**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**FORM
      10-QSB**










(MARK
                ONE)**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarterly period ended September 30, 2006****OR****o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the transition period from  ______________ to
                ______________**





**COMMISSION
      FILE NUMBER: 0-28749**







**FREESTAR
      TECHNOLOGY CORPORATION**


(Exact
      Name of Company as Specified in Its Charter)









**Nevada**
            
            **88-0446457**(State
                or Other Jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)









31
      Mespil
      Road, Ballsbridge, Dublin 4, Ireland


(Address
      of Principal Executive Offices)





353
      1 **** 6185060


(Company's
      Telephone Number)




(Former
      Name, Former Address, and Former Fiscal Year, if Changed Since Last
      Report)







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




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




As
      of
      November 13, 2006, the Company had 185,304,569 shares
      of
      common stock issued and outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes o No x










TABLE
                OF CONTENTSPAGEPART
                I
            FINANCIAL
                INFORMATIONITEM
                1.
            FINANCIAL
                STATEMENTS (UNAUDITED)
            3CONDENSED
                CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2006
            3CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
              THREE
                MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
            4CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
              MONTHS
                ENDED SEPTEMBER 30, 2006 AND 2005
            5NOTES
                TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            6ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND
                RESULTS OF OPERATIONS
            19ITEM
                3.
            CONTROLS
                AND PROCEDURES
            29PART
                II
            OTHER
                INFORMATION30ITEM
                1.
            LEGAL
                PROCEEDINGS
            30ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            31ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            31ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            31ITEM
                5.
            OTHER
                INFORMATION
            31ITEM
                6.
            EXHIBITS
            31SIGNATURES
            32








2






PART
      I -
      FINANCIAL INFORMATION











ITEM
      1.
      FINANCIAL STATEMENTS.








FREESTAR
                TECHNOLOGY CORPORATIONCONDENSED
                CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2006(UNAUDITED)ASSETS2006Current
                assets:Cash
                and cash equivalents
            
            $                      
                3,040,769Accounts
                receivable, net of allowance for doubtfulaccounts
                of $52,613 (note 2)
            
            184,244Other
                current assets (note 4)
            
            480,014Inventory
                (note 3)
            
            123,801Total
                current assets
            
            3,828,828Property,
                  plant and equipment, net of accumulated depreciation andamortization
                  of $91,108 (note 5)
            
            163,997Software
                license, net of accumulated amortization of $860,492
            
            1,400,664Customer
                relationships and contracts, net of accumulated amortization of
                $635,148
            1,332,056Software,
                net of accumulated amortization of $821,878
            
            1,959,815Total
                assets
            
            $                       8,685,360LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses (note 7)
            
            $                         
                921,021Accrued
                officer salaries
            
            78,150Cash
                advance from officer
            
            18,709Total
                current liabilities
            
            1,017,880Stockholders'
                Equity:Convertible
                preferred stock, series A, $0.001 par value,1,000,000
                shares authorized; 1,000,000 shares issued and outstanding
            
            1,000Convertible
                preferred stock, series B, $0.001 par value,4,000,000
                shares authorized, issued and outstanding
            
            4,000Additional
                paid-in capital - preferred stock
            
            6,368,058Common
                stock, $0.001 par value, 500,000,000 shares authorized;185,147,427
                shares issued and outstanding (note 8)
            
            185,147Additional
                paid-in capital - common stock
            
            61,821,924Common
                stock subscrptions receivable
            
            (183,292
            )Common
                stock subscribed
            
            2,200,000Deferred
                compensation
            
            (2,047,538
            )Accumulated
                deficit
            
            (60,583,936
            )Accumulated
                other comprehensive gain (loss)
            
            (97,883
            )Total
                stockholders' equity
            
            7,667,480Total
                liabilities and stockholders' equity
            
            $                     
                8,685,360The
                accompany notes form an integral part of these unaudited condensed
                consolidated financial statements.







