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|   | Nevada                                                | 65-1071956                        |   |
|--------|-------------------------------------------------------|-----------------------------------|--------|
|   | (State or other jurisdiction of                       | (IRS Employer Identification No.) |   |
|   | incorporation or organization)                        |                              |   |
|   |                                                  |                              |   |
|   | 3923 Coconut Palm Drive, Suite 107                    |                              |   |
|   | Tampa, Florida                                        | 33619                             |   |
|   | (Address of principal executive offices)              | (Zip Code)                        |   |
|   |                                                  |                              |   |
|   | Issuer’s telephone number, including area code: | (813) 367-4400                    |   |

| Yes | X |   | No |   |   |
|-----|---|--------|----|--------|--------|

| Yes | X |   | No |   |   |
|-----|---|--------|----|--------|--------|

|   | Large accelerated filer   £                                             | Accelerated filer   £    |
|--------|---------------------------------------------------------------------------------------------|----------------------------------------------|
|   | Non-accelerated filer (Do not check if a smaller reporting company)   £ | Smaller reporting company   T |

| Yes |   |   | No | X |   |
|-----|--------|--------|----|---|--------|

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| nFinanSe Inc.                        |
|-------------------------------------------|
| A Development Stage Enterprise       |
| Table of Contents                         |
|                                      |   | Page No. |
| NOTE REGARDING FORWARD LOOKING STATEMENTS | 1 |
|                                      |   |
| PART I - FINANCIAL INFORMATION       |   |
|                                      | Item 1.     Financial Statements:  |   |
|                                      |   | Consolidated Balance Sheets as of July 4, 2009 (unaudited) and January 3, 2009 (audited)  | 2 |
|                                      |   | Consolidated Statements of Operations (unaudited) for the thirteen and twenty-six weeks ended July 4, 2009 and June 28, 2008, and for the period July 10, 2000 (inception) to July 4, 2009  | 3 |
|                                      |   | Consolidated Statements of Cash Flows (unaudited) for the twenty-six weeks ended July 4, 2009 and June 28, 2008, and for the period July 10, 2000 (inception) to July 4, 2009  | 4 |
|                                      |   | Notes to Consolidated Financial Statements (unaudited) | 6 |
|                                      |   |   |   |
|                                      | Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.  | 23 |
|                                      | Item 3.     Quantitative and Qualitative Disclosures About Market Risk.  | 30 |
|                                      | Item 4T.     Controls and Procedures.  | 30 |
| PART II - OTHER INFORMATION          |   |
|                                      | Item 1.     Legal Proceedings.  | 31 |
|                                      | Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.  | 31 |
|                                      | Item 3.     Defaults Upon Senior Securities.  | 31 |
|                                      | Item 4.     Submission of Matters to a Vote of Security Holders.  | 31 |
|                                      | Item 5.     Other Information.  | 32 |
|                                      | Item 6.     Exhibits. | 33 |
|                                      |   |   |   |
| SIGNATURES                                |   |

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| · | the extent to which we continue to experience losses;                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------|
| · | our real property leases and expenses related thereto;                                                                     |
| · | our ability to fund our future cash needs through public or private equity offerings and debt financings;                  |
| · | whether our business strategy, expansion plans and hiring needs will significantly escalate our cash needs;                |
| · | our need to raise additional capital and, if so, whether our success will depend on raising such capital;                  |
| · | our reliance on our card-issuing bank’s federal charter permitting us to offer stored value cards in various states; |
| · | our expectation of continued and increasing governmental regulation of the stored value card industry;                     |
| · | the completion of our Payment Card Industry Security and Compliance audit and certification of our network;                |
| · | our anticipation of future earnings volatility;                                                                            |
| · | our entrance into additional financings, which can result in a recognition of derivative instrument liabilities; and       |
| · | the hiring of a substantial number of additional employees in sales, operations and customer service.                      |

| · | our ability to design and market our products;                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the estimated timing of our product roll-outs;                                                                                                                                                                                                   |
| · | our ability to protect our intellectual property rights and operate our business without infringing upon the intellectual property rights of others;                                                                                             |
| · | the changing regulatory environment related to our products;                                                                                                                                                                                     |
| · | whether or not markets for our products develop and, if they do develop, the pace at which they develop;                                                                                                                                         |
| · | our ability to attract the qualified personnel to implement our growth strategies,                                                                                                                                                               |
| · | our ability to develop sales and distribution capabilities;                                                                                                                                                                                      |
| · | our ability to work with our distribution partners;                                                                                                                                                                                              |
| · | the accuracy of our estimates and projections;                                                                                                                                                                                                   |
| · | our ability to fund our short-term and long-term financing needs;                                                                                                                                                                                |
| · | changes in our business plan and corporate strategies; and                                                                                                                                                                                       |
| · | other risks and uncertainties discussed in greater detail in this quarterly report, including those risks discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |

