FNDS3000 Corp

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-04 (ASU 2011-04), Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this Update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company does not expect the provisions of ASU 2011-04 to have a material effect on our consolidated financial statements.

Additionally, the agreement between this client and the distributor included a 20% revenue share payable to the client. When the client became a direct client of FNDS3000, we agreed to the continuance of the revenue sharing agreement. The revenue share is based upon the monthly gross revenue minus certain expenses attributable to services provided to and transactions by its cardholders. As per the agreement, as of May 1, 2011, the revenue share percentage increased to 30% as the client met and sustained for three sequential months a threshold of 15,001 active cards.

For the fiscal quarter ended May 31, 2011, processing, technical and financial expense decreased approximately $133,000 as compared the fiscal quarter ended February 28, 2011. Fees for information technology consultants decreased approximately $140,000 as certain improvements and revisions to the processing platform were scaled back until our operations are producing sufficient revenue to maintain a positive cash flow. Additionally, effective April 1, 2011, the Company is no longer incurring $7,500 for monthly maintenance of the platform by GCC. This decreased our expense this fiscal quarter as compared to the prior fiscal quarter by $15,000 but this was offset by an increase of approximately $15,000 for revenue sharing expense. Various other increases and decreases netted to an increase of approximately $7,000. Due to the nature of the decrease in total expense, we do not expect a similar decrease in expense between our subsequent fiscal quarters.

Currently, the Company has a significant concentration of revenue attributable to one direct client, which is a leading provider of diversified employment services in South Africa. We began providing services to this client when it was a customer with a former distributor. As part of the dissolution of the distributor agreement between the Company and the distributor, we entered into has a direct service agreement with this client as of March 1, 2010. For the three months ended May 31, 2011 and 2010, revenue from this client accounted for approximately $504,000 (or 72.5%) and $26,000 (or 23.6%), respectively, of total revenue.

The increase of approximately $447,000 was primarily the result of increases of approximately $213,000 for computer consulting expense as we focused on improvements to the functionality of our processing platform, $131,000 for revenue sharing expense, $59,000 for MasterCard and sponsor bank fees expense, $56,000 for call center and hosting facility expense, $14,000 for GCC royalty fees and $5,000 for other expenses. These increases are offset by decreases of approximately $19,000 for GCC maintenance fee expense and $12,000 for monitoring software expense. We expect that certain of these expenses will increase as revenue increases, whereas other expenses may not.