunities

Girl Scouts Hornets’ Nest Council

In November 2013, we entered into a marketing and financial literacy program with the Girl Scouts Hornets’ Nest Council, which serves 16,000 members throughout North and South Carolina. We are now an integral part of the Hornets’ Nest Council’s financial literacy curriculum which provides us the opportunity to present the SpendSmart card solution to an audience known for being highly involved in their daughters’ lives. We are hopeful that this collaboration will be the model for similar Girl Scouts council partnerships across the U.S.

The Hornets’ Nest Council will actively promote the SpendSmart MasterCard Teen Prepaid Card to its associated communities through incentive-based card acquisition campaigns supported by a revenue sharing agreement. We will educate members about the SpendSmart MasterCard Teen Prepaid Card as well as develop comprehensive financial literacy programs and materials, the completion of which will be required in order for girl scouts to earn their Girl Scouts Financial Literacy badge.

DECA

In October 2013, we entered into a marketing agreement with DECA, a high school and college campus-based organization that prepares emerging leaders and entrepreneurs in marketing, finance and management. According to DECA, DECA's High School Division has over 190,000 members in 3,500 schools and over 15,000 members in 200 colleges and universities. DECA will promote the SpendSmart MasterCard Teen Prepaid Card and its mobile and web consumer-facing platform to its members, as well as offer the SpendSmart MasterCard Teen Prepaid Card as a travel solution for the 10,000 students who go to DECA’s regional and national contests each year. We will also play a role in DECA’s Competitive Events Program, where students compete on projects relevant to their particular interests, such as creative marketing, personal finance and marketing communications. We have agreed to work with DECA’s leadership to establish and promote a program for local chapters to offer SpendSmart MasterCard Teen Prepaid Cards to fellow high school students and their parents. We intend to kick off a fundraising program through a national contest focused on chapter marketing plans for card promotion and enrollment.

PlayMG

On September 24, 2012, we entered into a partnership with PlayMG Corp. Pursuant to the agreement, PlayMG has packaged their gaming device with a mock SpendSmart MasterCard Teen Prepaid Card and links to sign-up for an actual card, as well as instructions on how to load the card as the payment source for the gaming device. Our PlayMG relationship is continuing to expand as we move into the holiday season. PlayMG will be in hundreds of new retail outlets promoting their handheld device with our SpendSmart app preloaded into each unit.

Autism Speaks

On August 7, 2012, we entered into a partnership with Autism Speaks. Pursuant to the agreement, Autism Speaks will be promoting the SpendSmart MasterCard Teen Prepaid Cards to its base of over 1.4 million active members. The SpendSmart MasterCard Teen Prepaid Card will help with the mission of fostering independence for teens and families affected by autism. SpendSmart also supports Autism Speaks through its charitable giving functionality on www.spendsmartcard.com.

Advertising and Marketing Strategies

SpendSmart has pursued an aggressive advertising and marketing strategy of our SpendSmart MasterCard Teen Prepaid Card and our general services through celebrity endorsements, national sweepstakes campaigns as well as our management’s pre-existing relationships.

On November 20, 2012, we entered into an endorsement agreement (the "Agreement") for the promotion of our products. In connection with the Agreement, which is for a term of fourteen months (unless extended as provided in the Agreement), we agreed to pay a non-refundable advance totaling $3,750,000 (the "Advance") of which $1,900,000 was paid on November 21, 2012 with the remainder of $1,850,000 due by January 2, 2013. In addition to the Advance, we have agreed to pay monthly incentive compensation and royalty payments per active account. The Advance is not recoupable from incentive compensation payments and is recoupable from royalty payments made under the Agreement. Upon the expiration of the Agreement, the endorser will be entitled to receive the royalty payments, subject to recoupment of the Advance, and the incentive compensation, in perpetuity. In addition, the endorser may become entitled to warrants if the Agreement is extended and at the end of the term of the Agreement. The payments and warrants described herein are described in further detail in Note 8 to the financial statements contained in Item 8 below.

SpendSmart Pre-Paid Program Management and Platform

We believe that our pre-paid platform provides us with the opportunity to present turnkey, prepaid programs, such as the SpendSmart Teen card, to small or regional banks, credit unions, affinity organizations and business looking to issue a prepaid card. Under this Program Manager support platform, we will serve as a card program manager for various types of card programs for a revenue share or pay a per card fee structure. This platform enables us to provide card program management, back office operational and servicing support for other companies in the payment space. Through this strategy, we have enhanced our reach to a new and significantly broader universe including merchant/business/charitable for-profit and non-profit, and government sectors. At the same time, we intend to expand our access and mobile marketing capabilities to all demographic segments and a global consumer and partner base.

In September 2013, we signed a letter of intent to become the prepaid card program manager for a company that services the municipal, county and state government prepaid card segment. This is our first entry into the prepaid card program manager government vertical and provides us with an excellent opportunity to expand to other prepaid card program segments with our platform and superior operational capabilities. This initiative serves as a new business and will expand our revenue lines. We now have the ability to support and manage other prepaid card portfolios for other organizations looking to outsource the business line and their operational and customer service functions.

Financial Model

Revenues from SSPC are derived from fees from cardholders for various services we provide and fees we receive from merchants when our cards are used. The direct costs incurred by us in connection with SSPC include discounts and per transaction charges from merchant credit card companies and amounts paid to our processing partner for card issuance and transaction costs.

We continue to extensively employ outside consultants for the build out and ongoing maintenance of the platform and payment system, as well as for marketing, design, business development and other general and administrative functions of our Company. While we intend to restrict the number of new employees we add to our Company’s workforce, we believe that new personnel will be necessary in the future in the areas of project management, software programming, operations, accounting and administration.

Barriers to Entry

Our Company has applied for patents in connection with SSPC and its related uses and planned future features, one of which was recently issued. We believe that the business processes in connection with SSPC are original to our Company; however we may discover that others have patent claims of which we are currently unaware. Should we be successful in obtaining the grant of the patents under application and should we be successful in countering any challenges to their validity that might emerge, the lifetime of the granted patents would be twenty years. Should the patent applications in question be approved, it could give us a cost advantage from the license fees that future potential competitors would be required to pay as well as revenues from said license fees. There can be no assurance however that we will be successful in receiving such a patent or successful in countering any challenges thereto.

Competitive Business Conditions

The market for prepaid cards is large, growing and highly competitive. We have identified a number of providers of prepaid cards and related products and services.

Green Dot Corporation and NetSpend Holdings, Inc. are leaders in marketing general-purpose reloadable prepaid cards. Both of these companies have as primary market focuses under-banked consumers and tout their services as tailored to meet their customers’ particular financial services needs in a manner that traditional banking institutions have historically not met. Both companies have built extensive distribution networks throughout the US and have strong online presences. As of September 30, 2013, Green Dot’s filings with the SEC stated active card totals of 4.41 million. In addition to a formidable active card user base, Green Dot is a leader in establishing a convenient way for cardholders to add funds to their accounts. While neither company to our knowledge is currently specifically courting our identified target market of young people and their parents, they both represent potential sources of future competition for our Company.

American Express^TM is a worldwide leader in the credit card and financial services industry whose credit cards account for a significant percentage of the total volume of credit card transactions in the United States. American Express^TM has a product named PASS which is a prepaid reloadable card that “parents give to teens.” PASS has many of the features we offer and intend to offer with our SSPC Card and American Express^TM has devoted substantial resources to publicize this youth oriented payment option. We believe that PASS has drawbacks not found in SSPC Cards, nevertheless American Express^TMis a world recognized brand with substantial marketing capabilities that is likely to provide formidable competition for our Company.

PayPal^TMis a pioneer provider of alternatives to credit card use for Internet and other purchases. PayPal^TMfacilitates transactions between online buyers and sellers and first became popular for commerce interactions over online auction sites such as eBay (eBay purchased PayPal^TMin 2002). Users of PayPal^TMestablish accounts that are funded by the customer, either through the customer’s credit card or a bank account. Upon establishment of the account, a customer can designate that online payments be charged against his PayPal^TMaccount balance. PayPal^TMhas announced its intention to service the youth payment market through initiatives that would allow owners of PayPal^TMaccounts to establish allowance accounts for others (e.g. children) that the parents can fund as desired. PayPal^TMcould potentially present a strong challenge to the SSPC program given its substantial name recognition and financial strength.

We are also aware of other prepaid card providers that have products that seek to facilitate online commerce through added features aimed at both merchants and consumers. There are several prepaid card providers that specifically target youth in their product offerings (e.g. MYPLASH, and PAYjr). Similar to the SSPC Card, these prepaid cards represent a way for parents to be linked to their children’s accounts.

In summary, while we face potential future competition in our target market for our products, we currently believe our products offer distinct features that respond to market needs not well served by the identified competitors mentioned above. However, many of these firms have longer operating histories, greater name recognition and greater financial, technical, and marketing resources than us. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customer demand and market share to support the cost of our operations.

Corporate History

Our Company was originally incorporated in the State of Colorado on May 14, 1990 as “Snow Eagle Investments, Inc.” and was inactive from 1990 until 1997. In April 1997, the Company acquired the assets of 1^st Net Technologies, LLC, a California limited liability company, and the Company changed its name to “1st Net Technologies, Inc.” and operated as an Internet commerce and services business. In August 2001, the Company suspended its operations. In September of 2005, the Company acquired VOS Systems, Inc. (the “VOS Subsidiary”) as its wholly owned subsidiary and the Company changed its name to “VOS International, Inc.” and traded under the symbol “VOSI.OB”. The VOS Subsidiary operated as a technology company involved in the design, development, manufacturing, and marketing of consumer electronic products.

On October 16, 2007, we sold the VOS Subsidiary and acquired BillMyParents-CA (at the time both our Colorado parent and California subsidiary were named IdeaEdge, Inc.). On May 1, 2009, our Company changed our name from IdeaEdge, Inc. to Socialwise, Inc., and our stock traded under the symbol “SCLW.OB”. On May 25, 2011, we changed our name to BillMyParents, Inc. and beginning June 13, 2011, our stock traded under the symbol “BMPI.OB.” On February, 15, 2013, we changed our name to The SpendSmart Payments Company and beginning February 28, 2013, our stock traded under the symbol “SSPC.OB.”

Item 1A – Risk Factors

Investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this herein before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

WE HAVE A LIMITED OPERATING HISTORY OVERALL AND HAVE ONLY RECENTLY EMBARKED ON OUR CURRENT CORPORATE FOCUS OF PROVIDING ONLINE PAYMENT SOLUTIONS.

We completed our acquisition of BillMyParents-CA on October 16, 2007. BillMyParents-CA was formed in April 2007 to pursue opportunities in the gift card industry. We subsequently refocused our efforts on providing prepaid cards for young people and their parents. We do not currently have an adequate level of operating revenues that would support profitable operations and we have a limited operating history. Because we have a limited operating history, our historical financial information is not a reliable indicator of future performance. Therefore, it is difficult to evaluate the business and prospects of our Company. Furthermore, our revised business focus centered on SSPC has been ongoing only since 2009. We have limited experience as to whether SSPC will be popular with consumers. Failure to correctly evaluate our Company’s prospects could result in an investor’s loss of a significant portion or all of his investment in our Company.

OUR FAILURE TO OBTAIN ADDITIONAL ADEQUATE FINANCING WOULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.

We cannot be certain that we will ever generate sufficient revenues and gross margin to achieve profitability in the future. Our failure to significantly increase revenues or to raise additional adequate and necessary financing would seriously harm our business and operating results. We have incurred significant costs in building, launching and marketing our SSPC Product. In addition, we have signed an agreement with an endorser that requires the expenditure of significant capital resources, including advances totaling close to $4 million. On November 30, 2012, December 10, 2012 and July 15, 2013 we closed on private equity transactions whereby we raised $2,580,500, $2,286,000 and $1,401,273 respectively, in net proceeds after deducting fees and expenses. In addition, on July 5, 2013, we closed on a warrant tender offer which results in gross proceeds of $1,490,715. Finally, in November 2013 we closed on a private equity transaction whereby we raised $500,000 in net proceeds. Notwithstanding these transactions, we will still require additional funding in order to operate our business. If we fail to achieve sufficient revenues and gross margin with our SSPC Product, or our revenues grow more slowly than anticipated, or if our operating or capital expenses increase more than is expected or cannot be reduced in the event of lower revenues, our business will be materially and adversely affected and an investor could suffer the loss of a significant portion or all of his investment in our Company.

THERE ARE RISKS ASSOCIATED WITH THE PROPOSED ACQUISITION OF SMS MASTERMINDS.

An integral part of our current, proposed growth strategy is consummating the acquisition of substantially all of the assets of SMS Masterminds. The proposed SMS Masterminds transaction involves a number of risks and present financial, managerial and operational challenges, including: diversion of management’s attention from running the existing business; increased expenses, including legal, administrative and compensation expenses resulting from newly hired employees; increased costs to integrate personnel, customer base and business practices of the acquired company; adverse effects on reported operating results due to possible write-down of goodwill associated with the acquisition; and dilution to stockholders due to the issuance of securities in the proposed transaction. In addition, we may be unable to consummate the proposed SMS Masterminds acquisition due to the failure to meet the relevant closing conditions or our inability to raise the funds necessary to consummate the transaction. If we are unable to consummate the SMS Masterminds acquisition our business may be adversely affected and we may be unable to achieve the growth of our business

WE FACE COMPETITION FROM OTHER ONLINE PAYMENT SYSTEMS.

We will face competition from other companies with similar product offerings. Many of these companies have longer operating histories, greater name recognition and substantially greater financial, technical and marketing resources than us. Many of these companies also have more extensive customer bases, broader customer relationships and broader industry alliances than us, including relationships with many of our potential customers. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support the cost of our operations.

WE HAVE LIMITED RESOURCES TO DEVELOP OUR PRODUCT OFFERINGS.

Our ability to successfully access the capital markets at the same time that our Company has required funding for the development and marketing of our product offerings is challenging. This has caused and will likely continue to cause us to restrict funding of the development of our products and to favor the development of one product offering over the other based on their relative estimated potentials for commercial success as evaluated by our management. We will require additional debt and/or equity financing to pursue our growth strategy. Given our limited operating history and existing losses, there can be no assurance that we will be successful in obtaining additional financing. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our common stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our current focus is on our SSPC Cards. The failure of our SSPC Cards to be commercially successful would substantially harm our business and results of operations. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations. Furthermore, in the future we may determine that it is in the best interest of our Company to severely curtail, license, jointly develop with a third party or sell one of our product offerings, which may be on terms which limit the revenue potential of the product offering to our Company.

WE RELY ON THIRD-PARTY SUPPLIERS AND DISTRIBUTORS THAT ARE SPECIFIC TO OUR BUSINESS AND DISTRIBUTION CHANNELS SUCH AS PROCESSORS, PROGRAMMERS, SOCIAL NETWORKS AND SECURITY ADVISORS.

We will be dependent on other companies to provide necessary products and services in connection with key elements of our business. Any interruption in our ability to obtain these services, or comparable quality replacements would severely harm our business and results of operations. Should any of these adverse contingencies result, they could substantially harm our business and results of operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.

WE RELY ON OUR BANK ISSUERS TO ISSUE SSPC CARDS AND THIRD-PARTY CREDIT CARD MERCHANT PROCESSORS TO ALLOW OUR CUSTOMERS TO LOAD BALANCES ON THEIR SSPC CARDS AND THESE THIRD PARTIES COULD VIEW OUR PRE-PAID SSPC CARD AND LIMITED FINANCIAL RESOURCES AS OVERLY RISKY.

SSPC Cards are issued by our bank issuers who are essential to our ability to market our products. Additionally, most of our customers load balances on their SSPC cards with a credit card. We are dependent on our bank issuers in order to market SSPC cards. Should one or more of our bank issuers judge our financial resources inadequate, it/they could terminate its/their relationship(s) with us, and we could no longer issue or service cards issued by that bank. This would require us to incur large expenses to obtain a new bank issuer(s), if obtaining such issuer were even possible.

We are also dependent on third party credit card merchant processors to allow our customers to load these balances on their SSPC cards. Many credit card merchant processors view the prepaid card industry which we operate in as high risk from a fraud and financial standpoint. While we take steps to reduce fraud in our business, our limited financial resources can be viewed as too risky by credit card merchant processors and cause them not to want to do business with us, or discontinue doing business with us. Since most of our customers load balances on their SSPC cards with a credit card, any interruption in our ability to obtain these services or comparable quality replacements, would severely harm our business and results of operations.

Should we lose the services of one or more of our bank issuers or those of a credit card merchant processor and not be able to replace them, our business and results of operations would be substantially impaired, and an investor could suffer the loss of a significant portion or all of his investment in our Company.

WE OPERATE IN A HIGHLY REGULATED ENVIRONMENT AND FAILURE BY US OR THE BANK(S) THAT ISSUE(S) OUR CARDS TO COMPLY WITH APPLICABLE LAWS AND REGULATIONS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS.

We operate in a highly regulated environment, and failure by us or one or more of the banks that issue our cards to comply with the laws and regulations to which we are subject could negatively impact our business. We are subject to a wide range of federal and state laws and regulations. In particular, our products and services are subject to an increasingly strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities. Many of these laws and regulations are evolving, unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. Failure by us or our bank to comply with the laws and regulations to which we are or may become subject to could result in fines, penalties or limitations on our ability to conduct our business, or federal or state actions, any of which could significantly harm our reputation with consumers and other network participants, banks that issue our cards and regulators and could materially and adversely affect our business, operating results and financial condition.

CHANGES IN CREDIT CARD ASSOCIATION OR OTHER NETWORK RULES OR STANDARDS SET BY THE PAYMENT NETWORKS OR CHANGES IN CARD ASSOCIATION AND NETWORK FEES OR PRODUCTS OR INTERCHANGE RATES COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS.