----

|                                                                                                                                                                                                                                                                                                                                                  |   | July 4,     |        |   | January 3, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|------------|--------|
|                                                                                                                                                                                                                                                                                                                                                  |   | 2009        |        |   | 2009       |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                |   | (unaudited) |        |   | (audited)  |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |
| CURRENT ASSETS:                                                                                                                                                                                                                                                                                                                                       |   |        |        |   |       |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                             |   | $           | 173,843     |   |       | $      | 475,608 |   |
| Restricted cash                                                                                                                                                                                                                                                                                                                                       |   |        | 457,891     |   |       |   | 472,500 |   |
| Receivables:                                                                                                                                                                                                                                                                                                                                          |   |        |        |   |       |   |   |   |
| Accounts (net of allowance for doubtful accounts of $0 and $0, respectively)                                                                                                                                                                                                                                                                          |   |        | 47,611      |   |       |   | 52,078 |   |
| Other                                                                                                                                                                                                                                                                                                                                                 |   |        | 23,030      |   |       |   | 25,776 |   |
| Prepaid expenses and other current assets, ,including prepaid marketing costs of approximately $145,000 and $224,600, respectively                                                                                                                                                                                                                    |   |        | 417,360     |   |       |   | 402,505 |   |
| Current portion of deferred financing costs (net of accumulated amortization of $268,104 and $38,301, respectively)                                                                                                                                                                                                                                   |   |        | 191,503     |   |       |   | 421,306 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                           |   |        | 2,563,805   |   |       |   | 2,885,779 |   |
|                Total current assets                                                                                                                                                                                                                                        |   |        | 3,875,043   |   |       |   | 4,735,552 |   |
| PROPERTY AND EQUIPMENT  (net of accumulated depreciation of $828,810 and $ 567,805, respectively)                                                                                                                                                                                                                                           |   |        | 503,750     |   |       |   | 625,746 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| OTHER ASSETS                                                                                                                                                                                                                                                                                                                                          |   |        |        |   |       |   |   |   |
| Deferred financing costs (net of accumulated amortization of $2,355,311 and $127,532, respectively)                                                                                                                                                                                                                                                   |   |        | 1,447,300   |   |       |   | 1,402,849 |   |
| Deferred cost of marketing incentive agreement warrants     (net of accumulated amortization of $5,665 and $4,309, respectively)                                                                                                                                                                                             |   |        | 150,000     |   |       |   | 381,250 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                          |   |        | 256,413     |   |       |   | 272,404 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| TOTAL ASSETS                                                                                                                                                                                                                                                                                                                                          |   | $           | 6,232,506   |   |       | $      | 7,417,801 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| Accounts payable                                                                                                                                                                                                                                                                                                                                      |   | $           | 800,340     |   |       | $      | 343,020 |   |
| Accrued personnel costs                                                                                                                                                                                                                                                                                                                               |   |        | 125,665     |   |       |   | 105,772 |   |
| Accrued inventory liability                                                                                                                                                                                                                                                                                                                           |   |        | 94,712      |   |       |   | 210,159 |   |
| Accrued lease and contractual obligations                                                                                                                                                                                                                                                                                                             |   |        | 228,616     |   |       |   | 150,241 |   |
| Credit facility and term loans outstanding                                                                                                                                                                                                                                                                                                            |   |        | 5,200,000   |   |       |   | 1,200,000 |   |
| Deferred revenues                                                                                                                                                                                                                                                                                                                                     |   |        | 11,667      |   |       |   | 31,250 |   |
| Other accrued liabilities                                                                                                                                                                                                                                                                                                                             |   |        | 360,138     |   |       |   | 522,113 |   |
|                Total current liabilities                                                                                                                                                                                                                                   |   |        | 6,821,138   |   |       |   | 2,562,555 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                         |   |        |        |   |       |   |   |   |
| STOCKHOLDERS’ EQUITY (DEFICIT):                                                                                                                                                                                                                                                                                                                 |   |        |        |   |       |   |   |   |
| Preferred stock - $0.001 par value:  25,000,000 shares authorized; 12,537,984 and 12,537,984  shares issued and outstanding on July 4, 2009 and January 3, 2009, respectively, as follows:                                                                                                                                        |   |        |        |   |       |   |   |   |
|    Series A Convertible Preferred Stock – 9,330,514 shares authorized; 7,500,484 and 7,500,484 shares  issued and outstanding with a liquidation value of $7,690,565 and $7,692,620 (including undeclared accumulated dividends in arrears of $190,081 and $192,136) at July 4, 2009 and January 3, 2009, respectively |   |        | 7,500       |   |       |   | 7,500 |   |
|    Series B Convertible Preferred Stock – 1,000,010 shares authorized; 1,000,000 shares issued and outstanding with a liquidation value of $3,000,000 at July 4, 2009 and January 3, 2009,respectively                                                                                                                           |   |        | 1,000       |   |       |   | 1,000 |   |
|    Series C Convertible Preferred Stock – 4,100,000 shares authorized; 4,037,500 shares issued and outstanding with a liquidation value of $8,075,000 at July 4, 2009 and January 3, 2009, respectively                                                                                                                          |   |        | 4,038       |   |       |   | 4,038 |   |
| Common stock - $0.001 par value: 200,000,000 shares authorized; 9,542,887 and  9,344,108 shares issued and outstanding as of July 4, 2009 and January 3, 2009, respectively                                                                                                                                                                 |   |        | 9,543       |   |       |   | 9,344 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                                            |   |        | 59,049,116  |   |       |   | 56,770,705 |   |
| Deficit accumulated during the development stage                                                                                                                                                                                                                                                                                                      |   |        | (59,659,829 | )      |       |   | (51,937,341 | ) |
|                Total stockholders’ (deficit) equity                                                                                                                                                                                                                  |   |        | (588,632    | )      |       |   | 4,855,246 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                            |   | $           | 6,232,506   |   |       | $      | 7,417,801 |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |        |        |   |       |   |   |   |

----

|                                                                          |   | For the thirteen weeks endedJuly 4, 2009 |       |   | For the thirteen weeks endedJune 28, 2008 |   |       | For the twenty-six weeks endedJuly 4, 2009 |   |   | For the twenty-six weeks endedJune 28, 2008 |   |   | For the period July 10, 2000(inception) to July 4, 2009 |       |
|-------------------------------------------------------------------------------|--------|------------------------------------------|------------|--------|-------------------------------------------|--------|------------|--------------------------------------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------------------------------|------------|
| REVENUES                                                                      |   | $                                        | 1,774      |   |                                      | $      | 7,345      |                                       |   | $      | (3,880                                      | )      |   | $                                                       | 15,992     |   |   | $ | 1,235,697 |   |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| OPERATING EXPENSES                                                            |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Transaction and operating expenses                                            |   |                                     | 831,310    |   |                                      |   | 484,138    |                                       |   |   | 1,372,072                                   |   |   |                                                    | 937,444    |   |   |   | 6,138,263 |   |
| Selling and marketing expenses                                                |   |                                     | 431,571    |   |                                      |   | 1,161,930  |                                       |   |   | 930,667                                     |   |   |                                                    | 2,076,966  |   |   |   | 8,970,644 |   |
| General and administrative expenses                                           |   |                                     | 1,434,498  |   |                                      |   | 2,175,545  |                                       |   |   | 2,945,731                                   |   |   |                                                    | 4,198,469  |   |   |   | 33,449,327 |   |
|    Total operating expenses                                    |   |                                     | 2,697,379  |   |                                      |   | 3,821,613  |                                       |   |   | 5,248,470                                   |   |   |                                                    | 7,212,879  |   |   |   | 48,558,234 |   |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Loss before other income (expense)                                            |   |                                     | (2,695,605 | )      |                                      |   | (3,814,268 | )                                          |   |   | (5,252,350                                  | )      |   |                                                    | (7,196,887 | ) |   |   | (47,322,537 | ) |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Other income (expense):                                                       |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Interest expense                                                              |   |                                     | (1,505,906 | )      |                                      |   | (55,050    | )                                          |   |   | (2,279,417                                  | )      |   |                                                    | (55,466    | ) |   |   | (4,276,178 | ) |
| Interest income                                                               |   |                                     | 94         |   |                                      |   | 5,845      |                                       |   |   | 94                                          |   |   |                                                    | 6,842      |   |   |   | 1,164,519 |   |
| Gain (loss) on derivative instruments                                         |   |                                     | -          |   |                                      |   | (396,032   | )                                          |   |   | -                                           |   |   |                                                    | (396,032   | ) |   |   | 1,449,230 |   |
| Loss from litigation                                                          |   |                                     | -          |   |                                      |   | -          |                                       |   |   | -                                           |   |   |                                                    | -          |   |   |   | (105,500 | ) |
| Loss on debt extinguishment                                                   |   |                                     | -          |   |                                      |   | -          |                                       |   |   | -                                           |   |   |                                                    | -          |   |   |   | (4,685,518 | ) |
| Registration rights penalties                                                 |   |                                     | -          |   |                                      |   | -          |                                       |   |   | -                                           |   |   |                                                    | -          |   |   |   | (98,649 | ) |
| Other income (expense)                                                        |   |                                     | (152       | )      |                                      |   | (758       | )                                          |   |   | (1,761                                      | )      |   |                                                    | (758       | ) |   |   | (96,376 | ) |
|    Total other income (expense)                                |   |                                     | (1,505,964 | )      |                                      |   | (445,995   | )                                          |   |   | (2,281,084                                  | )      |   |                                                    | (445,414   | ) |   |   | (6,648,472 | ) |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Loss from continuing operations                                               |   |                                     | (4,201,569 | )      |                                      |   | (4,260,263 | )                                          |   |   | (7,533,434                                  | )      |   |                                                    | (7,642,301 | ) |   |   | (53,971,009 | ) |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Loss from discontinued operations                                             |   |                                     | -          |   |                                      |   | -          |                                       |   |   | -                                           |   |   |                                                    | -          |   |   |   | (3,861,579 | ) |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |
| Net loss                                                                      |   |                                     | (4,201,569 | )      |                                      |   | (4,260,263 | )                                          |   |   | (7,533,434                                  | )      |   |                                                    | (7,642,301 | ) |   |   | (57,832,588 | ) |
| Dividends paid on Series A Convertible Preferred    Stock |   |                                     | -          |   |                                      |   | -          |                                       |   |   | -                                           |   |   |                                                    | (396,318   | ) |   |   | (1,827,242 | ) |
| Undeclared and unpaid dividends on Series A Convertible Preferred Stock       |   |                                     | (96,582    | )      |                                      |   | (94,746    | )                                          |   |   | (190,081                                    | )      |   |                                                    | (188,450   | ) |   |   | (193,164 | ) |
| Net loss attributable to common stockholders                                  |   | $                                        | (4,298,151 | )      |                                      | $      | (4,355,009 | )                                          |   | $      | (7,723,515                                  | )      |   | $                                                       | (8,227,069 | ) |   | $ | (59,852,994 | ) |
| Net loss per share - basic and diluted:                                       |   | $                                        | (0.45      | )      |                                      | $      | (0.50      | )                                          |   | $      | (0.82                                       | )      |   | $                                                       | (1.01      | ) |   |   |   |   |
| Weighted average number of shares outstanding                                 |   |                                     | 9,542,887  |   |                                      |   | 8,758,652  |                                       |   |   | 9,371,413                                   |   |   |                                                    | 8,177,963  |   |   |   |   |   |
|                                                                          |   |                                     |       |   |                                      |   |       |                                       |   |   |                                        |   |   |                                                    |       |   |   |   |   |   |