3


FREESTAR
                TECHNOLOGY CORPORATIONCONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)Three
                Months
            
            Three
                MonthsEnded
            
            EndedSeptember
                30,
            
            September
                30,2006
            
            2005Revenue
            
            $
            461,860
            
            $
            602,748Cost
                of revenue
            
            
            533,978
            
            
            498,556Gross
                profit
            
            
            (72,118
            )
            
            104,192Selling,
                general and administrative expenses
            
            
            2,398,115
            
            
            1,024,454Loss
                from operations
            
            
            (2,470,233
            )
            
            (920,262Other
                income (expenses):Gain on disposal of assets
            
            
            -
            
            
            2,004Interest income/(expense)
            
            
            12
            
            
            (18,772
            )Loss
                before income taxes
            
            
            (2,470,221
            )
            
            (937,030
            )Income
                taxes
            
            
            -
            
            
            -Net
                Loss
            
            
            (2,470,221
            )
            
            (937,030
            )Other
                - Comprehensive income (loss): Gain (Loss) on foreign
                exchange
            
            
            11,480
            
            
            33,062Comprehensive
                loss
            
            $
            (2,458,741
            )
            $
            (903,968
            )Loss
                per share - basic
            
            $
            (0.01
            )
            $
            (0.01
            )Weighted
                average shares outstanding - basic
            
            
            184,296,884
            
            
            120,464,448Weighted
                average shares outstanding - diluted
            
            
            208,797,616
            
            
            127,908,153The
                accompany notes form an integral part of these unaudited condensed
                consolidated financial statements.

















4













FREESTAR
                TECHNOLOGY CORPORATIONCONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)Three
                Months
            
            Three
                MonthsEnded
            
            EndedSeptember
                30,
            
            September
                30,2006
            
            2005Cash
                flows used for operating activities:Net
              loss
            
            
            
            $(2,470,221
            )
            $(937,030
            )Adjustments
                to reconcile net loss to net cashprovided
                by operating activities:Amortization
                of discount on note
            
            
            
            
            
            -
            
            
            12,240Loss
                on legal settlementGain
                on disposal of fixed assets
            
            
            
            
            
            -
            
            
            (2,004
            )Depreciation
                and amortization
            
            
            
            
            
            192,812
            
            
            146,526Cancellation
                of common stock previously issued to consultants
            
            
            
            
            
            -
            
            
            (263,349
            )Non-cash
                compensation
            
            
            
            
            
            1,081,476
            
            
            586,148Changes
                in assets and liabilities:(Increase)
                decrease in assetsAccounts
                receivable
            
            
            
            
            
            126,482
            
            
            (126,140
            )Inventory
            
            
            
            
            
            (18,021
            )
            
            -Other
                current assets
            
            
            
            
            
            
            
            
            (78,945
            )Other
                assets
            
            
            
            
            
            (273,405
            )
            
            -Increase
                (decrease) in liabilitiesAccounts
                payable and accrued expenses
            
            
            
            
            
            (157,571
            )
            
            (137,644
            )Deferred
                revenue
            
            
            
            
            
            
            
            
            -Due
                to shareholders
            
            
            
            
            
            19,070
            
            
            -Payment
                of accrued salary to officers
            
            
            
            
            
            78,150
            
            
            -Total
                adjustments
            
            
            
            
            
            1,048,994
            
            
            136,832Net
                cash (used for) operating activities
            
            
            
            
            
            (1,421,228
            )
            
            (800,198
            )Cash
                flows  (used for) investing activities:Purchase
                of fixed assets
            
            
            
            
            
            (50,305
            )
            
            (30,871
            )Cash
                from sale of fixed assets
            
            
            
            
            
            -
            
            
            2,004Purchase
                of software and capitalized software cost
            
            
            
            
            
            (129,887
            )
            
            -Net
                cash (used for) investing activities
            
            
            
            
            
            (180,192
            )
            
            (28,867
            )Cash
                flows provided by financing activities:Proceeds
                from sale of common stock
            
            
            
            
            
            1,600,000
            
            
            1,000,000Proceeds
                from exercise of stock options/warrants
            
            
            
            
            
            52,500
            
            
            912,500Proceeds
                from (repayments to) related parties
            
            
            
            
            
            -
            
            
            (27,552
            )Net
                cash provided by financing activities
            
            
            