We and the banks that issue our cards are subject to card network association rules that could subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that work with us, including credit card merchant processors. The termination of the card association registrations held by us through any of the banks that issue our cards or any changes in card association or other network rules or standards, including interpretation and implementation of existing rules or standards, that increase the cost of doing business or limit our ability to provide our products and services could have an adverse effect on our business, operating results and financial condition. In addition, from time to time, card associations could increase the organization and/or processing fees that they charge, which could increase our operating expenses, reduce our profit margin and adversely affect our business, operating results and financial condition. Furthermore, a substantial portion of our operating revenues is derived from interchange fees, and we expect interchange revenues to someday potentially represent a significant percentage of our total operating revenues. The amount of interchange revenues that we earn is highly dependent on the interchange rates that the payment networks set and adjust from time to time. The enactment of the Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, required the Federal Reserve Board to implement regulations that have substantially limited interchange fees for many issuers. While we believe the interchange rates that may be earned by us are exempt from such limitations, in light of this legislation and recent attention generally on interchange rates in the United States, there can be no assurance that the interpretation or enforcement of interchange legislation or regulation will not impact our interchange revenues substantially. If interchange rates decline, whether due to actions by the payment networks, the banks that issue our cards or existing or future legislation, regulation or the interpretation or enforcement thereof, we would likely need to change our fee structure to compensate for lost interchange revenues. To the extent we increase the pricing of our products and services, we might find it more difficult to acquire new card customers and to maintain or grow card usage and customer retention, and we could suffer reputational damage and become subject to greater regulatory scrutiny. We also might have to discontinue certain products or services. As a result, our operating revenues, operating results, prospects for future growth and overall business could be materially and adversely affected.

CHANGES IN LAWS AND REGULATIONS TO WHICH WE ARE SUBJECT, OR TO WHICH WE MAY BECOME SUBJECT, MAY INCREASE OUR COSTS OF OPERATION, DECREASE OUR OPERATING REVENUES AND DISRUPT OUR BUSINESS.

Changes in laws and regulations or the interpretation or enforcement thereof may occur that could increase our compliance and other costs of doing business, require significant systems redevelopment, or render our products or services less profitable or obsolete, any of which could have an adverse effect on our results of operations. We could face more stringent anti-money laundering rules and regulations, as well as more stringent regulations, compliance with which could be expensive and time consuming. Changes in laws and regulations governing the way our products are sold or in the way those laws and regulations are interpreted or enforced could adversely affect our ability to distribute our products and the cost of providing those products and services. If onerous regulatory requirements were imposed on the sale of our products and services, the requirements could lead to a loss of retail distributors, which in turn could materially and adversely impact our operations. State and federal legislators and regulatory authorities have become increasingly focused on the banking and consumer financial services industries and continue to propose and adopt new legislation that could result in significant adverse changes in the regulatory landscape for financial institutions (including card issuing banks) and other financial services companies (including us). Changes in the way we or the banks that issue our cards could expose us and the banks that issue our cards to increased regulatory oversight, more burdensome regulation of our business, and increased litigation risk, each of which could increase our costs and decrease our operating margins. Additionally, changes to the limitations placed on fees, the interchange rates that can be charged or the disclosures that must be provided with respect to our products and services could increase our costs and decrease our operating revenues.

THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT MAY HAVE A SIGNIFICANT ADVERSE IMPACT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”). The DFA, as well as regulations promulgated thereunder, could have a significant adverse impact on the Company’s business, results of operations and financial condition.

The DFA has resulted in increased scrutiny and oversight of consumer financial services and products, primarily through the establishment of the Consumer Financial Protection Bureau (“CFPB”) within the Federal Reserve. The CFPB has broad rulemaking and enforcement authority over providers of pre-paid cards, among other credit providers. The CFPB has the authority to write regulations under federal consumer financial protection laws, and to enforce those laws. The CFPB regulations have yet to be fully promulgated and depending on how the CFPB functions, it could have a material adverse impact on our business. The impact this new regulatory regime will have on the Company’s business is uncertain at this time.

Many provisions of the DFA require the adoption of rules to implement. In addition, the DFA mandates multiple studies, which could result in additional legislative or regulatory action. Therefore, the ultimate consequences of the DFA and its impact on our Company’s business, results of operations and financial condition remain uncertain.

WE ARE SUBJECT TO VARIOUS PRIVACY RELATED REGULATIONS, INCLUDING THE GRAMM-LEACH-BLILEY ACT WHICH MAY INCLUDE AN INCREASED COST OF COMPLIANCE.

We are subject to various laws, rules and regulations related to privacy, information security and data protection, including the Gramm-Leach-Bliley Act, and we could be negatively impacted by these laws, rules and regulations. The Gramm-Leach-Bliley Act guidelines require, among other things, that each financial institution develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities and the sensitivity of any customer information at issue. Our management believes that we are currently operating in compliance with these regulations. However, continued compliance with these laws, rules and regulations regarding the privacy, security and protection of customer and employee data, or the implementation of any additional privacy rules and regulations, could result in higher compliance and technology costs for our Company.

OUR BUSINESS COULD SUFFER IF THERE IS A DECLINE IN THE USE OF PREPAID CARDS AS A PAYMENT MECHANISM OR THERE ARE ADVERSE DEVELOPMENTS WITH RESPECT TO THE PREPAID FINANCIAL SERVICES INDUSTRY IN GENERAL.

As the prepaid financial services industry evolves, consumers may find prepaid financial services to be less attractive than traditional or other financial services. Consumers might not use prepaid financial services for any number of reasons, including the general perception of our industry. For example, negative publicity surrounding other prepaid financial service providers could impact our business and prospects for growth to the extent it adversely impacts the perception of prepaid financial services among consumers. If consumers do not continue or decrease their usage of prepaid cards, our operating revenues may remain at current levels or decline. Predictions by industry analysts and others concerning the growth of prepaid financial services as an electronic payment mechanism may overstate the growth of an industry, segment or category, and you should not rely upon them. The projected growth may not occur or may occur more slowly than estimated. If consumer acceptance of prepaid financial services does not continue to develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, traditional prepaid cards and prepaid cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.

FRAUDULENT AND OTHER ILLEGAL ACTIVITY INVOLVING OUR PRODUCTS AND SERVICES COULD LEAD TO REPUTATIONAL DAMAGE TO US AND REDUCE THE USE AND ACCEPTANCE OF OUR CARDS AND RELOAD NETWORK.

Criminals are using increasingly sophisticated methods to engage in illegal activities involving prepaid/credit/debit cards or cardholder information, such as counterfeiting, fraudulent payment or refund schemes and identity theft. We rely upon third parties for some transaction processing services, which subjects us and our cardholders to risks related to the vulnerabilities of those third parties. A single significant incident of fraud or increases in the overall level of fraud involving our cards, could result in financial or reputational damage to us, which could reduce the use and acceptance of our cards, cause other channel members to cease doing business with us or lead to greater regulation that would increase our compliance costs.

A DATA SECURITY BREACH COULD EXPOSE US TO LIABILITY AND PROTRACTED AND COSTLY LITIGATION, AND COULD ADVERSELY AFFECT OUR REPUTATION AND OPERATING REVENUES.

We, the banks that issue our cards, network acceptance members and/or third-party processors receive, transmit and store confidential customer and other information in connection with the sale and use of our prepaid cards. Encryption software and the other technologies used to provide security for storage, processing and transmission of confidential customer and other information may not be effective to protect against data security breaches by third parties. The risk of unauthorized circumvention of such security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers. Improper access to our or these third parties’ systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information. A data security breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions against us. If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our operating revenues and profitability. We would also likely have to pay (or indemnify the banks that issue our cards for) fines, penalties and/or other assessments imposed as a result of any data security breach. Further, a significant data security breach could lead to additional regulation, which could impose new and costly compliance obligations. In addition, a data security breach at the bank that issues our cards, network acceptance members or third-party processors could result in significant reputational harm to us and cause the use and acceptance of our cards to decline, either of which could have a significant adverse impact on our operating revenues and future growth prospects.

OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY SURROUNDING OUR SSPC CARDS IS UNCERTAIN.

Our future success may depend significantly on our ability to protect our proprietary rights to the intellectual property upon which our products and services will be based. Any patents we obtain in the future may be challenged by re-examination or otherwise invalidated or eventually be found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt to challenge or invalidate our patents, or may be able to design alternative techniques or devices that avoid infringement of our patents, or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.

WE ARE DEPENDENT UPON CONSUMER TASTES WITH RESPECT TO PREFERRED METHODS OF ONLINE PAYMENT FOR THE SUCCESS OF OUR PRODUCTS AND SERVICES.

Our product offerings’ acceptance by consumers and their consequent generation of revenues will depend upon a variety of unpredictable factors, including:

Public taste, which is always subject to change;

The quantity and popularity of other payment systems available to the public;

The continued appeal and reputations of our celebrity spokespersons; and

The fact that the distribution and sales methods chosen for the products and services we market may be ineffective.

For any of these reasons, our programs may be commercially unsuccessful. If we are unable to market products which are commercially successful, we may not be able to recoup our expenses and/or generate sufficient revenues. In the event that we are unable to generate sufficient revenues, we may not be able to continue operating as a viable business and an investor could suffer the loss of a significant portion or all of his investment in our Company.

OUR COMPANY IS ECONOMICALLY SENSITIVE TO GENERAL ECONOMIC CONDITIONS, INCLUDING CONTINUED WEAKENING OF THE ECONOMY; THEREFORE A REDUCTION IN CONSUMER PURCHASES OF DISCRETIONARY ITEMS COULD CONSEQUENTLY MATERIALLY IMPACT OUR COMPANY’S FUTURE REVENUES FROM SSPC FOR THE WORSE.

Consumer purchases are subject to cyclical variations, recessions in the general economy and the future economic outlook. Our results may be dependent on a number of factors impacting consumer spending, including general economic and business conditions; consumer confidence; wages and employment levels; the housing market; consumer debt levels; availability of consumer credit; credit and interest rates; fuel and energy costs; energy shortages; taxes; general political conditions, both domestic and abroad; and the level of customer traffic on social networking websites. Consumer purchases of discretionary items may decline during recessionary periods and at other times when disposable income is lower. A downturn or an uncertain outlook in the economy may materially adversely affect our business and the success of our SSPC Cards.

Financial Risks

OUR FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING THAT OUR COMPANY WILL CONTINUE AS A GOING CONCERN.

The factors described herein raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent registered public accounting firm included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern in their audit report for the fiscal years ended September 30, 2013 and 2012. If we cannot generate the required revenues and gross margin to achieve profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.

CURRENT MACRO-ECONOMIC CONDITIONS COULD ADVERSELY AFFECT THE FINANCIAL VIABILITY OF OUR COMPANY.

Continuing recessionary conditions in the global economy threaten to cause further tightening of the credit and equity markets and more stringent lending and investing standards. The persistence of these conditions could have a material adverse effect on our access to further needed capital. In addition, further deterioration in the economy could adversely affect our corporate results, which could adversely affect our financial condition and operations.

WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND WE MAY NEVER PAY DIVIDENDS AND, CONSEQUENTLY, THE ONLY OPPORTUNITY FOR INVESTORS TO ACHIEVE A RETURN ON THEIR INVESTMENT IS IF A TRADING MARKET DEVELOPS AND INVESTORS ARE ABLE TO SELL THEIR SHARES FOR A PROFIT OR IF OUR BUSINESS IS SOLD AT A PRICE THAT ENABLES INVESTORS TO RECOGNIZE A PROFIT.

We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.

OUR NET OPERATING LOSS (“NOL”) CARRY-FORWARD IS LIMITED.

We have recorded a valuation allowance amounting to our entire net deferred tax asset balance due to our lack of a history of earnings, possible statutory limitations on the use of tax loss carry-forwards generated in the past and the future expiration of our NOL. This gives rise to uncertainty as to whether the net deferred tax asset is realizable. Internal Revenue Code Section 382, and similar California rules, place a limitation on the amount of taxable income that can be offset by carry-forwards after a change in control (generally greater than a 50% change in ownership). As a result of these provisions, it is likely that given our acquisition of The SpendSmart Payments Company-CA, future utilization of the NOL will be severely limited. Our inability to use our Company’s historical NOL, or the full amount of the NOL, would limit our ability to offset any future tax liabilities with its NOL.

Corporate and Other Risks

LIMITATIONS ON DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION OF OUR COMPANY’S OFFICERS AND DIRECTORS BY US MAY DISCOURAGE STOCKHOLDERS FROM BRINGING SUIT AGAINST AN OFFICER OR DIRECTOR.

Our Company’s articles of incorporation and bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director.

WE ARE RESPONSIBLE FOR THE INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS.

Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.

OUR EMPLOYEES, EXECUTIVE OFFICERS, DIRECTORS AND INSIDER STOCKHOLDERS BENEFICIALLY OWN OR CONTROL A SUBSTANTIAL PORTION OF OUR OUTSTANDING COMMON STOCK, WHICH MAY LIMIT YOUR ABILITY AND THE ABILITY OF OUR OTHER STOCKHOLDERS, WHETHER ACTING ALONE OR TOGETHER, TO PROPOSE OR DIRECT THE MANAGEMENT OR OVERALL DIRECTION OF OUR COMPANY.

Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his shares. Approximately half of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our employees, directors and executive officers. Accordingly, our employees, directors, executive officers and insider shareholders may have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

WE ARE DEPENDENT FOR OUR SUCCESS ON A FEW KEY EMPLOYEES.

Our inability to retain those employees would impede our business plan and growth strategies, which would have a negative impact on our business and the value of your investment. Our success depends on the skills, experience and performance of key members of our Company. Each of those individuals may voluntarily terminate his employment with our Company at any time. Were we to lose one or more of these key employees, we would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion of limited working capital. We do not maintain a key man insurance policy on any of our key employees.

SHOULD WE BE SUCCESSFUL IN TRANSITIONING TO A COMPANY GENERATING SIGNIFICANT REVENUES, WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY, WHICH COULD ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL PERFORMANCE.

The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.

Capital Market Risks

OUR COMMON STOCK IS THINLY TRADED, SO YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO SELL YOUR SHARES TO RAISE MONEY OR OTHERWISE DESIRE TO LIQUIDATE YOUR SHARES.

There is limited market activity in our stock and we may be too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. While we are trading on OTCQB, the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in over-the-counter stocks and certain major brokerage firms restrict their brokers from recommending over-the-counter stocks because they are considered speculative, volatile, thinly traded and the market price of the common stock may not accurately reflect the underlying value of our Company. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including “short” sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.

THE APPLICATION OF THE “PENNY STOCK” RULES TO OUR COMMON STOCK COULD LIMIT THE TRADING AND LIQUIDITY OF THE COMMON STOCK, ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.

As long as the trading price of our common stock is below $5 per share, our common stock will be subject to the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices as well as the regulatory disclosure requirements set forth above could increase the volatility of our share price, may limit investors’ ability to buy and sell our securities and have an adverse effect on the market price for our shares of common stock.

WE MAY NOT BE ABLE TO ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS, WHICH COULD HAVE A MATERIAL ADVERSE IMPACT ON THE MARKET VALUE OF OUR COMMON STOCK.

Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.

WE MAY BE UNABLE TO LIST OUR COMMON STOCK ON NASDAQ OR ON ANY SECURITIES EXCHANGE.

Although we intend to apply to list our common stock on NASDAQ in the future, we cannot assure you that we will be able to meet the initial listing standards, including the minimum per share price and minimum capitalization requirements, or that we will be able to maintain a listing of our common stock on this trading. Until such time as we qualify for listing on NASDAQ or another national securities exchange, our common stock will continue to trade on OTCQB or another over-the-counter quotation system where an investor may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, rules promulgated by the SEC impose various practice requirements on broker-dealers who sell securities that fail to meet certain criteria set forth in those rules to persons other than established customers and accredited investors. Consequently, these rules may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. It would also make it more difficult for us to raise additional capital.

FUTURE SALES OF OUR EQUITY SECURITIES COULD PUT DOWNWARD SELLING PRESSURE ON OUR SECURITIES, AND ADVERSELY AFFECT THE STOCK PRICE.

There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.

Item 2 –Properties

Our corporate offices were previously located at 6190 Cornerstone Court, Suite 216, San Diego California 92121, where we leased approximately 3,100 square feet of office space. The monthly rental payments for the facility were approximately $2,695 plus common area maintenance charges. We closed our San Diego offices on July 17, 2013, however we have lease payment obligations remaining through June, 2014. Our corporate offices are now located in Des Moines, IA, where we lease approximately 1,000 square feet of office space. The monthly payments for the facility is approximately $1,800, including common area maintenance charges. We believe our facilities are in good condition and adequate to meet our current and anticipated requirements.

Item 3 – Legal Proceedings

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of any ultimate liability from such claims cannot be determined. However, except as otherwise disclosed herein, there are no legal claims currently pending or threatened against us that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows. Our Company is currently involved in an arbitration with our incumbent processor. The arbitration is currently scheduled to commence on January 15, 2014. In connection with the services provided under a processing agreement, the processor asserted that we are liable for previously unbilled services. We are vigorously defending the claim. We have adequate reserves allocated in the event that we would be required to make any payments in connection with this matter. If we are judged liable for either a portion or all of the charges, or should we enter into a monetary settlement with the processor, such liability or settlement could materially affect our ability to execute our customer acquisition strategy by reducing the amount available for such activities by any amounts due to the processor or needed for related expenses.

Item 4 – Mine Safety Disclosures

Not applicable.

Part II

Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades publicly on the OTCQB under the symbol "SSPC." The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. The OTCQB securities are traded by a community of market makers that enter quotes and trade reports. This market is extremely limited and any prices quoted may not be a reliable indication of the value of our common stock. The following table sets forth the high and low bid prices per share of our common stock by the OTCQB for the periods indicated as reported on the OTCQB. On December 17, 2013, the closing price of our common stock as reported on the OTCQB was $1.10 per share.