----

|                                                                                                |   | For thetwenty-six weeks endedJuly 4, 2009 |       |   | For thetwenty-six weeks endedJune 28, 2008 |   |       | For the periodJuly 10, 2000(inception) toJuly 4, 2009 |   |
|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------------|------------|--------|-------------------------------------------------|--------|------------|------------------------------------------------------------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |   |                                           |       |   |                                            |   |       |                                                       |   |
|     Net loss                                                                    |   | $                                              | (7,533,434 | )      |                                            | $      | (7,642,301 | )                                                          |   | $ | (57,832,588 | ) |
|     Adjustments to reconcile net loss to net cash used in operating activities: |   |                                           |       |   |                                            |   |       |                                                       |   |   |   |   |
|        Depreciation and amortization                             |   |                                           | 125,817    |   |                                            |   | 152,591    |                                                       |   |   | 1,376,621 |   |
|        Provision for inventory obsolescence                      |   |                                           | 171,099    |   |                                            |   | 57,925     |                                                       |   |   | 836,907 |   |
|        Provision for bad debts                                   |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | 461,972 |   |
|        Amortization of intangible assets                         |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | 15,485 |   |
|        Stock-based compensation and consulting                   |   |                                           | 228,606    |   |                                            |   | 1,098,241  |                                                       |   |   | 8,323,408 |   |
|        Purchased in process research and development             |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | 153,190 |   |
|        Loss (gain) on derivative instruments                     |   |                                           | -          |   |                                            |   | 396,032    |                                                       |   |   | (1,449,230 | ) |
|        Loss on debt extinguishments                              |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | 4,685,518 |   |
|        Loss (gain) on disposal of assets                         |   |                                           | 1,609      |   |                                            |   | 394        |                                                       |   |   | 30,372 |   |
|        Loss from impairment of assets                            |   |                                           | 449,589    |   |                                            |   | -          |                                                       |   |   | 1,919,672 |   |
|        Debt forgiveness as a result of litigation settlement     |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | (50,000 | ) |
|        Non-cash interest expense                                 |   |                                           | 1,778,548  |   |                                            |   | 25,003     |                                                       |   |   | 2,681,797 |   |
|        Other non-cash expense                                    |   |                                           | 1,013      |   |                                            |   | 292        |                                                       |   |   | 10,922 |   |
|       Changes in assets and liabilities, net:                         |   |                                           |       |   |                                            |   |       |                                                       |   |   |   |   |
|         Restricted cash                                     |   |                                           | 14,609     |   |                                            |   | -          |                                                       |   |   | (457,891 | ) |
|         Receivables                                         |   |                                           | 7,213      |   |                                            |   | 11,695     |                                                       |   |   | (370,350 | ) |
|         Prepaid expenses and other current assets           |   |                                           | 214,948    |   |                                            |   | (487,519   | )                                                          |   |   | (370,552 | ) |
|         Inventories                                         |   |                                           | (68,476    | )      |                                            |   | (755,709   | )                                                          |   |   | (3,489,848 | ) |
|         Other assets                                        |   |                                           | 15,992     |   |                                            |   | (238,410   | )                                                          |   |   | (205,600 | ) |
|         Assets of discontinued operations                   |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | (229,060 | ) |
|         Accounts payable and accrued  liabilities |   |                                           | 278,166    |   |                                            |   | 122,734    |                                                       |   |   | 1,791,282 |   |
|         Accrued registration rights penalties               |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | 98,649 |   |
|         Deferred revenues                                   |   |                                           | (19,583    | )      |                                            |   | (37,500    | )                                                          |   |   | 11,667 |   |
| NET CASH USED IN OPERATING ACTIVITIES                                                               |   |                                           | (4,334,284 | )      |                                            |   | (7,296,532 | )                                                          |   |   | (42,057,657 | ) |
|                                                                                                |   |                                           |       |   |                                            |   |       |                                                       |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |   |                                           |       |   |                                            |   |       |                                                       |   |   |   |   |
|   Purchases of property and equipment                                                     |   |                                           | (5,431     | )      |                                            |   | (73,179    | )                                                          |   |   | (2,116,136 | ) |
|   Early redemption of short-term investment                                               |   |                                           | -          |   |                                            |   | 725,496    |                                                       |   |   | (2,504 | ) |
|   Investment in Product Benefits Systems Corporation                                      |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | (15,737 | ) |
|   Cash advanced under note receivable                                                     |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | (202,000 | ) |
|   Other                                                                                   |   |                                           | -          |   |                                            |   | -          |                                                       |   |   | (15,000 | ) |
| NETCASH PROVIDED BY (USED IN)   INVESTING ACTIVITIES                                 |   |                                           | (5,431     | )      |                                            |   | 652,317    |                                                       |   |   | (2,351,377 | ) |
|                                                                                                |   |                                           |       |   |                                            |   |       |                                                       |   |   |   |   |