            
            
            1,652,500
            
            
            1,884,948Net
                increase in cash and cash equivalents
            
            51,080
            
            
            1,055,883Foreign
                currency translation adjustments
            
            17,554
            
            
            25,426Cash
                and cash equivalents, beginning of period
            
            2,972,135
            
            
            632,678Cash
                and cash equivalents, end of period
            $
            3,040,769
            
            $
            1,713,987Supplemental
                disclosure of cash flow information:Interest
                paid
            
            
            
            
            $
            -
            
            $
            -Income
                tax paid
            
            
            
            
            $
            -
            
            $
            -Shares
                of common stock issued for services
            
            
            
            
            $
            209,000
            
            $
            -Adjustment
                of deferred compensation for the period
            
            
            
            
            $
            744,787
            
            $
            168,236Cancellation
                of shares of common stock
            
            
            
            
            $
            -
            
            $
            378,574Fair
                value of options issued to consultants and employees
            
            
            
            
            $
            127,689
            
            $
            484,584Shares
                of common stock issued for prepaid rent
            
            
            
            
            $
            75,600
            
            $
            -Stock
                options exercised, cash not received
            
            
            
            
            $
            75,000
            
            $
            -Shares
                of common stock issued for subscriptions payable
            
            
            
            
            $
            352,500
            
            $
            -The
                  accompany notes form an integral part of these unaudited condensed
                  consolidated financial
                  statements.





5




FREESTAR
      TECHNOLOGY CORPORATON


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





1.
      BASIS
      OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS





Basis
      Of Presentation





The
      accompanying unaudited condensed consolidated financial statements of FreeStar
      Technology Corporation, a Nevada corporation ("Company"), have been prepared
      in
      accordance with the instructions to Form 10-QSB and do not include all of the
      information and footnotes required by accounting principles generally accepted
      in the United States of America for complete consolidated financial statements.
      These condensed consolidated financial statements and related notes should
      be
      read in conjunction with the Company's Form 10-KSB for the fiscal year ended
      June 30, 2006. In the opinion of management, these condensed consolidated
      financial statements reflect all adjustments that are of a normal recurring
      nature and which are necessary to present fairly the financial position of
      the
      Company as of September 30, 2006, and the results of operations and cash flows
      for the three months ended September 30, 2006 and 2005. The results of
      operations for the three months ended September 30, 2006 are not necessarily
      indicative of the results that may be expected for the entire fiscal year.
      Certain amounts in the prior period on the Statements of Cash Flows have been
      changed to conform to the current period presentation.





Nature
      Of Business Operations





The
      Company (formerly Freestar Technologies) was formed on November 17, 1999 as
      a
      Nevada corporation. The Company is a provider of payment services and
      processing. Its principal offices are in Dublin, Ireland; the Company also
      has
      offices in Helsinki, Finland; Stockholm, Sweden; Geneva, Switzerland; and Santo
      Domingo, the Dominican Republic.





The
      Company intends to derive revenues from its core payment processing products,
      which include: (1) Authorization: transaction fees derived from processing
      point
      of sale terminal transactions; (2) Dynamic Currency Conversion support services:
      fees for facilitating real-time currency conversion and transaction
      authorization and settlement services for merchants and acquiring banks; (3)
      Consulting and Software Development Fees: consulting services and customized
      software development provided to financial institutions and merchants; (4)
      Sale
      of Point of Sale solutions: sales of point of sale terminals; (5) Internet
      Payment Gateway: transaction fees from processing internet transactions through
      its Internet Payment Gateway; and (6) Private Label Cards: transaction
      management services provided for a private label card issuer. Our revenue for
      the year ended September 30, 2006 was primarily generated from transaction
      fees
      and consulting fees through our Finland operations





Going
      Concern





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplate continuation of the Company as a going concern. However,
      the
      Company has reported a net loss of $2,470,221 for the three months ended
      September 30, 2006 and $13,999,773 for the year ended June 30, 2006, and had
      an
      accumulated deficit of $60,583,936 as of September 30, 2006.