For the year ended September 30, 2013	High		Low
Fourth Quarter	$	2.73	$	.76
Third Quarter		6.75		2.25
Second Quarter		6.30		4.50
First Quarter		11.25		5.40

For the year ended September 30, 2012
Fourth Quarter	$	13.50	$	4.95
Third Quarter		7.95		3.15
Second Quarter		7.95		5.40
First Quarter		7.80		4.50

Our stock began trading on the OTC Bulletin Board under the symbol “IDED.OB” on October 18, 2007 and was later changed to “IDAE.OB” on March 12, 2008 and to “SCLW.OB” on May 13, 2009 and to “BMPI.OB” on June 13, 2011. On July 23, 2012 our stock was moved from the OTC Bulletin Board to the OTCQB. The quotes represent inter-dealer prices, without adjustment for retail mark-up, markdown or commission and may not represent actual transactions. The trading volume of our securities fluctuates and may be limited during certain periods. As a result of these volume fluctuations, the liquidity of an investment in our securities may be adversely affected.

Holders of Record

As of December 17, 2013, 10,398,527 shares of our common stock were issued and outstanding, and held by approximately 2,000 stockholders.

Transfer Agent

Our transfer agent is TranShare Corporation, 4626 South Broadway, Englewood, CO 80113, Telephone (303) 662-1112.

Dividends

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors.

Securities Authorized for Issuance under Equity Compensation Plans

The table below sets forth information as of September 30, 2013, with respect to compensation plans under which our common stock is authorized for issuance.

On January 8, 2013, our Board of Directors approved the adoption of our 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan was approved by our shareholders on February 15, 2013. The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan shall not exceed in the aggregate 3,000,000 shares of the common stock of our Company. On August 4, 2011, our Board of Directors approved the adoption of the SpendSmart Payments Company 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan has been approved by our shareholders. The 2011 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2011 Plan shall not exceed in the aggregate 25,000,000 shares of the common stock of our Company. We also have a stockholder-approved Plan (the IdeaEdge, Inc. 2007 Equity Incentive Plan - the “2007 Plan”, previously approved by our shareholders). The 2007 Plan has similar provisions and purposes as the 2011 Plan. The total number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan shall not exceed in the aggregate 4,000,000 shares of the common stock of our Company. The table below sets forth information as of September 30, 2013 with respect to our 2007 Plan and 2011 Plan:

Plan Category	Number of securities to be issued upon exercise of outstanding options		Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by shareholders (2007 Plan)		24,271	$	7.35		242,395
Equity compensation plans subject to approval by shareholders (2011 Plan)		1,627,407		6.99		39,260
Equity compensation plan approved by shareholders (2013 Plan)		-		-		200,000

Total		1,651,678	$	7.05		481,655

Item 6 – Selected Consolidated Financial Data

Disclosure not required as a result of our Company’s status as a smaller reporting company.

Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this prospectus. See “FORWARD LOOKING STATEMENTS” paragraph above.

Overview and Financial Condition

Discussions with respect to our Company’s operations included herein refer to our operating subsidiary, The SpendSmart Payments Company-CA. The Company purchased The SpendSmart Payments Company-CA on October 16, 2007. The Company has no other operations than those of The SpendSmart Payments Company-CA.

Results of Operations

Revenues

The Company has total revenues of $1,020,438 for the year ended September 30, 2013 ($1,009,250 for the year ended September 30, 2012). Our revenues increased $11,188 or 1.1% our prior fiscal year’s total, but have not reached the level required to support our current and planned infrastructure and that would result in profits from operations. Revenues consist of fees charged to our customer prepaid cardholders for monthly maintenance fees, ATM fees, load fees and other insignificant revenues. We continue to not charge our cardholders for new card initiation fees. We charge maintenance fees on our issued cards (“ICs”) to cardholders on a monthly basis pursuant to the terms and conditions in our cardholder agreements. We charge ATM fees to cardholders when they withdraw money or conduct other transactions at certain ATMs in accordance with the terms and conditions in our cardholder agreements. Other revenues (currently insignificant) consist primarily of fees associated with optional products or services, which we may offer to consumers during the card activation process.

Our aggregate new card fee revenues vary based upon the number of ICs activated and the activities associated therewith. Our aggregate monthly maintenance fee revenues vary primarily based upon the number of active cards in our portfolio and the average fee assessed per account. Our average monthly maintenance fee per active account depends upon the extent to which fees are waived based on promotional considerations. Our aggregate ATM fee revenues vary based upon the number of cardholder ATM transactions and the average fee per ATM transaction.

Our prepaid card product offerings are marketed primarily to parents, enabling them to link and communicate with younger cardholders (generally their children or other young people in their care) in order to guide responsible spending. Our products have been designed with significant features that we hope consumers will find compelling. We continue to market our products (both online, in traditional retail settings and with strategic partners) to the public as a convenient and safe youth payment system.

While we are optimistic about the prospects for prepaid card products, since this continues to be a relatively new product offering, there can be no assurance about whether or when they will turn out to be a successful or if they will generate sufficient revenues to fund our operations over future periods.

Operating Expenses

In order to better represent our financial results and to make them comparable to leading companies in the prepaid card industry, we have classified our operating expenses into four major categories: (1) selling and marketing; (2) personnel related; (3) operations; and (4) general and administrative expenses. We do not allocate common expenses to any of these expense categories.

Selling and marketing expenses

Selling and marketing expenses for the year ended September 30, 2013 totaled $5,617,974 ($3,025,724 in fiscal 2012). This was an increase of $2,592,250 and 85.7% from fiscal 2012 to fiscal 2013. More significant components of these expenses for the years ended September 30, 2013 and 2012 were as follows.

	2013		2012		Change			% Change

Marketing consulting	$	487,261	$	603,949	$	(116,688	)		-19.3	%
Public relations		277,186		125,369		151,817			121.1	%
Direct marketing		85,156		1,972,416		(1,887,260	)		-95.7	%
Marketing programs		4,709,690		272,172		4,437,518			1630.4	%
Market research		58,550		44,646		13,904			31.1	%
Other		131		7,172		(7,041	)		-98.2	%
	$	5,617,974		3,025,724	$	2,592,250			85.7	%

Decreases in marketing consulting in the most recent fiscal year over the prior year totals were due to not employing brand awareness marketing agencies in fiscal 2013. Our levels of direct marketing were significantly reduced toward the end of 2013 while we focused more on our account engagement (e.g. revenue per account) and our transition to a new card processor. Marketing programs in the current year included the recognition of $3,750,000 in expense in connection with payment made in connection with a new endorsement agreement signed in November 2012.

Personnel related expenses

Personnel related expenses totaled $12,316,632 during the year ended September 30, 2013, ($8,983,667 for the year ended September 30, 2012). This amounted to an increase of $3,332,965 or a 37.1% increase from fiscal 2012 to fiscal 2013. More significant components of these expenses for the years ended September 30, 2013 and 2012 were as follows.

	2013		2012		Change			% Change

Salaries and wages	$	2,052,348	$	2,341,563	$	(289,215	)		-12.4	%
Stock based compensation		9,495,292		6,040,144		3,455,148			57.2	%
Consulting and outside services		399,711		296,230		103,481			34.9	%
Other		369,281		305,730		63,551			20.8	%
	$	12,316,632		8,983,667	$	3,332,965			37.1	%

Overall increases in personnel related expenses reflected the closing of our San Diego office in July and reduction in bonus accruals offset by the addition of employees and consultants over the prior fiscal year, including a new President and Controller. Stock based compensation was significantly higher due to option and warrant grants made to directors, executive officers and endorsers (and in prior periods that vested in the current year). Other personnel related expenses include employer taxes, employee benefits and other employee related costs.

Processing expenses

Processing expenses totaled $1,792,179 for the year ended September 30, 2013 ($3,284,869 for the year ended September 30, 2012). This resulted in a decrease of $1,492,690 or 45.4% compared to fiscal 2012. The following is a detail of the significant components of processing expenses for the respective periods.

	2013		2012		Change			% Change

Card processing	$	311,505	$	791,854	$	(480,349	)		-60.7	%
Fraud losses		6,340		54,923		(48,583	)		-88.5	%
Account initiation		10,385		127,532		(117,147	)		-91.9	%
Card creation		4,521		371,484		(366,963	)		-98.8	%
Account holder communications		29,584		56,441		(26,857	)		-47.6	%
Merchant credit card fees		277,186		343,482		(66,296	)		-19.3	%
Contracted software development		947,312		1,055,309		(107,997	)		-10.2	%
Customer service		161,204		381,145		(219,941	)		-57.7	%
Other		44,142		102,699		(58,557	)		-57.0	%
	$	1,792,179		3,284,869	$	(1,492,690	)		-45.4	%

Decreases in processing expenses were the result of a decrease in our account holder base compared to fiscal 2012 as well as more favorable rates with our new processor. Our plan is to continue to reduce such costs on a per account basis over time. Contracted software development expenses decreased compared to the prior fiscal year due to expenses incurred in fiscal 2012 in connection with the completed transition to our new card processor. Card creation and account initiation expenses were down significantly year to date due to our change in processors and the related cost structure negotiated from prior year along with associated credits recorded in fiscal 2013. Customer service costs were reduced due to our bringing much of the customer service function in house (with the related personnel expense included in salaries and wages above).

General and administrative expenses

General and administrative expenses totaled $2,548,890 for the fiscal year ended September 30, 2013 ($1,468,718 for the fiscal year ended September 30, 2012). This resulted in an increase of $1,080,172 or 73.5% from fiscal 2012 to fiscal 2013. The following is a detail of the significant components of general and administrative expenses for the respective periods.

	2013		2012		Change			% Change

Accounting	$	185,853	$	66,981	$	118,872			177.5	%
Insurance		193,349		68,417		124,932			182.6	%
Investor relations		151,209		113,205		38,004			33.6	%
Investor relations consulting		1,046,500		673,326		373,174			55.4	%
Legal fees - general counsel		451,370		198,389		252,981			127.5	%
Rent		74,778		45,103		29,675			65.8	%
Travel and lodging		135,837		121,761		14,076			11.6	%
Seminars		8,296		28,737		(20,441	)		-71.1	%
Telecommunications		66,941		51,055		15,886			31.1	%
Other		234,757		101,744		133,013			130.7	%
	$	2,548,890		1,468,718	$	1,080,172			73.5	%

Investor relations consulting results from the issuance of stock to investor relations consultants for services performed on our behalf (this is a noncash expense). We had significant issuances of stock issued to an investor relations consultant in fiscal 2013, up from work done in fiscal 2012. Legal expenses are up significantly over the prior year in connection with continued work on our name change, proxy vote, stock split, SEC reporting obligations, and pending acquisition. Insurance increased due to increased coverage needed for D&O insurance. Accounting charges increased due to the restatements for the years ended September 30, 2012 and 2011 along with the interim quarterly reports.

Total operating expenses

Total operating expenses for the year ended September 30, 2013 were $22,275,675 ($16,762,978 for the year ended September 30, 2012). The increase in operating expenses of $5,512,697 or 32.8% from the previous year’s level is noted throughout above. Included in the total operating expenses were noncash expenses (primarily for stock based compensation) totaling $9,495,292 and $6,040,144 for fiscal 2013 and 2012, respectively.

Non-operating Income and Expense

For the years ended September 30, 2013 and 2012, interest income totaled $4,334 and $5,103, respectively. Interest income resulted from cash on deposit during the respective fiscal years.

During the year ended September 30, 2013, we recognized a gain from the change in the fair value of derivative liabilities of $8,668,688 (and a loss of $5,346,358 in fiscal 2012). These derivative liabilities are the fair value of warrants issued in fiscal 2010 with anti-dilution privileges and warrants issued in fiscal 2012 with certain registration privileges.

Net Loss and Net Loss per Share

For the year ended September 30, 2013, our net loss totaled $12,583,216 ($21,094,983 for the year ended September 30, 2012). Our basic and diluted net loss per share was $1.55 and $3.94 for the years ended September 30, 2013 and September 30, 2012, respectively. Common stock equivalents and outstanding options and warrants were not included in the calculations due to their effect being anti-dilutive.

Liquidity and Capital Resources

We have primarily financed our operations to date through the sale of unregistered equity. At September 30, 2013, our total current assets were $1,264,913. Total current liabilities were $1,395,469 (all of which were current) and our stockholders’ deficiency totaled $123,174. Also included in current liabilities were amounts arising in connection with derivative liabilities (consisting of warrants) totaling $57,784. These liabilities represent the fair value of the warrants. Any future settlement of these securities could result either: (1) upon their expiration unexercised; or (2) upon their exercise and receipt of cash by our Company of the cash proceeds of their exercise (assuming the exercise is not effected on a cashless basis allowed by some of the outstanding warrants accounted for as derivatives).

We may raise additional funding through the sale of unregistered common stock and warrants although there can be no assurance that we will be successful in raising such funds. This description of our recent financing and our future plans does not constitute an offer to sell or the solicitation of an offer to buy our securities, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

Our cash and cash equivalents balance at September 30, 2013 totaled $1,070,748. During the fiscal year ended 2013, positive cash flows resulted from financing activities of $6,260,165, offset by negative cash flows from operating activities totaling $10,701,833.

Going Concern

As noted above (and by our independent registered public accounting firm in their report on our consolidated financial statements as of and for the year ended September 30, 2013), there exists substantial doubt about our ability to continue as a going concern. Our financial statements do not contain any adjustments related to the outcome of this uncertainty.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles that are 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 and liabilities, related 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. We continually evaluate our estimates and judgments and we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Contractual Obligations

With the exception of employment agreements and the endorsement agreement described elsewhere herein, we have no outstanding contractual obligations through the date of this report that are not cancellable at our Company’s option.

Critical Accounting Policies Involving Management Estimates and Assumptions

In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures. We have identified the following accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our significant accounting policies are described in more detail in the notes to consolidated financial statements included elsewhere in this filing. If actual results differ significantly from our estimates and projections, there could be a material effect on our financial statements.

Use of Estimates

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

Revenue Recognition

We generally have two revenue sources: monthly account fees and usage fees. Monthly account fees are recognized in the month for which the cardholder has a balance on an active card. No fees are charged or recorded as revenue for cards for which there is no cardholder balance. Usage fees are recognized at the time of the transaction. We defer revenue for monthly fees paid in advance of the related month of service. Deferred revenues at September 30, 2013 and 2012 were insignificant. We recognize fee revenue gross of related processing costs and service fees. We do not collect sales taxes in connection with our products or services. During the year ended September 30, 2013 we remitted cardholder funds to the issuing bank within two business days of card loading. As of September 30, 2013 we had $177,894 of cardholder funds included in amounts on deposit with or due from merchant processors.

Stock Based Compensation

We account for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. We use historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information, due to the lack of comparable publicly traded companies that exist in our industry.

Derivatives

We account for certain of our outstanding warrants as derivative liabilities. These derivative liabilities are ineligible for equity classification due to provisions of the instruments that may result in an adjustment to their conversion or exercise prices. The fair value of these liabilities is estimated using option pricing models that are based on the individual characteristics of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.

Recent Accounting Pronouncements

Please see note 2 to our consolidated financial statements included herein.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2013.

THE SPENDSMART PAYMENTS COMPANY

Index

Item 8 - Financial Statements

Report of Independent Registered Public Accounting Firm	23

Consolidated Balance Sheets at September 30, 2013 and 2012	24

Consolidated Statements of Operations for the years ended September 30, 2013 and 2012	25

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the years ended September 30, 2013 and 2012	26

Consolidated Statements of Cash Flows for the years ended September 30, 2013 and 2012	27

Notes to Consolidated Financial Statements	28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

The SpendSmart Payments Company

We have audited the accompanying consolidated balance sheets of The SpendSmart Payments Company (the “Company”) as of September 30, 2013 and 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended September 30, 2013. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The SpendSmart Payments Company as of September 30, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the consolidated financial statements, the Company has incurred net losses since inception and has an accumulated deficit at September 30, 2013. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regard to those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ EisnerAmper LLP

Iselin, New Jersey

December 30, 2013

THE SPENDSMART PAYMENTS COMPANY

Consolidated Balance Sheets

September 30, 2013 and 2012

	September 30, 2013			September 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	1,070,748		$	5,509,911
Amounts on deposits with or due from merchant processor		177,894			203,479
Prepaid insurance		16,271			56,010
Total current assets		1,264,913			5,769,400
Other assets:
Property and equipment, net of accumulated depreciation of $48,583 ($44,057 - September 30, 2012)		1,682			8,713
Other assets		5,700			5,700

TOTAL ASSETS	$	1,272,295		$	5,783,813

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued liabilities	$	1,163,692		$	1,161,191
Accrued deferred personnel compensation		173,993			271,067
Derivative liabilities		57,784			14,345,625
Total current liabilities		1,395,469			15,777,883

Redeemable Series B convertible preferred stock; $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding; liquidation preference of $0 converted to common stock at January 19, 2013 (10,165 shares issued and outstanding at September 30, 2012; liquidation preference of $10,165,000 September 30, 2012)		-			8,656,892
Redeemable common stock; $0.001 par value; 0 shares issued and outstanding, and not classified as equity at September 30, 2013 (784,750 shares issued and outstanding, and not classified as equity at September 30, 2012)		-			1,026,173

Commitments and Contingencies

STOCKHOLDERS' DEFICIENCY
Series A convertible preferred stock; $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2013 (353 shares issued and outstanding at September 30, 2012)		-			-
Common stock; $0.001 par value; 300,000,000 shares authorized; 10,380,888 shares issued and outstanding (5,855,312 - September 30, 2012)		10,381			5,855
Additional paid-in capital		66,467,197			34,334,546
Accumulated deficit		(66,600,752	)		(54,017,536	)
TOTAL STOCKHOLDERS’ DEFICIT		(123,174	)		(19,677,135	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,272,295		$	5,783,813

See accompanying notes to consolidated financial statements

THE SPENDSMART PAYMENTS COMPANY

Consolidated Statements of Operations

For the years ended September 30, 2013 and 2012

	Year Ended			Year Ended
	September 30, 2013			September 30, 2012
Revenues	$	1,020,438		$	1,009,250