----

|                                                                       |   | For thetwenty-sixweeks endedJuly 4, 2009 |      |   | For the twenty-sixweeks endedJune 28, 2008 |   |      | For theperiodJuly 10, 2000(inception) toJuly 4, 2009 |   |
|----------------------------------------------------------------------------|--------|------------------------------------------|-----------|--------|--------------------------------------------|--------|-----------|------------------------------------------------------|--------|
| CASH FLOWS FROM FINANCING ACTIVITIES:                                      |   |                                     |      |   |                                       |   |      |                                                 |   |
|   Proceeds from issuance of Series A Convertible Preferred Stock |   |                                     | -         |   |                                       |   | -         |                                                 |   |   | 4,000,000 |   |
|   Proceeds from issuance of Series B Convertible Preferred Stock |   |                                     | -         |   |                                       |   | -         |                                                 |   |   | 3,000,000 |   |
|   Proceeds from issuance of Series C Convertible Preferred Stock |   |                                     | -         |   |                                       |   | 8,075,000 |                                                 |   |   | 8,075,000 |   |
|   Proceeds from borrowings                                       |   |                                     | 4,000,000 |   |                                       |   | -         |                                                 |   |   | 10,565,162 |   |
|   Repayments of notes payable                                    |   |                                     | -         |   |                                       |   | -         |                                                 |   |   | (147,912 | ) |
|   Collections on note receivable from stockholder                |   |                                     |      |   |                                       |   | -         |                                                 |   |   | 3,000,000 |   |
|   Payment for deferred financing costs                           |   |                                     | -         |   |                                       |   | (368,083  | )                                                    |   |   | (459,606 | ) |
|   Payments for stock issuance costs                              |   |                                     | 37,950    |   |                                       |   | (656,329  | )                                                    |   |   | (1,458,791 | ) |
|   Proceeds from the exercise of vested stock options             |   |                                     | -         |   |                                       |   | -         |                                                 |   |   | 8,249 |   |
|   Proceeds from the issuance of Common Stock                     |   |                                     | -         |   |                                       |   | 2,840,000 |                                                 |   |   | 18,000,775 |   |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                  |   |                                     | 4,037,950 |   |                                       |   | 9,890,588 |                                                 |   |   | 44,582,877 |   |

| NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                  |   |   | (301,765  | )      |   |   | 3,246,373 |   |   |   | 173,843   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|
|                                                                                                                     |   |   |      |   |   |   |      |   |   |   |      |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                           |   |   | 475,608   |   |   |   | 2,497,365 |   |   |   | -         |   |
|                                                                                                                     |   |   |      |   |   |   |      |   |   |   |      |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                 |   | $      | 173,843   |   |   | $      | 5,743,738 |   |   | $      | 173,843   |   |
|                                                                                                                     |   |   |      |   |   |   |      |   |   |   |      |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                        |   |   |      |   |   |
| Interest paid                                                                                                            |   | $      | 503,903   |   |   | $      | 463       |   |   | $      | 552,758   |   |
| Income taxes paid                                                                                                        |   | $      | -         |   |   | $      | -         |   |   | $      | -         |   |
|                                                                                                                     |   |   |      |   |   |   |      |   |   |   |      |   |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                                                  |   |
| Acquisition of assets by issuance of Common Stock                                                                        |   | $      | -         |   |   | $      | -         |   |   | $      | 818,200   |   |
| Reclassification of proceeds from sales of Common Stock to derivative financial instrument liabilities                   |   | $      | -         |   |   | $      | -         |   |   | $      | 4,007,443 |   |
| Issuance of Common Stock for net assets of Pan American Energy Corporation in a recapitalization  - see Note A |   | $      | -         |   |   | $      | -         |   |   | $      | 2,969,000 |   |
| Issuance of Common Stock in lieu of cash payment of registration penalties                                               |   | $      | -         |   |   | $      | -         |   |   | $      | 652,625   |   |
| Reclassification of long-lived assets to assets of discontinued telecom operations                                       |   | $      | -         |   |   | $      | -         |   |   | $      | 100,000   |   |
| Warrants issued to DFS Services, LLC                                                                                     |   | $      | -         |   |   | $      | (292      | )      |   | $      | 535,302   |   |
| Warrants issued to Lenders                                                                                               |   | $      | 1,353,877 |   |   | $      | -         |   |   | $      | 2,884,258 |   |
| Conversion of Series A Convertible Preferred Stock to Common Stock                                                       |   | $      | -         |   |   | $      | 220       |   |   | $      | 1,828,000 |   |
| Dividends on Series A Convertible Preferred Stock                                                                        |   | $      | 189,053   |   |   | $      | 395,309   |   |   | $      | 1,827,242 |   |
| Conversion of Senior Secured Convertible Promissory Notes and accrued interest to Series A Convertible Preferred Stock   |   | $      | -         |   |   | $      | -         |   |   | $      | 5,327,934 |   |
|                                                                                                                     |   |   |      |   |   |   |      |   |   |   |      |   |

----

----

|   |  •  Wholesale fees, charged to our prepaid card distributors when our SVCs are sold or reloaded.                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |  •  Transaction fees, paid by the applicable networks and passed through by our card issuing banks when our SVCs are used in a purchase or ATM transaction. |
|   |  •  Maintenance fees, charged to an SVC with a cash balance for initial activation and monthly maintenance.                                                 |
|   |  •  Interest revenue, on overnight investing of SVC balances by our card issuing bank.                                                                      |

----

|                                                            |   | July 4, 2009 |   | January 3, 2009 |   |
|-----------------------------------------------------------------|--------|--------------|--------|-----------------|--------|
| Finished cards                                                  | $      | 3,102,105    | $      | 2,582,661       |   |
| Inventory in process                                            |   | 85,000       |   | 474,533         |   |
|                                                            |   | 3,187,105    |   | 3,057,194       |   |
| Less reserve for damaged and obsolete inventory at distributors |   | 623,300      |   | 171,415         |   |
|      Total Inventories                 | $      | 2,563,805    | $      | 2,885,779       |   |