The
      Company cannot be certain that anticipated revenues from operations will be
      sufficient, to satisfy its ongoing capital requirements. Management's belief
      is
      based on the Company's operating plan, which in turn is based on assumptions
      that may prove to be incorrect. If the Company's financial resources are
      insufficient the Company may require additional financing in order to execute
      its operating plan and continue as a going concern. The Company cannot predict
      whether this additional financing will be in the form of equity or debt, or
      be
      in another form. The Company may not be able to obtain the necessary additional
      capital on a timely basis, on acceptable terms, or at all. In any of these
      events, the Company may be unable to implement its current plans for growth,
      repay its debt obligations as they become due or respond to competitive
      pressures, any of which circumstances would have a material adverse effect
      on
      its business, prospects, financial condition and results of
      operations.








6


Management
      plans to take the following steps that it believes will be sufficient to provide
      the Company with the ability to continue as a going concern. Management intends
      to raise financing through the sale of its stock in private placements to
      individual investors. Management may raise funds in the public markets, though
      there currently are no plans to do so. Management believes that with this
      financing, the Company will be able to generate additional revenues that will
      allow the Company to continue as a going concern. This will be accomplished
      by
      hiring additional personnel and focusing sales and marketing efforts on the
      distribution of product through key marketing channels currently being developed
      by the Company. The Company also intends to pursue the acquisition of certain
      strategic industry partners where appropriate.





Revenue
      Recognition





The
      Company recognizes revenues from contracts in which the Company provides only
      consulting services as the services are performed. The contractual terms of
      the
      agreements dictate the recognition of revenue by the Company. Payments received
      in advance are deferred until the service is provided.





Contract
      costs include all direct equipment, material, and labor costs and those indirect
      costs related to contract performance, such as indirect labor. Selling, general
      and administrative costs are charged to expense as incurred. Provisions for
      estimated losses on uncompleted contracts are made in the period in which such
      losses are determined. Changes in contract performance, contract conditions,
      and
      estimated profitability that may result in revisions to costs and income are
      recognized in the period in which the revisions are determined.





For
      revenue from product sales, the Company recognizes revenue in accordance with
      Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which
      superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB
      No.101 requires that four basic criteria must be met before revenue can be
      recognized: (1) persuasive evidence of an arrangement exists; (2) delivery
      has
      occurred; (3) the selling price is fixed and determinable; and (4)
      collectibility is reasonably assured. Determination of criteria (3) and (4)
      are
      based on management's judgments regarding the fixed nature of the selling prices
      of the products delivered and the collectibility of those amounts. Provisions
      for discounts and rebates to customers, estimated returns and allowances, and
      other adjustments are provided for in the same period the related sales are
      recorded. The Company defers any revenue for which the product has not been
      delivered or is subject to refund until such time that the Company and the
      customer jointly determine that the product has been delivered or no refund
      will
      be required. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No.
      00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses
      accounting for arrangements that may involve the delivery or performance of
      multiple products, services and/or rights to use assets. The effect of
      implementing EITF No. 00-21 on the Company's consolidated financial position
      and
      results of operations was not significant. This issue addresses determination
      of
      whether an arrangement involving more than one deliverable contains more than
      one unit of accounting and how the arrangement consideration should be measured
      and allocated to the separate units of accounting. EITF No. 00-21 became
      effective for revenue arrangements entered into in periods beginning after
      June
      15, 2003. For revenue arrangements occurring on or after August 1, 2003, the
      Company revised its revenue recognition policy to comply with the provisions
      of
      EITF No. 00-21.