Operating expense:
Selling and marketing		5,617,974			3,025,724
Personnel related		12,316,632			8,983,667
Processing		1,792,179			3,284,869
General and administrative		2,548,890			1,468,718
Total operating expenses		22,275,675			16,762,978

Loss from operations:		(21,255,237	)		(15,753,728	)

Nonoperating income (expense):
Interest expense		(1,001	)		-
Interest income		4,334			5,103
Change in fair value of derivative liabilities		8,668,688			(5,346,358	)
Total other expense		8,672,021			(5,341,255	)
Net loss and comprehensive net loss	$	(12,583,216	)	$	(21,094,983	)

Deemed dividend on preferred stock	$	-			(4,481,126	)

Net loss and comprehensive net loss applicable to common shareholders		(12,583,216	)		(25,576,109	)

Basic and diluted net loss per share	$	(1.55	)	$	(3.94	)

Basic and diluted weighted average common shares outstanding used in computing net loss per share		8,141,737			6,488,079

See accompanying notes to consolidated financial statements

THE SPENDSMART PAYMENTS COMPANY

Consolidated Statements of Changes in Stockholders’ Deficiency and Redeemable Preferred and Common Stock (not classified as equity)

For the years ended September 30, 2013 and 2012

	Redeemable Series B
	Preferred Stock						Redeemable Common Stock						Series A Preferred						Common Stock						Additional						Total
	(not classified as equity)						(not classified as equity)						Stock						(classified as equity)						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Shares			Par Value			Shares			Par Value			Capital			Deficit			Deficiency
Balance at September 30, 2011		-			-			-		$	-			4,325		$	4			5,688,171		$	5,688		$	31,665,691		$	(32,922,553	)	$	(1,251,170	)
Issuance of redeemable common and preferred stock and warrants for cash, less issuance costs		10,165			9,219,461			784,750			4,173,643			-			-			-			-			-			-			-
Allocation of net proceeds to warrant derivative liability		-			(5,043,695	)		-			(3,147,470	)		-			-			-			-			-			-			-
Conversions of preferred stock to common stock		-			-			-			-			(3,972	)		(4	)		80,253			80			(76	)		-			-
Issuance of common stock for services		-			-			-			-			-			-			125,222			125			751,205			-			751,330
Stock based compensation from stock options and warrants		-			-			-			-			-			-			-			-			6,040,144			-			6,040,144
Preferred stock deemed dividend		-			4,481,126			-			-			-			-			-			-			(4,481,126	)		-			(4,481,126	)
Repurchase of common stock		-			-			-			-			-			-			(40,000	)		(40	)		(159,960	)		-			(160,000	)
Exercise of warrants to purchase common stock		-			-			-			-			-			-			1,667			2			(2	)		-			-
Forfeiture of accrued compensation		-			-			-			-			-			-			-			-			37,252			-			37,252
Reclassification of derivative liabilities		-			-			-			-			-			-			-			-			481,418			-			481,418
Net loss		-			-			-			-			-			-			-			-			-			(21,094,983	)		(21,094,983	)
Balance at September 30, 2012		10,165			8,656,892			784,750			1,026,173			353		$	-			5,855,312		$	5,855		$	34,334,546		$	(54,017,536	)	$	(19,677,135	)
Reverse Stock split shares		-			-			-			-			-						165			-			-			-			-
Series B (reclassify from convertible preferred stock)		(10,165	)		(8,656,892	)		-			-			-						1,694,167			1,694			8,655,198			-			8,656,892
Common Shares (reclassify from convertible common stock)		-			-			(1,699,415	)		(2,777,433	)		-						1,699,415			1,700			2,775,733			-			2,777,433
Issuance of common stock for services		-			-			-			-			-						461,167			461			1,079,041			-			1,079,502
Stock based compensation from stock options and warrants		-			-			-			-			-						-			-			9,495,292			-			9,495,292
Issuance of redeemable common and preferred stock and warrants for cash, less issuance costs		-			-			914,665			4,866,192			-						-			-			-			-			-
Exercise of warrants to purchase common stock		-			-			-			-			-						663,540			664			1,393,309			-			1,393,973
Series A preferred stock conversion		-			-			-			-			(353	)					7,121			7			(7	)		-			-
Allocation of net proceeds to warrant derivative liability		-			-			-			(3,114,932	)		-						-			-			-			-			-
Reclassification of derivative liabilities		-			-			-			-			-						-			-			8,734,085			-			8,734,085
Net loss		-			-			-			-			-						-			-			-			(12,583,216	)		(12,583,216	)
Balance at September 30, 2013		-			-			-			-			-		$				10,380,888		$	10,381		$	66,467,197		$	(66,600,752	)	$	(123,174	)

See accompanying notes to consolidated financial statements

THE SPENDSMART PAYMENTS COMPANY

Consolidated Statements of Cash Flows

For the years ended September 30, 2013 and 2012

	For the year ended			For the year ended
	September 30, 2013			September 30, 2012
Cash flows from operating activities:
Net loss	$	(12,583,216	)	$	(21,094,983	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense		4,526			1,131
Stock based compensation		9,495,292			6,040,144
Issuance of common stock for services		1,079,502			751,330
Change in fair value of derivative liability		(8,668,688	)		5,346,358
Changes in operating assets and liabilities:
Amounts on deposits with card processor		-			90,359
Prepaid insurance		39,739			(2,968	)
Amounts on deposits with or due from merchant processor		25,585			(161,686	)
Other assets		-			(648	)
Accounts payable and accrued liabilities		2,501			(295,175	)
Accrued and deferred personnel compensation		(97,074	)		226,387
Net cash used in operating activities		(10,701,833	)		(9,099,751	)

Cash flows from investing activities:
Sale of property and equipment		2,505			-
Purchase of property and equipment		-			(9,844	)
Net cash provided by (used in) investing activities		2,505			(9,844	)

Cash flows from financing activities:
Net proceeds from issuance of preferred and common stock and warrants		-			13,393,104
Net proceeds from exercise of warrants to purchase common stock		1,393,973			-
Repurchase of common stock		-			(160,000	)
Issuance of redeemable common and preferred stock and warrants for cash, less issuance costs		4,866,192			-
Net cash provided by financing activities		6,260,165			13,233,104

Net (decrease) increase in cash and cash equivalents		(4,439,163	)		4,123,509

Cash and cash equivalent at beginning of the period		5,509,911			1,386,402
Cash and cash equivalent at end of the period	$	1,070,748		$	5,509,911

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	1,001		$	5,568

Supplemental statement of cash flows:
Modification and exercise of warrants:
Decrease in additional paid-in capital	$	(287,385	)	$	-
Increase in additional paid-in capital		287,385			-
	$	-		$	-
Noncash investing and financing transactions
Forfeiture of accrued compensation	$	-		$	37,252
Reclassification of derivative liabilities	$	8,734,085		$	481,418

The Company had conversion of 3,972 shares of Series A preferred stock into 80,253 shares of common stock during the year ended September 30, 2012.

See accompanying notes to consolidated financial statements

The SpendSmart Payments Company

Notes to Consolidated Financial Statements

Basis of Presentation and Going Concern

The Company is a Colorado corporation. Through the subsidiary incorporated in the state of California, the SpendSmart Payments Company (“SpendSmart-CA”), the Company issues and services prepaid cards marketed to young people and their parents. The Company is a publicly traded company trading on the OTC Bulletin Board under the symbol “SSPC.” The accompanying audited consolidated financial statements include the accounts of the Company and SpendSmart-CA for the year ended September 30, 2013 and 2012, respectively. All intercompany amounts have been eliminated in consolidation.

The Company has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and with rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the years ended September 30, 2013 and 2012, respectively.

For the years ended September 30, 2013 and 2012, the Company’s audited consolidated financial statements included an opinion containing an explanatory paragraph as to the uncertainty of the Company’s ability to continue as a going concern. The Company has continued to incur net losses through September 30, 2013 and have yet to establish profitable operations. These factors among others create a substantial doubt about our ability to continue as a going concern. The Company’s audited consolidated financial statements as of and for the year ended September 30, 2013 do not contain any adjustments for this uncertainty. In response to the Company’s cash needs, in the first quarter of fiscal 2014 the Company raised additional cash through the sale of common stock and warrants as described in our footnotes that follow. All additional amounts raised will be used for the Company’s future investing and operating cash flow needs.

The Company also currently plan to attempt to raise additional required capital through the sale of unregistered shares of the Company’s preferred or common stock (accompanied by warrants to purchase our common stock). All additional amounts raised will be used for our future investing and operating cash flow needs. However there can be no assurance that we will be successful in consummating such financing. This description of our recent financing and future plans for financing does not constitute an offer to sell or the solicitation of an offer to buy our securities, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

In March 2013, the Company changed its name to SpendSmart Payments Company, Inc. and BillMyParents-CA changed its name to The SpendSmart Payments Company.

2. Summary of Significant Accounting Policies

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

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

Revenue Recognition

The Company generally has two revenue sources: monthly account fees and usage fees. Monthly account fees are recognized in the month for which the cardholder has a balance on an active card. No fees are charged or recorded as revenue for cards for which there is no cardholder balance. Usage fees are recognized at the time of the transaction. The Company defers revenue for monthly fees paid in advance of the related month of service. Deferred revenues at September 30, 2013 and September 30, 2012 were insignificant. The Company recognizes fee revenue gross of related processing costs and service fees. The Company does not collect sales taxes in connection with the products or services. During the year ended September 30, 2013, the Company remitted cardholder funds to the issuing bank within two business days of card loading. As of September 30, 2013 and September 30, 2012 we had $177,894 and $203,479, respectively, of cardholder funds included in amounts on deposit with or due from merchant processor and also recorded an offsetting liability of the same amount in accounts payable.

Cash and cash equivalents

The Company considers all investments with an original maturity of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in money market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.

From time to time, the Company has maintained bank balances in excess of insurance limits established by the Federal Deposit Insurance Corporation. The Company has not experienced any losses with respect to cash. Management believes the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to five years). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. Depreciation expense for the years ended September 30, 2013 and 2012 was $4,526 and $1,131, respectively.

Valuation of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the estimated fair value of the assets. There were no impairments recorded in 2013 or 2012.

Income Tax Expense Estimates and Policies

As part of the income tax provision process of preparing the Company’s financial statements, the Company is required to estimate the Company’s provision for income taxes. This process involves estimating our current tax liabilities together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Management then assesses the likelihood that the Company deferred tax assets will be recovered from future taxable income and to the extent believed that recovery is not likely, a valuation allowance is established. Further, to the extent a valuation allowance is established and changes occur to this allowance in a financial accounting period, such changes are recognized in the Company’s tax provision in the Company’s consolidated statement of operations. The Company’s use of judgment in making estimates to determine the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance is recorded against our net deferred tax assets.

There are various factors that may cause these tax assumptions to change in the near term, and the Company may have to record a future valuation allowance against our deferred tax assets. The Company recognizes the benefit of an uncertain tax position taken or expected to be taken on the Company’s income tax returns if it is “more likely than not” that such tax position will be sustained based on its technical merits.

Stock Based Compensation

The Company accounts for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. The Company uses the Black-Scholes option valuation model to estimate the fair value of the Company’s stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. The Company uses historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information.

Derivatives

The Company accounts for certain of its outstanding warrants issued in fiscal 2010, 2012 and 2013 (“2010 Warrants,” “2012 Warrants” and “2013 Warrants, respectively) as derivative liabilities. The 2010 Warrants were determined to be ineligible for equity classification due to provisions of the respective instruments that may result in an adjustment to their conversion or exercise prices. These derivative liabilities which arose from the issuance of the 2010 Warrants resulted in an ending balance of derivative liabilities of $57,784 and $14,345,625, as of September 30, 2013 and September 30, 2012, respectively. On March 20, 2013, the Company amended its warrant agreement for the 2012 and 2013 warrants whereby removing all terms that required net cash settlement, and as a result, the Company recorded its derivative liabilities relating to these warrants through March 20, 2013, at which time the balance of the derivative liability was reclassified into additional paid in capital. The value of the derivative liability that was reclassified to additional paid in capital at March 20, 2013 was $8,734,085.

The Company recognized a gain due to changes in the fair value of derivatives for the year ended September 30, 2013 totaling $8,668,688 and a loss of $5,346,358 for the year ended September 30, 2012, respectively. Subsequent changes to the fair value of the derivative liabilities will continue to require adjustments to their carrying value that will be recorded as other income (in the event that their value decreases) or as other expense (in the event that their value increases). In general (all other factors being equal), the Company will record income when the market value of the Company’s common stock decreases and will record expense when the value of the Company’s stock increases. The fair value of these liabilities is estimated using option pricing models that are based on the individual characteristics of the Company’s warrants, preferred and common stock, as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.

Net Loss per Share

The Company calculates basic earnings per share (“EPS”) by dividing the Company’s net loss and comprehensive net loss applicable to common shareholders by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss and comprehensive net loss applicable to common shareholders by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

During the year ended September 30, 2012, the Company issued Series B preferred stock with warrants to purchase additional common stock. The fair value of the warrants issued was approximately $4,481,126, at the issue date, resulting in a beneficial conversion feature and an immediate deemed dividend of approximately $4,481,126.

Warrant Liability

The Company accounts for the 159,167 common stock warrants granted in connection with certain financing transactions (“Transactions”) in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity" whereby under that provision they do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's statements of operations. The fair value of the warrants issued by the Company in connection with the transactions have been estimated using a Monte Carlo simulation.

Fair value of assets and liabilities

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s financial instruments are cash and cash equivalents, accounts payable, and derivative liabilities. The recorded values of cash equivalents and accounts payable approximate their fair values based on their short-term nature. The fair value of derivative liabilities is estimated using option pricing models that are based on the individual characteristics of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread. The derivative liabilities are the only Level 3 fair value measures.

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of September 30, 2013 and September 30, 2012 is as follows:

Date of Valuation	September 30, 2013			September 30, 2012
Stock Price	$	1.95		$	10.65
Volatility (Annual)		69% to 70	%		68% to 74	%
Number of assumed financings		1			1
Number of anti-dilutive warrants		159,167			159,167
Total warrants outstanding		9,637,948			7,339,917
Total shares outstanding		10,380,888			5,855,313
Strike Price	$	6.00		$	6.00
Risk-free Rate		0.33	%		0.23	%
Maturity Date		1/24/14 to 11/24/15			1/24/14 to 11/24/15
Expected Life		0.73 to 2.15 years			1.73 to 3.15 years

At September 30, 2013 and September 30, 2012, the estimated fair values of the liabilities measured on a recurring basis are as follows:

	Fair Value Measurements at September 30, 2013
	Balance at September 30, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant derivative liabilities	$	57,784	$	-	$	-	$	57,784
Total	$	57,784	$	-	$	-	$	57,784

	Fair Value Measurements at September 30, 2012
	Balance at September 30, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant derivative liabilities	$	14,345,625	$	-	$	-	$	14,345,625
Total	$	14,345,625	$	-	$	-	$	14,345,625

The following tables present the activity for liabilities measured at estimated fair value using unobservable inputs for the years ended September 30, 2013 and 2012:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Warrant Derivative Liabilities
Beginning balance at October 1, 2012	$	14,345,625
Issuance of warrants with derivative liabilities		3,114,932
Changes in estimated fair value		(8,668,688	)
Reclassification of derivative liability to additional paid-in capital		(8,734,085	)
Ending balance at September 30, 2013	$	57,784

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Warrant Derivative Liabilities
Beginning balance at October 1, 2011	$	1,289,520
Issuance of warrants with derivative liabilities		8,191,165
Changes in estimated fair value		5,346,358
Reclassification of derivative liability to additional paid-in capital		(481,418	)
Ending balance at September 30, 2012	$	14,345,625

Advertising

The Company expenses advertising costs as incurred. The Company has no existing arrangements under which we provide or receive advertising services from others for any consideration other than cash. Advertising expenses (primarily in the form of Internet direct marketing) totaled $85,156 and $2,077,766 for the years ended September 30, 2013 and 2012, respectively.

Litigation

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. Through the date of these financial statements, the Company is currently not involved in litigation or other legal actions. The Company is involved in a disagreement with our incumbent processor. The Company is currently involved in an arbitration proceeding with its former transaction processor and the Company’s arbitration hearing date is currently set for January 14-15, 2014. In connection with the services provided under a processing agreement, the processor asserted that we are liable for previously unbilled services. The Company is vigorously asserting the Company’s position and the Company currently estimates that it will prevail in the arbitration. The Company has adequate reserves allocated in the event that we would be required to make any payments in connection with this matter. If the Company is judged liable for either a portion or all of the charges, or should the Company enter into a monetary settlement with the processor, such liability or settlement could materially affect its ability to execute the Company’s customer acquisition strategy by reducing the amount available for such activities by any amounts due to the processor or needed for related expenses.

Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, “FASB” issued ASU 2011-05, “Presentation of Comprehensive Income”, an amendment to FASB ASC Topic 220, “Comprehensive Income”. The update gives companies the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in the update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The ASU is effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of ASU 2011-05 did not have any impact on the company as the company has no other comprehensive income or loss, and therefore the net income or loss equals to the total comprehensive income or loss. In December 2011, the FASB issued ASU 2011-12 “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update stated that the specific requirement to present items that are reclassified from other comprehensive income to net income alongside their respective components of net income and other comprehensive income will be deferred. In February 2013, the FASB issued ASU 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. This update requires companies to present the effects on the line items of net income of significant reclassifications out of accumulated other comprehensive income if the amount being reclassified is required under U.S. generally accepted accounting principles to be reclassified in its entirety to net income in the same reporting period. ASU 2013-02 is effective prospectively for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company’s consolidated financial statements were not significantly impacted by the adoption of this amended guidance.