----

|                                 |   |                                                            |   |
|--------------------------------------|--------|-----------------------------------------------------------------|--------|
| Description                          |   | Shares of Common Stock and Common Stock Equivalents Outstanding |   |
|                                 |   |                                                            |   |
| Common Stock                         |   | 9,542,887                                                       |   |
| Series A Convertible Preferred Stock |   | 7,500,484                                                       |   |
| Series B Convertible Preferred Stock |   | 1,000,000                                                       |   |
| Series C Convertible Preferred Stock |   | 4,037,500                                                       |   |
| Stock Options                        |   | 3,046,029                                                       |   |
| Warrants                             |   | 10,374,340                                                      |   |
|                                 |   |                                                            |   |
| Total                                |   | 35,504,240                                                      |   |
|                                 |   |                                                            |   |

----

|                                 |   |                                      |    |   |                                       |   |    |                                        |   |   |                                         |   |
|--------------------------------------|--------|-------------------------------------------|---------|--------|--------------------------------------------|--------|---------|---------------------------------------------|--------|--------|----------------------------------------------|--------|
| Stock-based compensation charged to: |   | For the thirteen weeks ended July 4, 2009 |    |   | For the thirteen weeks ended June 28, 2008 |   |    | For the twenty-six weeks ended July 4, 2009 |   |   | For the twenty-six weeks ended June 28, 2008 |   |
|                                 |   |                                      |    |   |                                       |   |    |                                        |   |   |                                         |   |
| Transaction and operating expenses   |   | $                                         | 789     |   |                                       | $      | -       |                                        |   | $      | 1,593                                        |   |   | $ | 243 |   |
| Selling and marketing expenses       |   |                                      | 29,604  |   |                                       |   | 66,611  |                                        |   |   | 58,442                                       |   |   |   | 129,523 |   |
| General and administrative expenses  |   |                                      | 88,796  |   |                                       |   | 431,615 |                                        |   |   | 168,571                                      |   |   |   | 968,475 |   |
| Interest expense                     |   |                                      | -       |   |                                       |   | 25,003  |                                        |   |   | 9,925                                        |   |   |   | 25,003 |   |
| Total stock-based compensation       |   | $                                         | 119,189 |   |                                       | $      | 523,229 |                                        |   | $      | 238,531                                      |   |   | $ | 1,123,244 |   |
|                                 |   |                                      |    |   |                                       |   |    |                                        |   |   |                                         |   |   |   |   |   |

----

Financial Accounting Standard No. 157, “Fair Value Measurements” (“FAS 157”) defines fair value, establishes amethodology for measuring fair value, and expands the required disclosure for fair value measurements.  In February 2007, the Financial Accounting Standards Board (the “FASB”) issued Financial Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115” (“FAS159”).  We adopted FAS 159 on December 30, 2007, the first day of our 2008 fiscal year. This standard permits entities to choose to measure many financial instruments and certain other items at fair value. Although FAS 159 became effective for our 2008 fiscal year, we did not elect the fair value measurement option for any of our financial assets or liabilities. 

----

----

----

|   | Issue Date           | Warrants  |   | Fair Value |   |
|--------|----------------------|-----------|--------|------------|--------|
|   | May 7 & 8, 2009  | 600,000   |   | $ 318,092  |   |
|   | May 13, 2009         | 200,000   |   | 74,514     |   |
|   | May 21, 2009         | 100,000   |   | 35,542     |   |
|   | June 4 & 5, 2009 | 1,014,000 |   | 302,877    |   |
|   | June 11, 2009        | 86,000    |   | 24,743     |   |
|   |   Totals   | 2,000,000 |   | $ 755,768  |   |

----

|                            |                   |   |                   |   |
|---------------------------------|------------------------|--------|------------------------|--------|
|                            | Twenty-six weeks ended |   | Twenty-six weeks ended |   |
|                            | July 4, 2009           |   | June 28, 2008          |   |
| Expected term in years          | 5                      |   | 5                      |   |
| Expected stock price volatility | 165% - 191%            |   | 73% - 75%              |   |
| Risk free interest rate         | 1.50%                  |   | 2.67% - 3.08%          |   |
| Dividend yield                  | 0%                     |   | 0%                     |   |

|                                                                          |   |                               |   |                                                           |   |
|-------------------------------------------------------------------------------|--------|------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                          |   |    Number ofoptions |   | Weighted averageexerciseprice per share(price atdate of grant) |   |
|                                                                          |   |                               |   |                                                           |   |
| Outstanding at January 3, 2009                                                |   | 2,641,779                          | $      | 3.57                                                           |   |
| Granted                                                                       |   | 416,500                            | $      | 1.01                                                           |   |
| Cancelled                                                                     |   | (12,250)                           | $      | 1.85                                                           |   |
| Outstanding at July 4, 2009                                                   |   | 3,046,029                          | $      | 3.22                                                           |   |
|                                                                          |   |                               |   |                                                           |   |
| Options granted at or above market value during the period ended July 4, 2009 |   | 416,500                            |   |                                                           |   |

----

|                    |        |   | Options outstanding |   |      | Options exercisable                              |   |
|-------------------------|-------------|--------|---------------------|--------|-----------|--------------------------------------------------|--------|
|                    |        |   |                |   |      |                                             |   |   |   |   |   |   |   |   |   |   |
| Range ofexercise prices |        |   | Numberoutstanding   |   |      | Weightedaverageremainingcontractuallife in years |   |   | Weightedaverageexerciseprice |   |   | NumberExercisable |   |   | Weightedaverageexerciseprice pershare |   |
|                    |        |   |                |   |      |                                             |   |   |   |   |   |   |   |   |   |   |
| $                       | 0.75-$1.60  |   |                |   | 1,555,790 |                                             |   |   | 8.1 |   |   | $ | 1.35 |   |   |   | 1,072,818 |   |   | $ | 1.50 |   |
| $                       | 2.20-$3.75  |   |                |   | 577,130   |                                             |   |   | 6.6 |   |   | $ | 3.29 |   |   |   | 493,102 |   |   | $ | 3.29 |   |
| $                       | 4.00-$7.00  |   |                |   | 682,502   |                                             |   |   | 4.0 |   |   | $ | 4.19 |   |   |   | 634,183 |   |   | $ | 4.20 |   |
| $                       | 8.00-$32.00 |   |                |   | 230,607   |                                             |   |   | 1.7 |   |   | $ | 12.83 |   |   |   | 230,607 |   |   | $ | 12.83 |   |
|                    |        |   |                |   | 3,046,029 |                                             |   |   | 6.4 |   |   | $ | 3.22 |   |   |   | 2,430,710 |   |   | $ | 3.64 |   |