For
      those
      contracts which contain multiple deliverables, management must first determine
      whether each service, or deliverable, meets the separation criteria of EITF
      No.
      00-21. In general, a deliverable (or a group of deliverables) meets the
      separation criteria if the deliverable has standalone value to the customer
      and
      if there is objective and reliable evidence of the fair value of the remaining
      deliverables in the arrangement. Each deliverable that meets the separation
      criteria is considered a "separate unit of accounting." Management allocates
      the
      total arrangement consideration to each separate unit of accounting based on
      the
      relative fair value of each separate unit of accounting. The amount of
      arrangement consideration that is allocated to a unit of accounting that has
      already been delivered is limited to the amount that is not contingent upon
      the
      delivery of another separate unit of accounting. After the arrangement
      consideration has been allocated to each separate unit of accounting, management
      applies the appropriate revenue recognition method for each separate unit of
      accounting as described previously based on the nature of the arrangement.
      All
      deliverables that do not meet the separation criteria of EITF No. 00-21 are
      combined into one unit of accounting, and the appropriate revenue recognition
      method is applied under SAB No. 101. Processing fee revenue is earned based
      upon
      the actual number of transactions processed through the Company's processing
      system. Transaction processing fees are recognized in the period that the
      service is performed. These fees are typically charged on a per transaction
      basis, depending on the arrangement with the customer.







7





Stock
      Based Compensation





Effective
      January 1, 2006, the Company adopted SFAS No. 123 (revised), “Share-Based
      Payment” (SFAS 123R) utilizing the modified prospective approach. Prior to the
      adoption of SFAS 123R we accounted for stock option grants in accordance with
      APB Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic
      value method), and accordingly, recognized compensation expense for stock option
      grants.





Under
      the
      modified prospective approach, SFAS 123R applies to new awards and to awards
      that were outstanding on January 1, 2006 that are subsequently modified,
      repurchased or cancelled. Under the modified prospective approach, compensation
      cost recognized in the first quarter of fiscal 2006 includes compensation cost
      for all share-based payments granted prior to, but not yet vested as of January
      1, 2006, based on the grant-date fair value estimated in accordance with the
      original provisions of SFAS 123, and compensation cost for all share-based
      payments granted subsequent to January 1, 2006 based on the grant-date fair
      value estimated in accordance with the provisions of SFAS 123R. Prior periods
      were not restated to reflect the impact of adopting the new
      standard.





A
      summary
      of option activity under the Employee Stock Plan as of September 30, 2006,
      and
      changes during the period then ended are presented below:





Number
                of
              Shares
            
            Weighted
                Average Exercise PriceOutstanding
                at June 30, 2006
            
            
            625,000
            
            $
            0.34Granted
            
            
            -
            
            
            -Exercised
            
            
            (50,000)
            
            $
            0.15Cancelled
                / Expired
            
            
            -
            
            
            -Options
                exercisable at September 30, 2006
            
            
            575,000
            
            $
            0.36





Aggregate
      intrinsic value of options outstanding and options exercisable at September
      30,
      2006 was $40,000. Aggregate intrinsic value represents the difference between
      the company’s closing stock price on the last trading day of the fiscal period,
      which was $0.35 as of September 30, 2006, and the exercise price multiplied
      by
      the number of options outstanding. As of September 30, 2006, total unrecognized
      stock-based compensation expense related to non-vested stock options was $0.
      The
      total fair value of options vested was $127,645 and $0 for the three-month
      periods ended September 30, 2006 and 2005, respectively.





The
      modified transition method of SFAS 123R requires the presentation of pro forma
      information for periods presented prior to the adoption of SFAS 123R regarding
      net loss an net loss per share as if we had accounted for our stock plans under
      the fair value method of SFAS 123R. For pro forma purposes, the fair value
      of
      stock options was estimated using the Black-Scholes option valuation model
      and
      amortizing on a straight-line basis. The pro forma amounts for the three months
      ended September 30, 2005 are as follows:








Net
                loss, as reported
            $(937,030)Compensation
                recognized under APB No. 25
            -Compensation
                recognized under SFAS No. 123
            
            -Pro
                forma net loss
            $
            (937,030
            )Pro
                forma loss per share
            $
            (0.01
            )





Disclosure
      for the period ended September 30, 2006 was not presented because the amounts
      are recognized in the consolidated financial statements.