Management’s Evaluation of Subsequent Events

Management evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, management did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

3. Redeemable Preferred Stock

From January 1, 2012 through July 19, 2012, the Company entered into subscription agreements with accredited investors pursuant to which we issued a total of 10,165 shares of our Series B Preferred Stock (convertible into 1,694,167 shares of the Company’s Common Stock), and five year warrants to purchase up to an additional 1,111,042 shares of our Common Stock at exercise prices ranging between $7.50 and $9.00 per share, in exchange for gross and net proceeds totaling approximately $10,165,000 and $9,219,461, respectively. The Series B Convertible Preferred Stock automatically converted to common stock on January 19, 2013 as in accordance with the registration statement. In aggregate 10,165 outstanding shares of the Series B Stock automatically converted into 1,694,167 common shares.

During the year ended September 30, 2012, the Company issued Series B preferred stock with warrants to purchase additional common stock. The fair value of the warrants issued was approximately $4,481,126 at the issue date, resulting in a beneficial conversion feature and an immediate deemed dividend of approximately $4,481,126.

4. Common Stock and Warrants

Common stock

On November 30, 2012, the Company entered into subscription agreements (“Subscription Agreement”) with seven accredited investors pursuant to which the Company issued 486,667 shares of our common stock, $0.001 par value (the “Common Shares”) at a purchase price of $6.00 per share (the “Offering”). Pursuant to the terms of the Offering, the Company issued five year warrants to purchase up to an additional 458,333 shares of common stock in the aggregate, at an exercise price of $7.50 per share, to two investors, and five year warrants to purchase up to 7,083 shares of the Company’s common stock in the aggregate, at an exercise price of $9.00 per share, to five investors (collectively, the “Warrants”). The Offering resulted in net proceeds to the Company of approximately $2,580,500 after deducting fees and expenses totaling $339,500.

On December 13, 2012, the Company entered into subscription agreements (“Subscription Agreement”) with fifty-five accredited investors pursuant to which the Company issued 427,998 shares of our common stock, $0.001 par value (the “Common Shares”) at a purchase price of $6.00 per share (the “Offering”). Pursuant to the terms of the Offering, the Company issued five year warrants to purchase up to an additional 83,333 shares of our common stock in the aggregate, at an exercise price of $7.50 per share, to one investors, and five year warrants to purchase up to 86,166 shares of our common stock in the aggregate, at an exercise price of $9.00 per share, to fifty-four investors. The Offering resulted in net proceeds to the Company of approximately $2,285,692 after deducting fees and expenses totaling $282,299.

On March 20, 2013, the Company amended its warrant and registration rights agreement whereby removing all terms that required net cash settlement. As a result, the Company reclassed 1,699,415 shares or $2,777,433 from redeemable common stock to common stock (classified as equity).

On July 15, 2013, the Company issued to a service provider 450,000 shares of common stock, at $2.25 per share, with a fair value of $1,012,500. During the period ended March 2013, the Company issued 11,167 shares of common stock to a contractor in exchange for programming services performed, at $6.00 per share, with a fair value of $67,002.

During the year ended September 30, 2012, the company issued 18,000 shares of common stock, at $6.00 per share, and the Company recognized expense of $108,000 for services rendered.

Warrants

On June 10, 2013, the Company announced its intention to exercise certain classes of outstanding warrants that were initially issued to investors participating in private placement financings in 2010, 2011 and 2012 consisting of the following classes: (i) outstanding warrants to purchase an aggregate of 634,916 shares of the Company’s common stock issued to investors participating in the Company’s private placement financing completed on December 13, 2012 and November 30, 2012, of which 541,667 are exercisable at an exercise price of $7.50 per share (the “$7.50 December Warrants”) and 93,249 are exercisable at an exercise price of $9.00 per share (the “$9.00 December Warrants”); (ii) outstanding warrants to purchase an aggregate of 1,016,518 shares of the Company’s common stock issued to investors participating in the Company’s private placement financings closed on July 19, 2012, June 20, 2012, May 24, 2012 and March 31, 2012, of which 833,333 are exercisable at an exercise price of $7.50 per share (the “$7.50 Investor Warrants”) and 183,185 are exercisable at an exercise price of $9.00 per share (the “$9.00 Investor Warrants”); (iii) outstanding warrants to purchase an aggregate of 446,188 shares of the Company’s common stock issued to investors participating in the Company’s private placement financing completed on October 21, 2011 and November 21, 2011, of which 333,334 are exercisable at an exercise price of $7.50 per share (the “$7.50 2011 Warrants”) and 112,854 are exercisable at an exercise price of $9.00 per share (the “$9.00 2011 Warrants”); and (iv) outstanding warrants to purchase an aggregate of 431,950 shares of the Company’s common stock issued to investors participating in the Company’s private placement financings closed on November 16, 2010, of which 125,000 are exercisable at an exercise price of $6.00 per share (the “$6.00 2010 Warrants”) and 306,950 are exercisable at an exercise price of $9.00 per share (the “$9.00 2010 Warrants”).The warrant redemption was intended to raise non-dilutive capital.

A Notice of Election to Participate was provided to the affected warrant holders on June 10, 2013. These warrant holders had until 5:00 p.m. ET on July 15, 2013, to exercise their outstanding warrants at $2.25 per share. Pursuant to the Offer to Amend and Exercise, on July 15, 2013 an aggregate of 662,540 warrants were tendered by their holders and were amended and exercised in connection therewith for an aggregate exercise price of approximately $1,490,715, including the following warrants: 85,974 $9.00 December Warrants; 99,703 $9.00 Investor Warrants; 83,334 $7.50 Investor Warrants; 82,408 $9.00 2011 Warrants; 93,751 $7.50 2011 Warrants; 154,870 $9.00 2010 Warrants; and 62,500 $6.00 2010 Warrants.

In accordance with ASC 718- 20-35, short-term inducement modifications shall be treated as an exchange of the original award for a new award. In substance, the Company repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional expense for any incremental value. The effects of this modification (incremental cost) shall be measured as the excess, if any, of the fair value of the modified award determined over the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. Total recognized cost for an equity award shall at least equal the fair value of the award at the grant date. As a result of this modification, there was no incremental cost.

5. Convertible Preferred Stock

Series A Preferred Stock

At September 30, 2013 and September 30, 2012 the Company had 0 and 353 shares, respectively, of Series A Cumulative Convertible Preferred Stock (the “Series A Stock”) outstanding. The Series A Stock was originally issued to investors for $100 per share. The following summarizes the terms of the Series A preferred stock outstanding:

Face Value: Each share of Series A Stock has a face and par value of $100 and $.001 per share, respectively.

Voluntary Conversion: Each share of Series A Stock is convertible at the election of the holders at any time into approximately 20 shares of our common stock, subject to increase under the anti-dilution provisions under the Certificate of Designation and the Subscription Agreement upon the occurrence of events as defined therein.

Dividends: Except in the event of default under the terms of the Subscription Agreement, the Series A Stock pays no dividends. In the event of an uncured default by our Company, the Series A Stock pays dividends of 12% per annum during the period our Company is in default as described under the Certificate of Designation.

Redemption: The Series A Stock is not required to be redeemed by our Company.

Liquidation Rights: Upon the occurrence of a liquidation event (as defined in the Certificate of Designation), the holders of Series A Stock will be repaid their full face value and cumulative accrued dividends prior to the receipt of any other class of preferred or common stock.

Forced Conversion: The Company has the right to force conversion of each share of Series A Stock into approximately 20 shares of common stock at any time provided the Company’s common stock has maintained a closing price of $15.00 per share for three consecutive trading days prior to conversion.

Voting Rights: The Company’s Series A Stock has no voting rights.

Covenants: The Subscription Agreement imposes certain covenants on the Company, including restrictions against incurring additional indebtedness, issuing any additional equity except certain permitted issuances, creating any liens on the Company’s property, amending its certificate of incorporation or bylaws in a manner which may adversely affect the Series A Stock holders, redeeming or paying dividends on shares of the Company’s outstanding common stock, and entering into certain related party transactions.

At September 30, 2013 and September 30, 2012, the Series A preferred stock was convertible into 0 and 7,121 shares, respectively, of the Company’s common stock at an effective price of $4.95 per share.

Series B Preferred Stock

The Company’s Series B Convertible Preferred Stock (“Series B Stock”) automatically converted to common stock on January 19, 2013 as in accordance with the registration statement which states that six months from the date of the final closing, as defined in the related subscription agreement, each share of Series B will automatically convert into common stock. 10,165 outstanding shares of Series B Stock automatically converted into 1,694,167 common shares at an effective price of $600 per share when adjusted for the 1:15 stock split.

At September 30, 2012, the Company had 10,165 shares of Series B convertible preferred stock (“Series B Stock”) outstanding that were issued to investors for $1,000 per share. The following summarizes the terms of the Series B Stock outstanding:

Face Value: Each share of Series B Stock has a face and par value of $1,000 and $0.001 per share, respectively.

Voluntary Conversion: Each share of Series B Stock is convertible at the election of the holders at any time into 167 shares of our common stock. Dividends: None.

Redemption: The Series B Stock is not required to be redeemed by the Company.

Liquidation Rights: Upon the occurrence of a liquidation event and after any payments to the holders of Series A Stock, the holders of Series B Stock will be repaid their full face value prior to the receipt of any other class of preferred or common stock.

Forced Conversion: Each share of Series B Stock shall automatically convert into common stock at the earlier of: 1) the effective date of registration of common shares into which Series B Stock is convertible; or 2) six months from the date of the final closing as defined in the related subscription agreement. The Series B Stock automatically converted to common stock on January 19, 2013 due to (2) above (the final closing date was July 19, 2012).

Voting Rights: Equal to the largest number of full shares of common stock into which the shares can be converted.

Agreements for services, officer and Board of Directors’ compensation

In August 2012, the Company entered into one-year consulting agreements with Patrick Kolenik and Cary Sucoff (Messrs. Kolenik and Sucoff are members of the Company’s Board of Directors). The agreements call for the payment to Messrs. Kolenik and Sucoff of $5,000 each per month for their services to our Company. During the year ended September 30, 2013, the Company recognized and paid expenses totaling $55,000, each in connection with these consulting agreements.

In October 2012, the Company granted a five-year warrant to purchase up to 133,333 shares of common stock to Chris Leong, a member of our Board of Directors. The warrant vests monthly over a period of twelve months; has an exercise price of $6.90 per share; and includes a cashless exercise option. In November 2012, the Company granted warrants to purchase up to 333,333 shares of common stock to William Hernandez, the Company’s President and a member of the Board of Directors (as of January 2013). The warrants vest over a period of three years; have an exercise price of $7.35 per share; include a cashless exercise option; and expire five years after the date of grant. The fair value of these warrants on the grant date was $1,210,150 of which $527,984 was recognized as a noncash charge to personnel related expense during period ended September 30, 2013.

In November 2012 (the "Effective Date"), the Company entered into an Endorsement Agreement (the “Endorsement Agreement”) for the promotion of our products. The Endorsement Agreement has a term of fourteen months (the “Term”), unless extended as provided in the Endorsement Agreement. In connection with the Endorsement Agreement, the Company agreed to pay a nonrefundable advance totaling $3,750,000 (the “Advance”), of which $1,900,000 was paid in November 2012, with the remainder totaling $1,850,000 paid in January 2013. In addition to the Advance, the Company agreed to pay monthly incentive compensation per active account (“Incentive Compensation”). The Advance is not recoupable from incentive compensation payments. The Company also agreed to pay a per month royalty per active account (“Royalty”). The Royalty payments are a single digit percentage of the revenue per card. The Advance is recoupable from Royalty payments made under the Endorsement Agreement. Upon the expiration of the Endorsement Agreement, the endorser will be entitled to receive the Royalty payments, subject to the recoupment of the Advance, and the Incentive Compensation, in perpetuity. The entire balance of the Advance totaling $3,750,000 was charged to operations during the three months ended December 31, 2012. The amount of the royalty payments were immaterial at the end of the year ended September 30, 2013 due to the number of accounts earned to date as a result of this endorsement.

Pursuant to the terms of the Endorsement Agreement, the Company issued the endorser warrants to purchase up to 133,334 shares of our common stock, as follows: 1) warrants to purchase 66,667 shares of the Company’s common stock vested upon the Effective Date, and 2) warrants to purchase another 66,667 shares of the Company’s common stock shall vest in equal monthly installments during the Term, each exercisable at an exercise price $7.05 per share. The Company also issued the endorser warrants to purchase up to an additional 133,333 shares of common stock (the “Additional Warrant”). The Additional Warrant is exercisable for the number of shares of common stock equal to five times the number of active accounts in effect at the end of the Term, provided there are more than two hundred and fifty thousand active accounts as of the last day of the Term. The Additional Warrant will be exercisable no more rapidly than in equal monthly installments during the six month period immediately following the Term at an exercise price of $7.05 per share. In the event the product of five times the number of active accounts exceeds two million, we will issue the endorser an “End of Term Warrant” for the number of shares in excess of 133,333. The exercise price of the End of Term Warrant shall be the arithmetic mean of the high and low prices of our Company’s common stock on the last trading day before the date of the issuance of the End of Term Warrant. If the Endorsement Agreement is extended, which is at the sole discretion of the endorser, the endorser will receive additional warrants to purchase 133,333 shares of the Company’s common stock for any such Extension Period (each, an “Extension Warrant”). Extension Warrants will vest equally on a monthly basis and will have an exercise price equal to the mean of the high and low prices of the Company’s common stock on the last trading day before the date of issuance of each Extension Warrant. The Company recognized $604,372 in expense related to the warrants issued to the endorser for the year ended September 30, 2013.

Payments made in connection with the Advance, Incentive Compensation and Royalty will be recorded as an expense when incurred. Compensation expense related to the warrants, additional warrants, end of term warrants and extension warrants will be recognized based upon actual and expected vesting, of which an insignificant amount has been expensed for the period ended September 30, 2013.

In connection with the Endorsement Agreement (dated November 20, 2012) as of September 30, 2013, the Company made payments to two entities associated with a member of our Board of Directors, Jesse Itzler. Expenses related to these payments totaled $115,000 and $728,405 during the year ended September 30, 2013.

During January 2013 (the "Effective Date"), the Company entered into a Promotion/Endorsement Agreement (the “P/E Agreement”) with a term of eighteen (18) months (the “Term”). In connection with the P/E Agreement, the Company agreed to pay a nonrefundable fee of two hundred and fifty thousand dollars payable in four equal installments, on predetermined dates over the Term.

In addition to the fee, the Company has agreed to pay monthly incentive compensation per active account (“Incentive Compensation”) and have issued to the endorser additional warrants to purchase our common stock. Should the number of accounts reach a specified level, the endorser will have the opportunity to earn additional warrants equal to five times the number of active accounts at the end of the Term. The Additional Warrant (“Additional Warrant”) is exercisable for the number of shares of the Company’s common stock equal to five times the number of active accounts in effect at the end of the Term, provided there are more than two hundred and fifty thousand active accounts as of the last day of the Term. The Additional Warrant will be exercisable no more rapidly than in equal monthly installments during the six month period immediately following the Term at an exercise price of $5.70 per share. In the event the product of five times the number of active accounts exceeds two million, the Company will issue the endorser an “End of Term Warrant” for the number of shares in excess of 133,333. The exercise price of the End of Term Warrant shall be the arithmetic mean of the high and low prices of our Company’s common stock on the last trading day before the date of the issuance of the End of Term Warrant. Extension Warrants will vest equally on a monthly basis and will have an exercise price equal to the mean of the high and low prices of our Company’s common stock on the last trading day before the date of issuance of each Extension Warrant.

Agreements with former officer

In February 2013, the Company granted warrants to purchase up to 200,000 shares of common stock to Kim Petry, the Company’s former CFO. She replaced former CFO, Jonathan Shultz. The warrants vest over a period of three years; have an exercise price of $5.85 per share; include a cashless exercise option; and expire five years after the date of grant. The fair value of these warrants on the grant date was $587,802. Ms. Petry resigned from the Company in the first quarter of 2014 and the cost associated with the remainder of her warrants will be recorded then.

On June 28, 2012, the Company entered into a Severance Agreement and General Release with James Collas the Company’s former President and Chief Executive Officer. Pursuant to the significant terms of the Agreement: 1) Mr. Collas left the Company’s employment effective July 6, 2012; 2) Mr. Collas surrendered 40,000 shares of common stock owned or controlled by him in exchange for $160,000 cash; and 3) Mr. Collas and the Company mutually released one another for all liabilities resulting from Mr. Collas’ employment with our Company.

On April 26, 2011, the Company entered into an Agreement and Release with Mr. Collas pursuant to which the parties agreed that effective as of April 26, 2011, (i) Mr. Collas resigned as an officer and director of the Company; (ii) Mr. Collas’ Employment Agreement dated January 31, 2011 was terminated and Mr. Collas continued his employment with the Company as a non-executive on an “at-will” basis; (iii) the Company paid Mr. Collas $400,000 in satisfaction of all of its obligations under a terminated Employment Agreement; and (iv) Mr. Collas surrendered to the Company 66,667 shares of the Company’s common stock held by him.

8. Net Loss per Share Applicable to Common Stockholders

Options, warrants, and convertible debt outstanding were all considered anti-dilutive for the years ended September 30, 2013, and 2012, due to net losses.

The following securities were not included in the diluted net income (loss) per share calculation because their effect was anti-dilutive as of the periods presented:

	For the years ended
	September 30,
	2013		2012

Common stock options		1,651,678		1,649,110

Common stock warrants		7,907,435		7,396,481

Exlcluded potentially dilutive securities		9,559,113		9,045,591

9. Stockholder’s equity

Stock options

On January 8, 2013, the Company’s Board of Directors approved the adoption of the SpendSmart Payments Company 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan (as approved by the Board of Directors but subject to future shareholder approval solicited by a Proxy Statement filed in January 2013) shall not exceed in the aggregate 3,000,000 shares of the common stock of the Company. On August 4, 2011, the Board of Directors approved the adoption of the SpendSmart Payments Company 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the Plan shall not exceed in the aggregate 1,666,667 shares of the common stock of the Company. The Company also have a stockholder-approved Plan (the IdeaEdge, Inc. 2007 Equity Incentive Plan - the “2007 Plan”, previously approved by our shareholders). The 2007 Plan has similar provisions and purposes as the 2011 Plan. The total number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan (as amended) shall not exceed in the aggregate 4,000,000 shares of the common stock of our Company. Upon shareholder approval of the 2013 Plan, our Board has expressed its intentions to issue no more shares under the 2011 and 2007 Plans.