----

| Warrants issued in connection with/as:                                                                                                                                        |   | Number outstanding |   | Exercise price per share |   | Expiration date                                                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|--------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Partial compensation for our placement agent in connection with the sale of our Series A Convertible Preferred Stock on December 28, 2006                                     |   | 320,000            |   | $1.10                    |   | December 28, 2011                                                                                                                               |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Partial compensation for our placement agent in connection with the sale of our Series B Convertible Preferred Stock and Common Stock on June 29, 2007                        |   | 120,928            |   | $1.00                    |   | June 29, 2012                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Securities Purchase Agreements dated June 29, 2007                                                                                                                |   | 155,600            |   | $5.00                    |   | June 29, 2012                                                                                                                                   |
|  Compensation for Mr. Bruce E. Terker in connection with the Guarantee and Indemnification Agreements for bond collateral required for our state licensing initiative1,7 |   | 33,912             |   | $1.00                    |   |  3,716 on April 1, 2013, 8,455 on June 30, 2013, 8,455 on September 30, 2013 and 8,455 on December 31, 2013 and 4,831 on February 15, 2013 |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to the exchanged securities issued pursuant to the Securities Purchase Agreements dated June 12, 20082                                                               |   | 700,000            |   | $2.30                    |   | June 12, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Securities Purchase Agreements dated June 29, 2007, as amended for participation in the June 12, 2008 Securities Purchase Agreements3                             |   | 264,333            |   | $2.30                    |   | June 29, 2012                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Securities Purchase Agreements dated June 29, 2007, as amended for participation in the June 12, 2008 Securities Purchase Agreements3,7                           |   | 1,091,667          |   | $1.00                    |   | June 29, 2012                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Securities Purchase Agreements dated June 12, 2008                                                                                                                |   | 760,000            |   | $2.30                    |   | June 12, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Securities Purchase Agreements dated June 12, 2008 7                                                                                                              |   | 1,268,750          |   | $1.00                    |   | June 12, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Warrants held by DFS Services LLC dated November 12, 2007                                                                                                                     |   | 200,000            |   | $3.00                    |   | November 12, 2010                                                                                                                               |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Loan and Security Warrant Agreements dated July 21, 2008 4                                                                                                        |   | 325,000            |   | $2.30                    |   | July 21, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Pursuant to Amended and Restated Loan and Security Warrant Agreements dated November 26, 2008 4,5,7                                                                           |   | 682,500            |   | $1.00                    |   | July 21, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Accommodation Loan Warrant Agreements 5,7                                                                                                                                     |   | 1,700,000          |   | $1.00                    |   | November 26, 2009                                                                                                                               |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Partial compensation for our placement agents in connection with the sale of our Series C Convertible Preferred Stock and Common Stock on June 12, 2008 6                     |   | 54,575             |   | $2.53                    |   | June 12, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Partial compensation for our placement agents in connection with the sale of our Series C Convertible Preferred Stock and Common Stock on June 12, 2008 6,7                   |   | 54,575             |   | $1.00                    |   | June 12, 2013                                                                                                                                   |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Term Note Warrant Agreements 8                                                                                                                                                |   | 2,000,000          |   | $0.50                    |   | May 7, 2010, through June 5, 2010                                                                                                               |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| July Term Loan Warrants 9                                                                                                                                                     |   | 600,000            |   | $0.50                    |   | July 2, 2010, through July 3, 2010                                                                                                              |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Consulting services agreement dated April 1, 2006                                                                                                                             |   | 37,500             |   | $5.00                    |   | Various dates through 2011                                                                                                                      |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Cooperation Agreement dated November 22, 2006                                                                                                                                 |   | 5,000              |   | $1.20                    |   | November 22, 2011                                                                                                                               |
|                                                                                                                                                                          |   |               |   |                     |   |                                                                                                                                            |
| Total warrants and weighted average exercise price per share outstanding at July 4, 2009                                                                                      |   | 10,374,340         |   | $1.26                    |   |                                                                                                                                            |

----

----

| Issue Date           | Warrants  |   | Fair Value |   |
|----------------------|-----------|--------|------------|--------|
| May 7 & 8, 2009  | 600,000   |   | $ 318,092  |   |
| May 13, 2009         | 200,000   |   | 74,514     |   |
| May 21, 2009         | 100,000   |   | 35,542     |   |
| June 4 & 5, 2009 | 1,014,000 |   | 302,877    |   |
| June 11, 2009        | 86,000    |   | 24,743     |   |
|   Totals   | 2,000,000 |   | $ 755,768  |   |

| Twelve months ending: |   |    | Amounts |   |
|-----------------------|--------|---------|---------|--------|
|                  |   |    |    |
| June 2010             | $      | 218,900 |    |
| June 2011             |   | 202,800 |    |
| June 2012             |   | 207,300 |    |
| June 2013             |   | 52,100  |    |
| June 2014             |   | -       |    |
|                  |   |    |    |
| Total                 | $      | 681,100 |    |

----

----

|   |         |                                                 |   |                                                   |   |
|--------|--------------|------------------------------------------------------|--------|--------------------------------------------------------|--------|
|   | Strike Price | Warrants OutstandingPrior to theSeries D transaction |   | WarrantsOutstanding After theSeries D transaction |   |
|   | $0.01        |                                                 |   | 49,129,587                                             |   |
|   | $0.50        | 6,666,667                                            |   | -                                                      |   |
|   | $1.00        | 4,952,332                                            |   | -                                                      |   |
|   | $1.10        | 320,000                                              |   | -                                                      |   |
|   | $1.20        | 5,000                                                |   | 5,000                                                  |   |
|   | $2.30        | 2,049,933                                            |   | 1,014,725                                              |   |
|   | $2.53        | 54,575                                               |   | 54,575                                                 |   |
|   | $3.00        | 200,000                                              |   | 200,000                                                |   |
|   | $5.00        | 192,500                                              |   | 142,500                                                |   |
|   | Totals       | 14,441,007                                           |   | 50,671,387                                             |   |

----

| STOCKHOLDERS’ EQUITY:                                                                                                                                                                                                                                                                                                                           |   |   |        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| Preferred stock - $0.001 par value:  25,000,000 shares authorized; 12,537,984 and 12,537,984  shares issued and outstanding on July 4, 2009 and January 3, 2009, respectively, as follows:                                                                                                                                        |   |   |        |
|    Series A Convertible Preferred Stock – 9,330,514 shares authorized; 7,500,484 and 7,500,484 shares  issued and outstanding with a liquidation value of $7,690,565 and $7,692,620 (including undeclared accumulated dividends in arrears of $190,081 and $192,136) at July 4, 2009 and January 3, 2009, respectively |   |   | 7,500       |   |
|    Series B Convertible Preferred Stock – 1,000,010 shares authorized; 1,000,000 shares issued and outstanding with a liquidation value of $3,000,000 at July 4, 2009 and January 3, 2009,respectively                                                                                                                           |   |   | 1,000       |   |
|    Series C Convertible Preferred Stock – 4,100,000 shares authorized; 4,037,500 shares issued and outstanding with a liquidation value of $8,075,000 at July 4, 2009 and January 3, 2009, respectively                                                                                                                          |   |   | 4,038       |   |
|    Series D Convertible Preferred Stock – 4,666,666 shares authorized; 3,623,038 shares issued and outstanding with a liquidation value of $10,869,114 at July 4, 2009                                                                                                                                                           |   |   | 3,623       |   |
| Common stock - $0.001 par value: 200,000,000 shares authorized; 9,542,887 and  9,344,108 shares issued and outstanding as of July 4, 2009 and January 3, 2009, respectively                                                                                                                                                                 |   |   | 9,543       |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                                            |   |   | 70,200,719  |   |
| Deficit accumulated during the development stage                                                                                                                                                                                                                                                                                                      |   |   | (60,879,072 | ) |
|                Total stockholders’ equity                                                                                                                                                                                                                            |   |   | 9,347,351   |   |
|                                                                                                                                                                                                                                                                                                                                                  |   |   |        |   |