8


Capitalized
      Software Development Costs





In
      accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
      "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
      Marketed," the Company capitalizes certain costs related to the development
      of
      new software products or the enhancement of existing software products for
      use
      in our transaction processing software. These costs are capitalized from the
      point in time that technological feasibility has been established, as evidenced
      by a working model or detailed working program design to the point in time
      that
      the product is available for general release to customers. Capitalized
      development costs are amortized on a straight-line basis over the estimated
      economic lives of the products, beginning when the product is placed into
      service. Research and development costs incurred prior to establishing
      technological feasibility and costs incurred subsequent to general product
      release to customers are charged to expense as incurred. The Company
      periodically evaluates whether events or circumstances have occurred that
      indicate that the remaining useful lives of the capitalized software development
      costs should be revised or that the remaining balance of such assets may not
      be
      recoverable.





The
      Company often has under development several discreet design features or
      enhancements, each of which may be completed and released to customers at
      different times. During the three months ended September 30, 2006, the Company
      placed into service and began amortizing $0 of software. The total net book
      value of software in service at September 30, 2006 is approximately $936,665.
      The total net book value of software under development at September 30, 2006
      is
      approximately $1,023,061. At September 30, 2006, total software capitalized
      at
      under SFAS No. 86 is $1,959,815 net of accumulated amortization of
      $821,878.





Software
      costs also include the Enhanced Transactions Secured Software ("ETSS"), which
      was originally contributed by the founder and president of ePayLatina, S.A.,
      Paul Egan, who is also president of the Company. This software is essential
      for
      the use of the Company's ePayPad. Software costs also include the development
      costs related to adding enhancements to this software consisting primarily
      of
      labor cost. Software costs are amortized on a straight-line basis over a period
      of three to six years. These costs have been substantially amortized as of
      September 30, 2006.





Inventories





Inventory
      is stated at the lower of cost or market determined by the first-in, first-out
      method.. Inventories consist primarily of equipment held for resale (see Note
      3).








New
      Accounting Pronouncements Not Yet Adopted





*Certain
      Hybrid Instruments,* On
      February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
      Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
      Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
      instruments that have embedded derivatives to be accounted for as a whole
      (eliminating the need to bifurcate the derivative from its host) if the holder
      elects to account for the whole instrument on a fair value basis. SFAS 155
      also
      clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
      statement is effective for all financial instruments acquired or issued in
      fiscal years beginning after September 15, 2006. The Company does not
      expect its adoption of this new standard to have a material impact on its
      financial position, results of operations or cash flows as it currently does
      not
      have any hybrid instruments outstanding at September 30, 2006.





*Accounting
      for Servicing of Financial Assets* ,
      In
      March 2006, the FASB issued SFAS No. 156, “Accounting *for
      Servicing of Financial Assets—an amendment of FASB Statement No. 140”
(“* SFAS
      No.
      156”), which amends FASB Statement No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,* with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This Statement requires that all separately recognized
      servicing assets and servicing liabilities be initially measured at fair value,
      if practicable. The Board concluded that fair value is the most relevant
      measurement attribute for the initial recognition of all servicing assets and
      servicing liabilities, because it represents the best measure of future cash
      flows. This Statement permits, but does not require, the subsequent measurement
      of servicing assets and servicing liabilities at fair value. An entity that
      uses
      derivative instruments to mitigate the risks inherent in servicing assets and
      servicing liabilities is required to account for those derivative instruments
      at
      fair value. Under this Statement, an entity can elect subsequent fair value
      measurement of its servicing assets and servicing liabilities by class, thus
      simplifying its accounting and providing for income statement recognition of
      the
      potential offsetting changes in fair value of the servicing assets, servicing
      liabilities, and related derivative instruments. An entity that elects to
      subsequently measure servicing assets and servicing liabilities at fair value
      is
      expected to recognize declines in fair value of the servicing assets and
      servicing liabilities more consistently than by reporting other-than-temporary
      impairments. An entity should adopt this Statement as of the beginning of its
      first fiscal year that begins after September 15, 2006. Earlier adoption is
      permitted as of the beginning of an entity’s fiscal year, provided the entity
      has not yet issued financial statements, including interim financial statements,
      for any period of that fiscal year. The effective date of this Statement is
      the
      date an entity adopts the requirements of this Statement. The Company has not
      yet determined the impact the Company’s condensed consolidated financial
      position or results of operations.