Through September 30, 2013, we have outstanding a total of 1,651,678 incentive and nonqualified stock options granted under the 2011 Plan and the 2007 Plan, all of which (for the purpose of computing stock based compensation) we have estimated will eventually vest. All of the options have terms of five years with expiration dates ranging from April 2014 to August 2017.

Stock option activity during the two years ended September 30, 2013 and 2012 was as follows:

	2013			2012
Beginning balance outstanding		1,649,110			1,486,333
Options issued during the year		333,334			393,333
Options expired or cancelled during the year		(330,766	)		(230,556	)
Ending balance outstanding		1,651,678			1,649,110

Warrants

During the year ended September 30, 2012, the Company issued warrants to purchase the Company’s common stock to third parties providing consulting and advisory services, including five-year warrants to purchase up to 2,033,333 shares to members of the Company’s Board of Directors (includes grants made not during members’ terms of service on the Board) during fiscal 2012, respectively. The Company also issued warrants to purchase shares of the Company’s common stock to investors in connection with the issuances of restricted shares of common stock during the years ended September 30, 2013 and 2012 (the value of which was offset against the proceeds of the issuance of common stock and not charged to operations). Outstanding warrants from all sources have terms ranging from two to five and a half years.

Warrant activity (including warrants issued to investors and for consulting and advisory services) during the two years ended September 30, 2013 and 2012 was as follows:

	2013			2012
Beginning balance outstanding		7,396,481			3,599,761
Warrants issued during the year:
For consulting and advisory services		486,667			2,196,333
In connection with sales of common and preferred stock		726,383			1,780,971
Warrants expired or cancelled during the year		(39,667	)		(133,513	)
Warrants exercised		(662,429	)		(47,071	)
Ending balance outstanding		7,907,435			7,396,481

The number and exercise price of all options and warrants outstanding at September 30, 2013 is as follows:

		Weighted
		Average
Shares		Exercise		Expiration
Outstanding		Price		Fiscal Period
	123,998		7.20	4th Qtr, 2013
	134,445		6.60	1st Qtr, 2014
	35,378		8.70	2nd Qtr, 2014
	60,667		9.60	3rd Qtr, 2014
	35,000		7.65	4th Qtr, 2014
	88,640		7.80	1st Qtr, 2015
	78,100		7.80	2nd Qtr, 2015
	10,600		10.05	3rd Qtr, 2015
	90,585		6.60	4th Qtr, 2015
	479,246		7.65	1st Qtr, 2016
	880,404		7.20	2nd Qtr, 2016
	960,100		6.45	3rd Qtr, 2016
	1,139,958		6.75	4th Qtr, 2016
	521,994		7.80	1st Qtr, 2017
	859,750		6.15	2nd Qtr, 2017
	1,083,142		7.65	3rd Qtr, 2017
	1,981,431		6.75	4th Qtr, 2017
	662,342		7.80	1st Qtr, 2018
	200,000		5.85	2nd Qtr, 2018
	133,333		7.05	1st Qtr, 2023
	9,559,113

Stock based compensation

Results of operations for the year ended September 30, 2013 include stock based compensation costs totaling $9,495,292 ($6,040,144 for the year ended September 30, 2012) all of which was charged to personnel related expenses in connection with the issuance of stock options and warrants issued to employees, directors, advisors and consultants (not including shares of stock issued directly for services).

For purposes of accounting for stock based compensation, the fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula. Compensation expense is recognized upon actual vesting of the options. The following weighted average assumptions were utilized for the calculations during the years ended September 30, 2013 and 2012:

	2013			2012
Expected life (in years)		4.33 years			4.04 years
Weighted average volatility		93.89	%		89.17	%
Risk-free interest rate		0.74	%		0.54	%
Expected dividend rate		0	%		0	%

The weighted average expected option and warrant term for employee stock options granted reflects the application of the simplified method set out in SEC Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107). The simplified method defines the life as the average of the contractual term of the options and the weighted average vesting period for all options. The Company utilized this approach as its historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term. Expected volatilities are based on the historical volatility of the Company’s stock. The Company estimated the forfeiture rate based on our expectation for future forfeitures and (for the purpose of computing stock based compensation given the contractual vesting of the Company’s options and warrants outstanding) the Company assumes that all options and warrants will vest. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at or near the time of grant. The Company has never declared or paid dividends and have no plans to do so in the foreseeable future.

As of September 30, 2013, $11,431,942 of total unrecognized compensation cost related to unvested stock based compensation arrangements is expected to be recognized over a weighted-average period of 18.1 months. The following table summarizes option activity in connection with stock options and warrants (which resulted in stock based compensation charges) as of and for the year ended September 30, 2013:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2012		5,095,103		$	6.85
Granted		820,001			6.86
Cancelled or expired		(370,433	)		(6.91	)
Exercised		-			-
Outstanding at September 30, 2013		5,544,671		$	6.84			40.6 months	$	-

Exercisable		4,362,580		$	6.90			39.4 months	$	-

Additional disclosure concerning options and warrants is as follows:

	2013		2012
Weighted average grant date fair value of options and warrants granted	$	6.86	$	6.52
Aggregate intrinsic value of options and warrants exercised		-		3.75
Weighted average fair value of options and warrants vested		6.90		6.67

The range of exercise prices for options and warrants granted and outstanding (which resulted in stock based compensation charges) was as follows at September 30, 2013:

Exercise Price Range	Number of Options and Warrants
$5.55 - $6.15		1,003,334
$6.16 - $6.30		230,000
$6.31 - $6.45		1,440,000
$6.46 - $7.05		1,267,604
$7.20 - $15.00		1,603,733
		5,544,671

A summary of the activity of our non-vested options and warrants for the year ended September 30, 2013 is as follows:

	2013			2012
Non-vested outstanding, beginning		2,707,530			1,763,850
Granted		820,000			2,589,667
Vested		(2,271,736	)		(1,405,431	)
Cancelled		(73,704	)		(240,556	)
Non-vested outstanding, ending		1,182,090			2,707,530

Common Shares Reserved for Future Issuance

The following table summarizes shares of our common stock reserved for future issuance at September 30, 2013:

Stock options outstanding			1,651,678
Stock options available for future grant			481,655
Warrants			7,907,435

Total common shares reserved for future issuance			10,040,768

10. Income taxes

Deferred tax assets at September 30, 2013 and 2012 consisted of the following:

	2013			2012
Deferred tax assets:
Primarily net operating loss carryforward	$	17,183,108		$	12,885,000

Valuation allowance		(17,183,108	)		(12,885,000	)

Net deferred tax assets	$	-		$	-

As of September 30, 2013 and September 30, 2012, the Company had federal and state net operating loss carryovers of approximately $42.6 million and $32.0 million, which will begin to expire in 2022. The net operating loss carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The Company has determined that, based on objective evidence currently available, it is more likely than not that the deferred tax assets will not be realized in future periods. Accordingly, the Company has provided a valuation allowance for the full amount of the deferred tax assets at September 30, 2013 and September 30, 2012. As of September 30, 2013 and September 30, 2012, the change in valuation allowance is $4.3 million and $3.4 million, respectively.

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

A reconciliation of the expected tax benefit computed at the U.S. federal and state statutory income tax rates to our tax benefit is as follows:

	2013			2012
Statutory federal income tax rate		34	%		34	%
State taxes, net of federal tax benefit		6	%		6	%
Permanent differences		-6	%		-27	%
Change in valuation allowance		-34	%		-13	%
Income tax provision (benefit)		0	%		0	%

We file income tax returns in the U.S. and in the state of California with varying statutes of limitations. Our policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of September 30, 2013. All operations are in California and the Company believes it has no tax positions which could more-likely-than not be challenged by tax authorities. We have no unrecognized tax benefits and thus no interest or penalties included in the financial statements. The Company is subject to examination for tax years after 2009 for federal purposes and after 2010 for California state tax purposes.

11. Commitments

Our Company lease its San Diego office facilities on a lease agreement through June 2014 with current monthly rentals of $2,695 plus common area maintenance charges. We moved our headquarters to Des Moines, IA in July, 2013. We lease space in Des Moines and additional storage in San Diego. Rent expense was $74,778 and $45,103 for the years ended September 30, 2013 and 2012, respectively. Future rental commitments under contract total $25,650 and $0 in fiscal 2014 and fiscal 2015, respectively.

12. Employee benefit plan

We have an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all of our employees. Participants in the Plan may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. Our Company may make contributions at the discretion of its Board of Directors. During the years ended September 30, 2013 and 2012, we made contributions to the Plan totaling $58,738 and $48,850, respectively.

13. Subsequent events

On October 1, 2013, Jerold Rubinstein was elected as a new board of director and head of the Audit Committee. He received 133,333 warrants with an exercise price of 2.00 per share.

On October 1, 2013, Brian Thompson resigned as a member of the board and as head of the Audit Committee.

On October 15, 2013, the Company, through its wholly owned subsidiary The SpendSmart Payments Company, a California corporation, entered into an Asset Purchase Agreement (the “Agreement”) with Intellectual Capital Management, Inc., d/b/a SMS Masterminds (“SMS”) a Nevada corporation, whereby, upon the completion of certain closing conditions, the Company will purchase substantially all of the assets of SMS. In consideration for such assets, the Company has agreed to issue SMS an aggregate of five million two hundred and fifty thousand shares of common stock of the Company. The closing of the Agreement is subject to standard and customary closing deliverables and is contingent upon, among other things, the Company completing due diligence of the assets and business of SMS to its sole satisfaction.

Effective October 28, 2013, Kim Petry resigned as CFO, Secretary, and Treasurer.

Effective October 28, 2013, the Company entered into an advisory agreement (the “Chord Agreement”) with Chord Advisors, LLC (“Chord”). Pursuant to the Chord Agreement, Chord will provide the Company with comprehensive outsourced accounting solutions. The Company will pay Chord $7,500 per month. The Company has also agreed to issue Chord a vested stock option to purchase five thousand shares of common stock at an exercise price of $2.00 per share. The Company’s Chief Financial Officer, David Horin, is the President of Chord. The Agreement may be terminated by either party.

On October 25, 2013 and November 4, 2013, the Company sold two 7% Convertible Promissory Notes, as well as warrants to purchase an aggregate of 200,000 shares of our common stock at an exercise price of $2.25 per share to two accredited investors, one of which is a former board member of the Company. The notes convert on a voluntary basis at a price equal to $1.25 per share, or will mandatorily convert upon a funding event at the price equal to the lesser of (i) a 25% discount to the effective price of the securities sold in such funding event, or (ii) $1.25 per share of common stock.

On November 27, 2013, Mr. Michael McCoy resigned from his position as Chairman of the Board. Mr. McCoy shall continue to serve as Chief Executive Officer and director of the Corporation. In Addition, Mr. Joseph Proto has been appointed to serve as the new Chairman of the Board until the next annual meeting of stockholders. Further, the Board accepted the resignation of Mr. Jesse Itzler from his seat on the Board.

Also, on November 27, 2013, Mr. Brett Schnell was appointed as the Secretary of the Corporations of SpendSmart Payment Company and its subsidiary of the Corporation.

On December 18, 2013, the Company, through its wholly owned subsidiary The SpendSmart Payments Company, a California corporation, entered into an Amended and Restated Asset Purchase Agreement (the “Amended Agreement”) with Intellectual Capital Management, Inc., d/b/a SMS Masterminds (“SMS”) a Nevada corporation, whereby, upon the completion of certain closing conditions, the Company will purchase substantially all of the assets of SMS. In addition, the Company, through its wholly owned subsidiary The SpendSmart Payments Company, a California corporation, entered into a Goodwill Purchase Agreement with Alex Minicucci, the Chief Executive Officer of SMS, to acquire all of Mr. Minicucci’s goodwill. In consideration for such assets and goodwill, the Company has agreed to issue an aggregate of five million two hundred and fifty thousand shares of common stock of the Company, in addition to other financial consideration. The closing of the Agreements are subject to standard and customary closing deliverables and is contingent upon, among other things, the Company completing due diligence of the assets and business of SMS to its sole satisfaction.

Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A - Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities and Exchange Commission Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Securities and Exchange Commission Rule 13a-15(e) and 15d-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not operating effectively as of September 30, 2013. Our disclosure controls and procedures were not effective because of the “material weakness” described below.

(b) Management’s annual report on internal control over financial reporting.

SEC rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 require our 2013 Annual Report on Form 10-K to contain management’s report regarding the effectiveness of internal control over financial reporting. As a basis for our report, we tested and evaluated the design, documentation, and operating effectiveness of our internal control.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, of The SpendSmart Payments Company and its subsidiaries. The Company’s internal control over financial reporting consists of policies and procedures that are designed and operated to provide reasonable assurance about the reliability of the Company’s financial reporting and its process for preparing financial statements in accordance with generally accepted accounting principles (“GAAP”). There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Restatement of Previously Issued Financial Statements. On August 19, 2013, after consulting with the Company’s Audit Committee, management concluded it had incorrectly calculated its historical volatility for the fiscal year ended September 30, 2012. The error specifically related to an excel spreadsheet calculation whereby it was calculating a volatility that was significantly higher than it should have been. The historical volatility is a key assumption and driver in determining the valuation of the company’s stock based compensation and derivative liabilities. The impact of the change will reduce the derivative liabilities and stock based compensation as of and for the fiscal year ended September 30, 2012. The Company also concluded that they did not maintain effective controls over financial reporting relating to the classification and reporting of financial instruments. The aforementioned errors constitute a material weakness over financial reporting and therefore the Company did not maintain effective internal control over financial reporting as of September 30, 2012. The control environment that existed at September 30, 2012 continued to exist through September 30, 2013 and therefore the company did not maintain effective internal controls over financial reporting.

Remediation plan. Since the determination regarding this deficiency, we have devoted significant effort and resources to remediation and improvement of our internal control over financial reporting. More specifically we have undertaken or will put in place the following actions:

In October 2013, we hired a new Chief Financial Officer through Chord Advisors to lead our complex accounting and finance initiatives.

In October 2012, we hired a Controller to assist our Chief Financial Officer with our Company’s accounting and financial tasks.

We have engaged a third party to administer our equity based compensation plan.

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

Item 10 – Directors, Executive Officers and Corporate Governance

Term of Office

Our directors are elected by our stockholders to a term of one year and to serve until their successor is duly elected and qualified, or until their death, resignation or removal. Each of our officers is appointed by our Board of Directors to a term of one year and serves until their successor is duly elected and qualified, or until their death, resignation or removal from office.

On December 23, 2011, our shareholders approved a change to our Articles of Incorporation, which was approved by our Board, which amended our bylaws to provide that the number of directors of the Company shall be no less than one (1) and no greater than eleven (11). Prior to the amendment, our Articles and Bylaws provided that the number of directors of the Company shall be no less than one (1) and no greater than five (5). The amendment to the Articles became effective upon the filing of the amendment with the Secretary of State of the State of Colorado on December 27, 2011. The amendment to the Bylaws became effective as of December 23, 2011.

Our current Board of Directors consists of nine directors.

The following table sets forth certain information regarding our executive officers and directors as of the date of this Annual Report:

Name	Age	Position
Michael R. McCoy	53	Chief Executive Officer and Chairman Board of Directors¹
William Hernandez	56	President
Jonathan Shultz	53	Chief Financial Officer, Secretary and Treasurer ²
Kim Petry	44	Chief Financial Officer, Secretary and Treasurer ³
Isaac Blech	63	Director
Rob DeSantis	49	Director
Joseph Proto	57	Director⁴
Cary Sucoff	61	Director
Patrick M. Kolenik	62	Director
Jesse Itzler	45	Director⁵
Brian Thompson	46	Director⁶
Ka Cheong Christopher Leong	64	Director
Jerold Rubinstein	70	Director⁷
David Horin	45	Chief Financial Officer and Treasurer ⁸

¹ On November 27, 2013, Mr. McCoy resigned from his position as Chairman of the Board of Directors.

² On February 19, 2013, Mr. Shultz resigned from his position as Chief Financial Officer, Secretary and Treasurer of the Company.

³ Ms. Petry was appointed as the Chief Financial Officer, Secretary and Treasurer of the Company on February 19, 2013. On October 28, 2013, Ms. Petry resigned from her position as Chief Financial Officer, Secretary and Treasurer of the Company.

⁴ On November 27, 2013, the Board of Directors appointed Mr. Proto as the Chairman of the Board of Directors.

⁵ On November 27, 2013, the Board of Directors accepted the resignation of Mr. Itzler.

⁶ On October 1, 2013, the Board of Directors accepted the resignation of Mr. Thompson.

⁷ On October 1, 2013, the Board of Directors appointed Mr. Rubinstein as a member of the Board of Directors.

⁸ On October 28, 2013, Mr. Horin was appointed the Chief Financial Officer and Treasurer of the Company.

Mr. Michael R. McCoy has been our Chief Executive Officer, since September 19, 2011, and Chairman, Board of Directors from September 19, 2011 until November 27, 2011. Mr. McCoy is responsible for our Company’s overall direction and strategic positioning. Formerly President, Consumer Credit Cards at Wells Fargo, Mr. McCoy was responsible for the overall business and strategic direction of this business unit, directing a staff of over 4,000 individuals and managing a customer base of over 8.5 million with over $20 billion in credit card balances. A recognized leader in the financial services industry, Mr. McCoy previously served in a number of executive positions at Wells Fargo, having served as group Senior Vice President, Strategy and Business Development for Wells Fargo Financial, where he led the Retail Sales Finance and Insurance Services businesses and directed Marketing for the Wells Fargo Financial enterprise. He also served as Executive Vice President, Human Resources and Communications for the Home and Consumer Finance Group, which included Leadership Development, Learning and Development, Compensation, Recruiting and Corporate Sponsorships.