|   |   |
|--------|--------|

----

----

|   | •  Wholesale fees, charged to our prepaid card distributors when our SVCs are sold or reloaded. |
|--------|------------------------------------------------------------------------------------------------------------|

|   | •  Transaction fees, paid by the applicable networks and passed through by our card issuing banks when our SVCs are used in a purchase or ATM transaction. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | •  Interest revenue, on overnight investing of SVC balances by our card issuing bank. |
|--------|--------------------------------------------------------------------------------------------------|

| Description                                     |   | For thethirteenweeks endedJuly 4, 2009 |    |   | For thethirteenweeks endedJune 28, 2008 |   |    | For thetwenty-sixweeks endedJuly 4, 2009 |   |   | For thetwenty-sixweeks endedJune 28, 2008 |   |
|-------------------------------------------------|--------|----------------------------------------|---------|--------|-----------------------------------------|--------|---------|------------------------------------------|--------|--------|-------------------------------------------|--------|
| SVC card cost, program and transaction expenses |   | $                                      | 339,266 |   |                                    | $      | 229,254 |                                     |   | $      | 613,015                                   |   |   | $ | 465,622 |   |
| Inventory reserves                              |   |                                   | 86,349  |   |                                    |   | 28,954  |                                     |   |   | 159,649                                   |   |   |   | 57,925 |   |
| Inventory impairment                            |   |                                   | 219,851 |   |                                    |   | -       |                                     |   |   | 219,851                                   |   |   |   | - |   |
| Stock-based compensation                        |   |                                   | 789     |   |                                    |   | -       |                                     |   |   | 1,593                                     |   |   |   | 243 |   |
| Customer service expenses                       |   |                                   | 185,055 |   |                                    |   | 225,930 |                                     |   |   | 377,964                                   |   |   |   | 413,654 |   |
| Total Transaction and Operating Expenses        |   | $                                      | 831,310 |   |                                    | $      | 484,138 |                                     |   | $      | 1,372,072                                 |   |   | $ | 937,444 |   |
|                                            |   |                                   |    |   |                                    |   |    |                                     |   |   |                                      |   |   |   |   |   |

----

| Description                          |   | For thethirteenweeks endedJuly 4, 2009 |    |   | For thethirteenweeks endedJune 28, 2008 |   |      | For thetwenty-sixweeks endedJuly 4, 2009 |   |   | For thetwenty-sixweeks endedJune 28, 2008 |   |
|--------------------------------------|--------|----------------------------------------|---------|--------|-----------------------------------------|--------|-----------|------------------------------------------|--------|--------|-------------------------------------------|--------|
| Advertising and marketing expenses   |   | $                                      | 150,502 |   |                                    | $      | 573,628   |                                     |   | $      | 303,730                                   |   |   | $ | 881,706 |   |
| Sales force expenses                 |   |                                   | 251,465 |   |                                    |   | 521,691   |                                     |   |   | 568,495                                   |   |   |   | 1,065,737 |   |
| Stock-based compensation             |   |                                   | 29,604  |   |                                    |   | 66,611    |                                     |   |   | 58,442                                    |   |   |   | 129,523 |   |
| Total selling and marketing expenses |   | $                                      | 431,571 |   |                                    | $      | 1,161,930 |                                     |   | $      | 930,667                                   |   |   | $ | 2,076,966 |   |

|   | Advertising and marketing expenses decreased 74%, or $423,126, to $150,502 when comparing 2Q2009 with 2Q2008.  For the 1st Half 2009 compared to the 1st Half 2008, advertisingand marketing expenses decreased 66%, or $577,976 to $303,730.   These period to period changes were primarily attributable to the expenses of  a national trade print advertising campaign in 2Q2008 and the 1st Half 2008 as opposed to none in 2Q2009 or the 1st Half 2009. Sales force expenses decreased $270,226 to $251,465, a 52% decrease for 2Q2009 when compared with 2Q2008.  For the 1st Half 2009 compared to the 1st Half 2008, sales force expensesdecreased 47%, or $497,242 to $568,495. The principal components of this decrease are employee compensation and benefits expense travel and entertainment expense, and rent expense.  The decrease in sales force compensation and travel and entertainment expenses can be attributed to reductions in the sales force to seven employees at the end of the first quarter of 2009 from a total of 15 employees at the end of the first quarter of 2008.  In addition, rent expense decreased due to the eliminationin the third quarter of 2008 of a temporary warehouse space used to store point-of-purchase displays for our distributors. Stock-based compensation decreased in 1Q2009 and the 1st Half 2009 due to forfeiture of options and the termination of stock based compensation expense associated with the reduction of sales force employees from the 1st Half2008. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Description                               |   | For thethirteenweeks endedJuly 4, 2009 |      |   | For thethirteenweeks endedJune 28, 2008 |   |      | For thetwenty-sixweeks endedJuly 4, 2009 |   |   | For thetwenty-sixweeks endedJune 28, 2008 |   |
|-------------------------------------------|--------|----------------------------------------|-----------|--------|-----------------------------------------|--------|-----------|------------------------------------------|--------|--------|-------------------------------------------|--------|
| Payroll, benefits and  taxes    |   | $                                      | 672,950   |   |                                    | $      | 866,205   |                                     |   | $      | 1,446,753                                 |   |   | $ | 1,575,994 |   |
| Stock-based compensation                  |   |                                   | 88,796    |   |                                    |   | 431,616   |                                     |   |   | 168,571                                   |   |   |   | 968,475 |   |
| Professional, legal and licensing expense |   |                                   | 214,281   |   |                                    |   | 511,797   |                                     |   |   | 400,175                                   |   |   |   | 914,227 |   |
| Office and occupancy expenses             |   |                                   | 198,005   |   |                                    |   | 225,427   |                                     |   |   | 426,873                                   |   |   |   | 462,070 |   |
| Impairment expense                        |   |                                   | 111,962   |   |                                    |   | -         |                                     |   |   | 230,238                                   |   |   |   | - |   |
| Other administrative expense              |   |                                   | 148,504   |   |                                    |   | 140,500   |                                     |   |   | 273,121                                   |   |   |   | 277,703 |   |
| Total General and Administrative Expenses |   | $                                      | 1,434,498 |   |                                    | $      | 2,175,545 |                                     |   | $      | 2,945,731                                 |   |   | $ | 4,198,469 |   |
|                                      |   |                                   |      |   |                                    |   |      |                                     |   |   |                                      |   |   |   |   |   |