Prior to joining Wells Fargo in January 2001, Mr. McCoy led several national distribution organizations within the financial services sector, including serving as general manager for ING’s Financial Institution Division and at American Express, where he was chief marketing officer and senior vice president for American Enterprise Life.

Mr. McCoy, as the recent former President of the Consumer Credit Cards business unit at Wells Fargo, was responsible for a business with numerous similarities to our Company’s prepaid card business. Mr. McCoy is a very articulate spokesman for us and an excellent interface from our Board of Directors to the outside world. Mr. McCoy’s insights in the areas of strategy, regulatory compliance, fraud prevention and corporate value enhancement will serve him well as he guides our Board of Directors in his role as Chairman.

Mr. McCoy serves on numerous Boards within his community including the United Way. He earned his bachelor’s degree in business management at Missouri State University.

Mr. William Hernandez has been the President of the Company since November 12, 2012. Mr. Hernandez brings more than 30 years of experience in the global financial services, payments, transaction processing, card network, and brokerage industries. Mr. Hernandez is President and CEO of Conifer Consulting Group. Mr. Hernandez previously held the position of Executive Vice President at Epana/Unidos Financial a telecommunications and financial services company delivering relevant products to the Hispanic community in the US and Mexico. Mr. Hernandez also held the position of Executive Vice President of First Data Corporation managing the US Card Strategic Financial Services supporting clients such as American Express. During his 7+ years at MasterCard International, Mr. Hernandez was a Senior Vice President of the Americas, directing the largest US-based financial institutions. Prior to MasterCard, he was employed by Citibank for 11 years, where he held various international executive positions where he spearheaded global consumer banking and consumer card products, services and access channel for Citibank’s businesses in the United States, Latin America, Europe and Asia. Mr. Hernandez also held executive positions at Financial Guaranty Insurance Co., Shearson American Express and Manufacturers Hanover Trust Company.

Mr. Jonathan Shultz had been the Chief Financial Officer and Treasurer of the Company from November 13, 2007 until February 2013. Mr. Shultz has Bachelor’s and Master’s Degrees in Accounting and Finance, respectively, from San Diego State University. He is a Certified Public Accountant, a Certified Management Accountant and a Certified Financial Manager.

Ms. Kim Petry had been the Chief Financial Officer and Treasury of the Company February 2013 until October 28, 2013. Ms. Petry was employed by American Express from October 2008 to December 2012. From 2008 to 2010, Ms. Petry was the Vice President and Controller of Global Credit Cards and Small Business Services at American Express. In addition, from 2011 through 2012, Ms. Petry served as CFO of the Global Credit Cards and Small Business Services at American Express, where she led a team of over 150 finance professionals globally, supporting a business with over $4 billion in revenue. Prior to American Express, from 2006 to 2008, she was Vice President of Corporate Finance, Planning and Analysis and Business Finance and Analysis with TIAA-CREF where she led over 140 professionals across the U.S. and was responsible for reporting, budgeting, forecasting, strategy, long-term planning, new product development, mergers and acquisitions. Ms. Petry served at US Trust Corporation/Schwab Corporation from 1998 to 2006 in several executive roles following her prior experience working as a Senior Audit Manager for Financial Services at PricewaterhouseCoopers. She earned her MBA from New York University and her BA with a major in accounting, graduating summa cum laude, from Adelphi University.

Mr. David Horin was appointed the Chief Financial Officer and Treasurer of the Company on October 28, 2013. Mr. Horin is currently the President of Chord Advisors, LLC, an advisory firm that provides targeted financial solutions to public (small-cap and mid-cap) and private small and mid-sized companies. From March 2008 to June 2012, Mr. Horin was the Chief Financial Officer of Rodman & Renshaw Capital Group, Inc., a full-service investment bank dedicated to providing corporate finance, strategic advisory, sales and trading and related services to public and private companies across multiple sectors and regions. From March 2003 through March 2008, Mr. Horin was the Managing Director of Accounting Policy and Financial Reporting at Jefferies Group, Inc., a full-service global investment bank and institutional securities firm focused on growth and middle-market companies and their investors. Prior to his employment at Jefferies Group, Inc., from 2000 to 2003, Mr. Horin was a Senior Manager in KPMG’s Department of Professional Practice in New York, where he advised firm members and clients on technical accounting and risk management matters for a variety of public, international and early growth stage entities. Mr. Horin has a Bachelor of Science degree in Accounting from Baruch College, City University of New York. Mr. Horin is also a Certified Public Accountant.

Mr. Isaac Blech was appointed to the Board of Directors on March 10, 2011. He currently serves on the Board of Directors of Contrafect Corp., a biotech company specializing in novel methods to treat infectious disease; Cerecor, Inc., a biopharmaceutical company focused on activity in the human brain; Medgenics, Inc., a company that has developed a novel technology for the manufacture and delivery of therapeutic proteins; and Premier Alliance Group, Inc. (PIMO), a public company that provides business and technology consulting services to primarily Fortune 500 companies. Previously, Mr. Blech was an investor, advisor and director in a number of well-known companies, primarily focused in biotechnology.

Mr. Blech is the owner of 1,500,000 shares of our Company’s common stock and warrants to purchase up to an additional 1,337,500 million shares of our Company’s common stock. Mr. Blech has been a successful investor and a member of a number of Boards of Directors. We believe Mr. Blech’s past experience will be a tremendous benefit to our Company. Included among Mr. Blech’s more notable successes were:

Celgene Corporation – Mr. Blech was a founding shareholder of Celgene in 1986. Celgene has introduced two major cancer drugs and has a stock market valuation (as of September 6, 2011) of approximately $27 billion.

ICOS Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of ICOS beginning in 1991. ICOS discovered the drug Cialis and was later acquired by Eli Lilly for over $2 billion.

Nova Pharmaceutical Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Nova from 1982 to 1990. Nova developed a treatment for brain cancer and subsequently merged with Scios Corporation which was later purchased for $2 billion by Johnson and Johnson.

Pathogeneses Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Pathogeneses from 1992 to 1997. Pathogeneses created TOBI for the treatment of cystic fibrosis and was later acquired by Chiron Corp for $660 million.

Genetic Systems Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of GSC from 1981 to 1986. GSC developed the first inexpensive and accurate test to diagnose chlamydia and was later acquired by Bristol Myers for approximately $300 million.

Mr. Rob DeSantis was appointed to our Board of Directors on March 26, 2012. Mr. DeSantis co-founded Ariba, a provider of business to business e-commerce solutions that was one of the first B2B Internet companies to go public, and whose market capitalization reached $40 billion. He was also an early angel investor and board member of LinkedIn, the world’s largest professional online network, which has more than 150 million global members today.

Mr. Joseph Proto was appointed to our Board of Directors on January 26, 2012 and was appointed Chairman of the Board of Directors on November 28, 2013, replacing Mike McCoy. Mr. Proto is a seasoned and successful senior executive and entrepreneur with three decades in the billing and payments industry. Mr. Proto is currently the Chairman and Chief Executive Officer of electronic billing company Transactis Inc. He founded REMITCO, a remittance processing company where he also served as President for 11 years, which was acquired in 2000 by First Data Corp. Mr. Proto also founded Financial Telesis (CashFlex), a payment processor to 65 of the top 100 banks in the U.S., which was acquired by CoreStates/Wachovia and is now a part of Wells Fargo. In 2004, Mr. Proto co-founded Windham Ventures, an investment company focusing on financial technology and life sciences companies, where he currently serves as a founding partner.

Mr. Cary Sucoff was appointed to our Board of Directors on May 23, 2011. Mr. Sucoff has served as an advisor to our Company since September 2009 through his firm Equity Source Partners, LLC, a firm he has owned and operated since February 2006. He has been key to our success in fundraising since joining our firm. Additionally, Mr. Sucoff is an attorney (non-practicing) and contributes valuable insights in the area of legal matters in addition to those areas for which he is contracted with our Company. We believe Mr. Sucoff’s broad and diversified background serves as a strong asset to our Company.

Mr. Sucoff currently serves on the Board of Directors of Contrafect Corp., a biotech company specializing in novel methods to treat infectious disease, Cerecor, Inc., a biopharmaceutical company focused on activity in the human brain, Premier Alliance Group, Inc. (PIMO), a public company that provides business and technology consulting services to primarily Fortune 500 companies and American Roadside Burgers, Inc., a fast-casual hamburger restaurant company. Mr. Sucoff has been a member of the Board of Trustees of New England Law/Boston for over 20 years and is the current Chairman of the Endowment Committee. Mr. Sucoff has recently taught a third year law school seminar entitled “Perspectives in Law: Lawyers as Entrepreneurs and as Representatives of Entrepreneurs”. Mr. Sucoff received a B.A. from SUNY Binghamton (1974) and a J.D. from New England School of Law (1977) where he was the Managing Editor of the Law Review and graduated Magna Cum Laude. Mr. Sucoff has been a member of the Bar of the State of New York since 1978.

Mr. Patrick M. Kolenik was appointed to our Board of Directors on August 30, 2011. Mr. Kolenik has over forty years of securities industry experience. Mr. Kolenik was the Chief Executive Officer of Sherwood Securities Corp. where he has been involved with more than 200 successful public and private financings. Since 2003, Mr. Kolenik has been a consultant to both public and private companies through his company PK Advisors. Mr. Kolenik currently serves on the Board of Directors of Premier Alliance Group, Inc. (PIMO) a public company that provides business and technology consulting services. Mr. Kolenik also serves on the Board of Directors of American Roadside Burgers, Inc. Mr. Kolenik has also been elected to the Board of Directors of Stratus Media Group (SMDI), a public company that owns and operates more than 140 live events.

Mr. Kolenik has advised our Company since May 2009 in the area of investment banking, fund raising and capital markets. We have greatly benefited from Mr. Kolenik’s contributions to date and look forward to his future guidance in his role as a member of our Board of Directors.

Mr. Jesse Itzler was appointed to our Board of Directors on July 24, 2012 and resigned from the Board of Directors effective November 27, 2013. In 2011, Mr. Itzler founded 100 Mile Group LLC, a brand incubator and creative marketing company, which is a successor to Suite 850, LLC (founded by Mr. Itzler in 2009). Mr. Itzler serves as the managing member of 100 Mile Group. In June 2010, Mr. Itzler co-founded PureBrands, LLC, a consumer products company featuring nutritional and dietary supplements. From 2001 through 2010, Mr. Itzler served as co-founder and vice-chairman of Marquis Jet Partners, a private aviation company. Mr. Itzler is a graduate of American University.

Mr. Brian Thompson was appointed to our Board of Directors on July 24, 2012 and resigned from the Board of Directors effective October 1, 2013. Since 2006, Mr. Thompson has been working for Mr. John Pappajohn at Equity Dynamics, Inc., a financial consulting firm. In his role as senior vice president, Mr. Thompson evaluates investment opportunities, performs due diligence, negotiates investment transactions, raises capital for new ventures and interacts with management teams through various board and board observer positions. Prior to this, Mr. Thompson was the CFO and CAO for Kum & Go, LC (“KG”), a convenience retailer. Prior to KG, Mr. Thompson was the President and CFO of Astracon, Inc. of Denver, CO, a provider of connectivity intelligence OSS software for communications service providers, until its sale in 2003. From 1995 to 2000, Mr. Thompson was a Partner and CFO of the Edgewater Private Equity Funds. After receiving his BS/BA in accounting from the University of South Dakota in 1991, Mr. Thompson spent four years in the audit department of KPMG, LLP in San Antonio and Des Moines.

Dr. Ka Cheong Christopher Leong was appointed to our board on October 29, 2012. Dr. Leong is a co-founder and the President of Transpac Capital, a venture capital firm based in Singapore. Transpac was formed in 1989 through the amalgamation of Techno-Ventures Hong Kong, which Dr. Leong co-founded in 1986, and Transtech Capital Management of Singapore, both pioneers of venture capital in their respective countries. Prior to his venture capital career, Dr. Leong was the CEO of Amoy Canning Corporation Limited, a food and packaging conglomerate listed on the stock exchange of Hong Kong. Prior to Amoy he founded Convenience Foods Limited in Hong Kong, which he sold to RJR Nabisco. Prior to his industrial career, Dr. Leong was a Senior Scientist at American Science and Engineering in Cambridge, MA. Dr. Leong has been a chairman of the Hong Kong Venture Capital Association, and is one of the founding inductees to the Singapore Venture Capital Hall of Fame in 2010 for his pioneering work in venture capital. Dr. Leong obtained a BS and a PhD degree from Massachusetts Institute of Technology, Cambridge, MA.

Mr. Jerold Rubinstein was appointed to our board on October 1, 2013. Mr. Rubinstein currently serves as the chair of our audit committee. Since June 28, 2012, Mr. Rubinstein has served as the Chairman of the Board, CEO and a director of Stratus Media Group, Inc., and joined the board of Stratus Group Media, Inc. in April 2011. Mr. Rubinstein is the chairman of the audit committee of CKE Restaurants, the parent company of Carl’s Jr. Restaurants and Hardees Restaurants. Mr. Rubinstein also serves as the non-executive chairman of US Global investors Inc., a mutual fund advisory company. Mr. Rubinstein has started and sold many companies over the years, including Bel Air Savings and Loan and DMX, a cable and satellite music distribution company. Mr. Rubinstein started and sold XTRA Music Ltd., a satellite and cable music distribution company in Europe. Most recently Mr. Rubinstein consults with and serves on 3 early stage development companies. Mr. Rubinstein is both a CPA and attorney.

In evaluating director nominees, our Company considers the following factors:

The appropriate size of the Board;

Our needs with respect to the particular talents and experience of our directors;

The knowledge, skills and experience of nominees;

Experience with accounting rules and practices; and

The nominees’ other commitments.

Our Company’s goal is to assemble a Board of Directors that brings our Company a variety of perspectives and skills derived from high quality business, professional and personal experience. Other than the foregoing, there are no stated minimum criteria for director nominees.

Specific talents and qualifications that we considered for the members of our Company’s Board of Directors are as follows:

Mr. McCoy as the recent former President of the Consumer Credit Cards business unit at Wells Fargo, was responsible for a business with numerous similarities to our Company’s prepaid card business. In the short time since joining our Company, Mr. McCoy has proven to be a very articulate spokesman for us and an excellent interface from our Board of Directors to the outside world. Mr. McCoy’s insights in the areas of strategy, regulatory compliance, fraud prevention and corporate value enhancement will serve him well as he guides our Board of Directors in his role as Chairman.

Mr. Blech is the owner of a significant number of shares of our Company’s common stock and warrants to purchase additional shares of our Company’s common stock. Mr. Blech has been a successful investor and a member of a number of Boards of Directors. We believe Mr. Blech’s past experience will be a tremendous benefit to our Company. Included among Mr. Blech’s more notable successes were:

Celgene Corporation – Mr. Blech was a founding shareholder of Celgene in 1986. Celgene has introduced two major cancer drugs and had a stock market valuation (as of March 8, 2011) of approximately $25 billion.

Mr. DeSantis co-founded Ariba, a provider of business to business e-commerce solutions that was one of the first B2B Internet companies to go public, and whose market capitalization reached $40 billion. He was also an early angel investor and board member of LinkedIn, the world’s largest professional online network, which has more than 150 million global members today.

Mr. Proto is a seasoned and successful senior executive and entrepreneur with three decades in the billing and payments industry. Mr. Proto is currently the Chairman and Chief Executive Officer of electronic billing company Transactis Inc. Mr. Proto’s also founded REMITCO, a remittance processing company, which was acquired in 2000 by First Data Corp., and Financial Telesis (CashFlex), a payment processor to 65 of the top 100 banks in the U.S., which was acquired by CoreStates/Wachovia and is now a part of Wells Fargo. In 2004, Mr. Proto co-founded Windham Ventures, an investment company focusing on financial technology and life sciences companies, where he currently serves as a founding partner.

Mr. Kolenik’s vast securities industry history and work as a consultant to both public and private companies allows us to benefit from wisdom he has accrued from many varied companies and situations. Mr. Kolenik’s other public and private company Board service has been valuable as he has been a Company interface to our investors and potential investors since 2009 (prior to his appointment to the Board). We expect to further benefit from his expertise, now as a recently added member of our Board of Directors.

Mr. Sucoff has advised our Company since September 2009 in the area of investment banking, fund raising and capital markets. He has been key to our success in fundraising since joining our firm. Additionally, Mr. Sucoff is an attorney (non-practicing) and contributes valuable insights in the area of legal matters in addition to those areas for which he is contracted with our Company. Mr. Sucoff’s broad and diversified background has been a strong asset to our Company.

Mr. Itlzer founded 100 Mile Group LLC, a brand incubator and creative marketing company, which is a successor to Suite 850, LLC (founded by Mr. Itzler in 2009). Mr. Itzler serves as the managing member of 100 Mile Group. In June 2010, Mr. Itzler co-founded PureBrands, LLC, a consumer products company featuring nutritional and dietary supplements.

Mr. Thompson has been working for Mr. John Pappajohn at Equity Dynamics, Inc., a financial consulting firm. Prior to this, Mr. Thompson was the CFO and CAO for Kum & Go, LC (“KG”), a convenience store retailer. Prior to KG, Mr. Thompson was the President and CFO of Astracon, Inc. of Denver, CO, a provider of connectivity intelligence OSS software for communications service providers, until its sale in 2003. From 1995 to 2000, Mr. Thompson was a Partner and CFO of the Edgewater Private Equity Funds.

Dr. Leong is a co-founder and the President of Transpac Capital, a venture capital firm based in Singapore. Transpac was formed in 1989 through the amalgamation of Techno-Ventures Hong Kong, which Dr. Leong co-founded in 1986, and Transtech Capital Management of Singapore, both pioneers of venture capital in their respective countries. Prior to his venture capital career, Dr. Leong was the CEO of Amoy Canning Corporation Limited, a food and packaging conglomerate listed on the stock exchange of Hong Kong. Prior to Amoy he founded Convenience Foods Limited in Hong Kong, which he sold to RJR Nabisco.

There are no family relationships among members of our management or our Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and beneficial owners of more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulations to furnish to us copies of all Section 16(a) reports they file.

Based solely on our review of the reports, we believe that all required Section 16(a) reports were timely filed during our last fiscal year. None of our directors, executive officers or greater than 10% beneficial owners filed any Form 5s.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to, among other persons, our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Business Conduct and Ethics is available, free of charge, to any stockholder upon written request to our Corporate Secretary at The SpendSmart Payments Company, 2680 Berkshire Parkway, Suite 130, Des Moines, Iowa 50325.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years, involved in any of the items below that the Company deems material to their service on behalf of the Company:

•	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
•	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
•	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
•	been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
•	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
•	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.

Corporate Governance

The business and affairs of the company are managed under the direction of our board. In the fiscal year ended September 30, 2013, we held five special board meetings. Each of our directors has attended all meetings either in person or via telephone conference.

Item 11. Executive Compensation

The information required by this item will be incorporated by reference from the information under the caption “Compensation of Named Executive Officers” contained in our 2013 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be incorporated by reference from the information under the caption “Security Ownership of Certain Beneficial Owners and Management” contained in our 2013 Proxy Statement.

Item 13 – Certain Relationships and Related Transactions, and Director Independence

Related Party Transactions. Our Company closely reviews transactions between the Company and persons or entities considered to be related parties (collectively “related parties”). Our Company considers entities to be related parties where an executive officer, director or a 5% or more beneficial owner of our common stock (or an immediate family member of these persons) has a direct or indirect material interest. Transactions of this nature require the approval of our management and our Board of Directors. We believe such transactions were at terms comparable to those we could have obtained from unaffiliated third parties. Since October 1, 2009, we have not had any transactions in which any of our related parties had or will have a direct or indirect material interest, nor are any such transactions currently proposed, except as noted below.

On July 24, 2012, our Board of Directors approved our entering into a management consulting agreement with each of Messrs. Kolenik and Sucoff (or an entity owned by either of them) with respect to consulting services to be provided to us for a period of 12 months, pursuant to which each of Messrs. Kolenik and Sucoff will receive $5,000 per month.

On July 23, 2012, we issued warrants to purchase common stock to certain Board members for their extraordinary efforts on behalf of the Company, as follows: Isaac Blech, 333,333; Joseph Proto, 200,000; Cary Sucoff, 133,333; and Patrick Kolenik, 133,333. The warrants vest monthly over a period of 12 months; have an exercise price of $6.45 per share; include a cashless exercise option; and expire 5 years after the date of grant. On July 24, 2012 we granted our Chief Executive Officer, Mr. McCoy, options to purchase 293,333 shares of the Company’s common stock. The options vest monthly over a period of 12 months; have an exercise price of $6.45 per share; and expire 5 years after the date of grant. On October 29, 2012, we granted Chris Leong warrants to purchase up to 133,333 shares of common stock at an exercise price of $10.35 per share and having a term of 5 years. The warrants will vest monthly over a period of 36 months provided Dr. Leong continues to serve on the Board. On November 12, 2012, we granted our President, William Hernandez, options to purchase up to 333,333 shares of common stock at an exercise price of $7.35 per share. The options will vest as follows: 66,667 options vested immediately and the remaining 266,667 options vest equally over a thirty-six month period.

During the year ended September 30, 2011, we entered into subscription agreements with a member of our Board of Directors, Isaac Blech, pursuant to which we issued 1,333,333 shares of our common stock and five-year warrants to purchase up to an additional 1,208,333 shares of our common stock with an exercise price of $6.00 per share, in exchange for gross proceeds totaling $8,000,000. We also issued warrants to purchase up to a total of 100,000 shares of our common stock with an exercise price of $9.00 per share to Equity Source Partners, LLC (“ESP”), who assisted us in connection with the transactions (these totals do not reflect amounts received in connection with convertible debt described below). A principal of ESP Cary Sucoff, became a member of our Company’s Board of Directors in May 2011.

During the year ended September 30, 2010, ESP assisted our Company in connection with the equity financing transactions and they or its designees earned the fees and commissions totaling $71,750.

On August 13, 2010, we entered into a Convertible Promissory Note Agreement (the “$1M Note”) with Mr. Blech payable for $1,000,000 at 5% interest, due February 13, 2011 (the “Maturity Date”). The $1M Note and all accrued interest was converted by Mr. Blech’s into 166,667 shares of our Company’s restricted common stock at a price of $6.00 per share on November 24, 2010. In addition Mr. Blech was issued warrants to purchase up to 41,667 shares of our Company’s restricted common stock at a price of $6.00 per share pursuant to a Warrant Agreement (the “Warrant”) with a five year term executed concurrently between Mr. Blech and our Company, and upon conversion of the $1M Note, was issued warrants to purchase an additional 83,333 shares of our Company’s restricted common stock at an exercise price of $6.00 per share pursuant to the terms of a warrant agreement (the “Additional Warrant”) in the same form as the Warrant. In addition, our Company agreed to issue Mr. Blech a warrant to purchase up to 4,167 additional shares of common stock at an exercise price of $6.00 per share to reflect the interest due to him under the terms of the Note from inception to its scheduled maturity on February 13, 2011. We paid additional fees to Maxim in connection with the conversion that included cash of $50,000 and five-year warrants to purchase up to 16,667 shares of our Company’s common stock at $9.00 per share. We also issued a five year warrant to purchase up to 23,333 shares of our common stock for $9.00 per share to ESP.

On August 24, 2009, we entered into a non-exclusive agreement with ESP to assist our Company in connection with fund raising activities. Under the agreement (as subsequently revised), we issued ESP 3,333 shares of our Company’s restricted common stock and paid it or its designees: 1) up to 8% (as amended) of the cash raised by ESP or its associates on our Company’s behalf; and 2) a five year warrant to purchase up to one share of common stock for each 2 shares sold at the exercise price of $9.00 per share. From inception of the agreement through September 30, 2011, ESP and its designees earned cash totaling $164,400, 3,333 shares of our common stock and warrants to purchase up to 89,533 shares (also included in totals previously described above) of our common stock under the agreement. No additional amounts were earned or paid since September 30, 2011 and no future sums are expected to be paid. In July 2011, Mr. Sucoff (a principal of ESP and a member of our Board of Directors) was paid $35,000 in cash for services performed on the Company’s behalf, all of which was charged to general and administrative expenses during the year ended September 30, 2011.

On May 8, 2009, we entered into an agreement with Patrick Kolenik to provide strategic advisory services to our Company through May 2011. Mr. Kolenik was named to our Company’s Board of Directors in August 2011. During the year ended September 30, 2011, Mr. Kolenik was issued 7,467 shares of common stock (9,333 in fiscal 2010), and warrants to purchase up to 7,467 common shares at $15.00 per share (9,333 in fiscal 2010). Mr. Kolenik was also granted an additional warrant to purchase up to 6,667 shares of our common stock during the year ended September 30, 2011. Noncash charges to operations during the year ended September 30, 2011 in connection with our issuance of common shares and warrants to Mr. Kolenik totaled $65,495 ($72,155 in fiscal 2010). In May 2011, we entered into a new agreement with Mr. Kolenik for strategic advisory services in exchange for cash consideration totaling $50,000.

Director Independence. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

the director is, or at any time during the past three years was, an employee of the company;

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

a family member of the director is, or at any time during the past three years was, an executive officer of the company;

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Messrs. Blech, DeSantis, Proto, Rubinstein and Leong are the only members of the Board of Directors that are considered independent.

Item 14 – Principal Accountant Fees and Services

Principal Accountant Fees and Services

(1) Audit Fees

The aggregate fees during the years ended September 30, 2012 and 2011 for professional services rendered by the predecessor auditors for the audit of the registrant’s annual financial statements and review of financial statements included in the registrant’s quarterly reports and registration statements (including expenses) totaled $59,243 and $64,509, respectively. Our audit fees for our 10-K for the years ended September 30, 2013 was $32,000 and the March 31, 2013 and June 30, 2013 10Q’s were $8,000 each.

For the amended 10-K/A and amended 10Q’s for the years ended September 30, 2012 and 2011, our Company engaged EisnerAmper LLP and the aggregate fees for professional services rendered was $65,000 for the 10-K/A and $35,000 for the 10Q-A’s.

(2) Audit-Related Fees

There were no fees billed in each of the last two fiscal years for assurance and related services by the predecessor auditors or EisnerAmper LLP that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1).

(3) Tax Fees

No fees were billed for professional services rendered by the predecessor auditors or EisnerAmper LLP for tax compliance, tax advice, and tax planning for the fiscal years ending September 30, 2013 and 2012.

(4) All Other Fees

No aggregate fees were billed for professional services provided by the predecessor auditors or EisnerAmper LLP, other than the services reported in items (1) through (3) for the fiscal years ending September 30, 2013 and 2012.

(5) Audit Committee

The registrant's Board of Directors, which formerly performed the functions of the Audit Committee prior to its establishment on November 1, 2011, previously approved the predecessor auditor’s performance of services for the audit of the registrant’s annual financial statements for the years ended September 30, 2012 and 2011. Audit-related fees, tax fees, and all other fees, if any, were also approved by the Board of Directors.

The registrants Audit Committee approved EisnerAmper LLP’s performance of services on for the audit of the registrant’s amended annual financial statements for the years ended September 30, 2012 and 2011 as well as those fees for the period ended September 30, 2013.

Item 15 – Exhibits, Financial Statement Schedules

Exhibit No.		Description
2.1		Share Exchange Agreement with IdeaEdge, Inc., a California corporation (1)
2.2		Purchase Agreement for VOS Systems, Inc. by Allan Ligi (1)
3.1		Amended and Restated Articles of Incorporation (2)
3.1a		Amendment to Amended and Restated Articles of Incorporation (13)
3.2		Bylaws (3)
3.3		Certificate of Designations for the Series A Cumulative Convertible Preferred Stock (4)
10.2		2007 Equity Incentive Plan (1)
10.10		Change of Control Agreement with Jonathan Shultz dated August 11, 2008(5)
10.25		Investor relations agreement dated February 12, 2010 (6)
10.26		Stock contribution and disposition restriction agreement with Chris Nicolaidis dated February 11, 2010 (6)
10.27		Investor relations agreement with Kay Holdings, Inc. dated May 10, 2010 (7)
10.28		Agreement with Equity Source Partners, LLC dated April 30, 2010 (7)
10.30		Investor relations agreement with Two Eight, Inc. dated April 7, 2010 (7)
10.31		Financial Advisory Services agreement with Iroquois Master Fund Ltd. dated June 24, 2010 (8)
10.32		Investor Relations Agreement with Kay Holdings, Inc. dated December 29, 2010(9)
10.33		Subscription Agreement dated January 19, 2011(10)
10.34		Common Stock Purchase Warrant dated January 19, 2011(10)
10.35		Registration Rights Agreement dated January 19, 2011(10)
10.39		Employment agreement between the Company and James Collas dated January 31, 2011 (11)
10.40		Employment agreement between the Company and Jonathan Shultz dated January 31, 2011(11)
10.43		Agreement and Release between the Company and James P. Collas dated April 26, 2011 (12)
10.46		Warrant Agreement with Mark Sandson dated July 19, 2011 (14)
10.47		Stock Option Modification Agreement with Jonathan Shultz dated July 19, 2011 (14)
10.48		Form of Warrant Agreement with named members of Company’s Board of Directors dated August 4, 2011(15)
10.49		Stock Option Agreement with Jonathan Shultz dated August 4, 2011(15)
10.50		Investor Relations Agreement with SPN Investments, Inc. dated August 5, 2011(15)
10.51		Employment Agreement with Michael R. McCoy dated September 19, 2011 (16)
10.52		Stock Option Agreement with Michael R. McCoy dated September 19, 2011 (16)
10.53		Warrant Agreement with Patrick Kolenik dated September 19, 2011 (16)
10.54		Form of Common Stock Purchase Warrant dated October 21, 2011(17)
10.55		Form of Subscription Agreement dated October 21, 2011 (17)
10.56		Form of Registration Rights Agreement dated October 21, 2011 (17)
10.57		Warrant Agreement with Isaac Blech dated November 1, 2011 (18)
10.58		Form of Common Stock Purchase Warrant dated November 21, 2011(19)
10.59		Form of Subscription Agreement dated November 21, 2011 (19)
10.60		Form of Registration Rights Agreement dated November 21, 2011(19)
10.61		Employment Agreement with Evan Jones dated May 1, 2011 (20)
10.62		Warrant Agreement with Robert DeSantis dated March 26, 2012 (21)
10.63		Amended Employment Agreement with Michael R. McCoy dated July 24, 2012 (22)
10.64		Stock Option Agreement with Michael R. McCoy dated July 24, 2012 (22)
10.65		Warrant Agreement with Isaac Blech dated July 23, 2012 (22)
10.67		Warrant Agreement with Cary Sucoff dated July 23, 2012 (22)
10.68		Warrant Agreement with Joseph Proto dated July 23, 2012 (22)
10.69		Warrant Agreement with Patrick Kolenik dated July 23, 2012 (22)
10.70		Warrant Agreement with Jesse Itzler dated July 23, 2012 (22)
10.71		Warrant Agreement with Dr. Ka Cheong Christopher Leong dated October 29, 2012 (23)
10.72		Employment Agreement with William Hernandez dated November 12, 2012 (24)
10.73		Form of Subscription Agreement (25)
10.74		Form of Common Stock Purchase Warrant (25)
10.75		Form of Registration Rights Agreement (25)
11.1		Statement re Computation of Per Share Earnings (20)
14.1		Code of Business Conduct and Ethics (21)
21.1*		Listing of Subsidiaries (20)
24.1		Power of Attorney (contained in the signature page to this Annual Report)
31.1*		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Executive Officer

31.2*		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Financial Officer
32.1*		Certification pursuant to 18 U.S.C. §1350 by Chief Executive Officer
32.2*		Certification pursuant to 18 U.S.C. §1350 by Chief Financial Officer
*		Filed as an exhibit to this report
(1)		Incorporated by reference from the registrant’s Definitive Proxy Statement filed on September 21, 2007
(2)		Incorporated herein by reference to the registrant's Form 8-K filed on October 22, 2007
(3)		Incorporated herein by reference to the registrant’s Form 8-K filed on September 22, 2005
(4)		Incorporated herein by reference to the registrant’s Form 8-K filed on June 11, 2008
(5)		Incorporated herein by reference to the registrant’s Form 10-QSB filed on August 14, 2008
(6)		Incorporated herein by reference to the registrant’s Form 10-Q filed on February 12, 2010
(7)		Incorporated herein by reference to the registrant’s Form 10-Q filed on May 14, 2010
(8)		Incorporated herein by reference to the registrant’s Form 10-Q filed on August 12, 2010
(9)		Incorporated herein by reference to the registrant’s Form 10-K filed on December 29, 2010
(10)		Incorporated herein by reference to the registrant’s Form 8-K filed on January 19, 2011
(11)		Incorporated herein by reference to the registrant’s Form 10-Q filed on February 1, 2011
(12)		Incorporated herein by reference to the registrant’s Form 8-K filed on April 26, 2011
(13)		Incorporated herein by reference to the registrant’s Form 8-K filed on May 13, 2011
(14)		Incorporated herein by reference to the registrant’s Form 8-K filed on July 21, 2011
(15)		Incorporated herein by reference to the registrant’s Form 10-Q filed on August 10, 2011
(16)		Incorporated herein by reference to the registrant’s Form 8-K filed on September 22, 2011
(17)		Incorporated herein by reference to the registrant’s Form 8-K filed on October 25, 2011
(18)		Incorporated herein by reference to the registrant’s Form 8-K filed on November 4, 2011
(19)		Incorporated herein by reference to the registrant’s Form 8-K filed on November 25, 2011
(20)		Included within the financial statements filed in this Annual Report
(21)		Incorporated herein by reference to the registrant’s Form 8-K filed on November 10, 2005
(20)		Incorporated by reference to the registrant’s form 10-K filed on December 21, 2011
(21)		Incorporated herein by reference to the registrant’s Form 8-K filed on April 4, 2012
(22)		Incorporated herein by reference to the registrant’s Form 8-K filed on July 27, 2012
(23)		Incorporated herein by reference to the registrant’s Form 8-K filed on November 1, 2012
(24)		Incorporated herein by reference to the registrant’s Form 8-K filed on November 16, 2012
(25)		Incorporated herein by reference to the registrant’s Form 8-K filed on December 6, 2012

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: December 30, 2013

	The SpendSmart Payments Company, a Colorado corporation

	By:	/s/ MICHAEL R. MCCOY
	Michael R. McCoy, Chief Executive Officer
	(Principal Executive Officer)

Power of Attorney

We, the undersigned directors and/or officers of The SpendSmart Payments Company, a Colorado corporation, hereby severally constitute and appoint Michael R. McCoy, acting individually, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done that such annual report and its amendments shall comply with the Securities Act, and the applicable rules and regulations adopted or issued pursuant thereto, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date

/s/ MICHAEL R. MCCOY	Chief Executive Officer and	December 30, 2013
Michael R. McCoy	Director (Principal Executive Officer)

/s/ WILLIAM HERNANDEZ	President	December 30, 2013
William Hernandez

/s/ DAVID HORIN	Chief Financial Officer and Treasurer	December 30 2013
David Horin	(Principal Financial Officer and Principal Accounting Officer)

/s/ ISAAC BLECH	Director	December 30, 2013
Isaac Blech

/s/ CARY SUCOFF	Director	December 30, 2013
Cary Sucoff

/s/ PATRICK KOLENIK	Director	December 30, 2013
Patrick Kolenik

/s/ ROBERT DESANTIS	Director	December 30, 2013
Robert DeSantis

/S/ JOSEPH PROTO	Director	December 30, 2013
Joseph Proto

/s/ KA CHEONG CHRISTOPHER LEONG	Director	December 30, 2013
Ka Cheong Christopher Leong

/s/ JEROLD RUBINSTEIN	Director	December 30, 2013
Jerold Rubinstein