|   | When comparing 2Q2009 with 2Q2008, changes in the expense categories are primarily attributable to: |
|--------|-----------------------------------------------------------------------------------------------------|

| ▪    | decreased payroll, benefits and taxes expenses of $193,255, due primarily to $165,000 for bonus compensation awards paid in 2Q2008 and lower general and administrative payroll in 2Q2009 than 2Q2008;                                                     |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ▪    | decreased stock-based compensation expense of $342,820, which is primarily attributable to our having fully expensed the stock option grants to Mr. Welch and Mr. Springer under their employment agreements as of the end of fiscal 2008;                 |
| ▪    | decreased professional, legal and licensing expense of $297,516 due to reduced recruiting fees incurred in the prior year to increase our sales force and reduced legal fees incurred in connection with the completion of our state licensing initiative; |
| ▪    | impairment of asset charge of $111,962 to write-down the expected value of a marketing incentive agreement compared with none in 2Q2008; and                                                                                                               |

|   | When comparing the 1st Half 2009 with the 1st Half 2008, changes in the expense categories are primarily attributable to: |
|--------|---------------------------------------------------------------------------------------------------------------------------|

| ▪    | decreased payroll, benefits and taxes expenses of $129,241, due primarily to $125,000 in higher bonuses paid in the 1st Half 2008 than the 1st Half 2009 and annual compensation increasesoffset by lower general and administrative payroll in 2Q2009 than 2Q2008;            |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ▪    | decreased stock-based compensation expense of $799,904, which is primarily attributable to our having fully expensed the stock option grants to Mr. Welch and Mr. Springer under their employment agreements as of the end of fiscal 2008;                                     |
| ▪    | decreased professional, legal and licensing expense of $514,052 due to $199,446 in lower recruiting fees incurred in the prior year to increase our sales force and $259,286 in lower legal fees incurred in connection with the completion of our state licensing initiative; |
| ▪    | impairment of asset charge of $230,238 to write-down the expected value of a marketing incentive agreement compared with none in the 1st Half 2008; and                                                                                                                        |

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| Twelve months ending: |   |    | Amounts |   |
|-----------------------|--------|---------|---------|--------|
|                  |   |    |    |
| June 2010             | $      | 218,900 |    |
| June 2011             |   | 202,800 |    |
| June 2012             |   | 207,300 |    |
| June 2013             |   | 52,100  |    |
| June 2014             |   | -       |    |
|                  |   |    |    |
| Total                 | $      | 681,100 |    |

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The 2009 Annual Meeting of Stockholder of nFinanSe Inc. was held on May 14, 2009.  The following summarizes the matters voted on and the results of such votes: 

|                                                                                                                                                                                                                        |   | Votes Cast |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|
|  Management Proposal                                                                                                                                                                                                   |   | For        |   | Against |   | Abstain |   |
|                                                                                                                                                                                                                        |   |       |   |   |   |   |   |
| Ratification of the appointment of Kingery & Crouse, P.A. as the Company’s independent registered public accounting firm for the fiscal year ended January 3, 2009 and for the fiscal year ending January 2, 2010 |   | 10,562,199 |   | 25 |   | - |   |
|                                                                                                                                                                                                                        |   |       |   |   |   |   |   |

|                                    |   |                 |   |      |   |
|-----------------------------------------|--------|----------------------|--------|-----------|--------|
| Five directors were elected as follows: |   | Votes Received       |   | Votes     |   |
| Director Nominee                        |   | in Favor of Election |   | Withheld  |   |
|                                    |   |                 |   |      |   |
| Jerry R Welch                           |   | 9,555,590            |   | 1,006,633 |   |
| Joseph D. Hudgins                       |   | 10,336,652           |   | 225,571   |   |
| Ernest W. Swift                         |   | 9,835,321            |   | 726,902   |   |
| Bruce E. Terker                         |   | 9,706,627            |   | 855,596   |   |
| Donald A. Harris                        |   | 10,336,652           |   | 225,571   |   |
|                                    |   |                 |   |      |   |

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|                                                                                                                                                       |   | Votes Cast |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|
|                                                                                                                                                       |   | For        |   | Against |   |
| Management Proposal                                                                                                                                        |   |       |   |   |   |
| Consent of the holders of the Series A Preferred allowing nFinanSe to issue additional indebtedness in an amount not to exceed $2,000,000 in the aggregate |   | 6,335,695  |   | - |   |
|                                                                                                                                                       |   |       |   |   |   |

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|  Exhibit Number |   |  Description of Exhibit                                                                                                                                      |
|----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                              |
| *10.1                |   | Form of Note, as issued by the Company to certain lenders in connection with the note offering which commenced on May 7, 2009 (the “Term Loan Notes”) |
|                 |   |                                                                                                                                                              |
| *10.2                |   | Form of Common Stock Warrant as issued by the Company in tandem with the Term Loan Notes                                                                          |
|                 |   |                                                                                                                                                              |
| *31.1                |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                |
|                 |   |                                                                                                                                                              |
| *31.2                |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                |
|                 |   |                                                                                                                                                              |
| *32.1                |   | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                 |
|                 |   |                                                                                                                                                              |
| *32.2                |   | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                 |

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|                       | NFINANSE INC. |
|----------------------------|---------------|
|                       |          |   |
| Date: August 24, 2009 | By:           | /s/ Jerry R. Welch |
|                       |          |   |
|                       |          | Jerry R. Welch, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) |
|                       |          |   |
|                       |          |   |

|                             | NFINANSE INC. |
|----------------------------------|---------------|
|                             |          |   |
| Date:  August 24, 2009 | By:           | /s/ Raymond P. Springer |
|                             |          |   |
|                             |          | Raymond P. Springer, Chief Financial Officer (Principal Financial Officer) |
|                             |          |   |
|                             |          |   |

|                             | NFINANSE INC. |
|----------------------------------|---------------|
|                             |          |   |
| Date:  August 24, 2009 | By:           | /s/ Jerome A. Kollar |
|                             |          |   |
|                             |          | Jerome A. Kollar, Vice President Finance and Controller (Principal Accounting Officer) |
|                             |          |   |
|                             |          |   |

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|  Exhibit Number |   |  Description of Exhibit                                                                                                                                      |
|----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                              |
| *10.1                |   | Form of Note, as issued by the Company to certain lenders in connection with the note offering which commenced on May 7, 2009 (the “Term Loan Notes”) |
|                 |   |                                                                                                                                                              |
| *10.2                |   | Form of Common Stock Warrant as issued by the Company in tandem with the Term Loan Notes                                                                          |
|                 |   |                                                                                                                                                              |
| *31.1                |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                |
|                 |   |                                                                                                                                                              |
|  *31.2          |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                |
|                 |   |                                                                                                                                                              |
|  *32.1          |   | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                 |
|                 |   |                                                                                                                                                              |
| *32.2                |   | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                 |

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