*Accounting
      for Fair Value Measurements,*In
      September 2006, the FASB issued SFAS No. 157,*“Fair
      Value Measurements”*(“SFAS
      No. 157”), to define fair value and establish a framework for measuring fair
      value in generally accepted accounting principles (“GAAP”) and to expand
      disclosures about fair value measurements. This Statement applies under other
      accounting pronouncements that require or permit fair value measurements. Prior
      to this Statement, there were different definitions of fair value and limited
      guidance for applying those definitions in GAAP. A single definition of fair
      value, together with a framework for measuring fair value, should result in
      increased consistency and comparability in fair value measurements. The expanded
      disclosures about the use of fair value to measure assets and liabilities should
      provide users of financial statements with better information about the extent
      to which fair value is used to measure recognized assets and liabilities, the
      inputs used to develop the measurements and the effect of certain of the
      measurements on earnings (or changes in net assets) for the period. SFAS No.
      157
      is effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods with those fiscal years. Early adoption
      is permitted.**The
      Company has not yet determined the impact the Company’s condensed consolidated
      financial position or results of operations.





SFAS
      158.
      In September 2006 the FASB issued its Statement of Financial Accounting
      Standards 158 “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans”. This Statement improves financial reporting by requiring
      an employer to recognize the overfunded or underfunded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity or changes in unrestricted net assets of a
      not-for-profit organization. This Statement also improves financial reporting
      by
      requiring an employer to measure the funded status of a plan as of the date
      of
      its year-end statement of financial position, with limited exceptions. The
      effective date for an employer with publicly traded equity securities is as
      of
      the end of the fiscal year ending after December 15, 2006. The Company does
      not
      expect adoption of this standard will have a material impact on its financial
      position, operations or cash flows








9


2.
      ACCOUNTS RECEIVABLE





At
      September 30, 2006, accounts receivable consists of:





Amounts
                receivable from customers
            $
            236,857Less:
                Reserve for doubtful accounts
            
            (52,613
            )Accounts
                receivable, net
            $
            184,244










3.
      INVENTORY





Inventory
      at September 30, 2006 consists of the Company's Point of Sale Terminals which
      have been purchased from third party manufacturers. Components of inventories
      as
      of September 30, 2006 are as follows:








Finished
                goods
            $
            123,801Total
            $
            123,801








4.
      OTHER
      CURRENT ASSETS





Other
      current assets at September 30, 2006 consist of the following:





Prepayments
                to vendors
            $      230,788Prepaid
                rent
            162,652Lease
                deposits
            49,077Advances
                to employees
            37,497$     480,014














10





5.
      PROPERTY AND EQUIPMENT





A
      summary
      of property and equipment at September 30, 2006 is as follows:








Computer
                equipment
            
            $                        
                142,361Furniture
                and office equipment
            
            112,744255,105Less
                accumulated depreciation and amortization
            
            (91,108
            )Property
                and equipment, net
            
            $                         163,997











6.
      ACQUISITION OF INTANGIBLE ASSETS





The
      costs
      to acquire intangible assets have been allocated to the assets acquired
      according to the estimated fair values. The Company has adopted SFAS No. 142,
      Goodwill and Other Intangible Assets, whereby the Company periodically tests
      its
      intangible assets for impairment. On an annual basis, and when there is reason
      to suspect that their values have been diminished or impaired, these assets
      are
      tested for impairment, and write-downs will be included in results from
      operations.





The
      identifiable intangible assets acquired and their carrying values at September
      30, 2006 are:





Gross
            
            
            
            
            
            
            
            AverageCarrying
            
            Accumulated
            
            
            
            Residual
            
            AmortizationAmount
            
            Amortization
            
            Net
            
            Value
            
            YearsAmortizable
                Intangible Assets:Software
                and related development costs
            
            $
            2,781,693
            
            $
            821,878
            
            $
            1,959,815
            
            $
            0
            
            
            4.6Customer
                Relationships and Contracts
            
            $
            1,967,204
            
            $
            635,148
            
            $
            1,332,056
            
            $
            0
            
            
            10.0Software
                Licenses
            
            $
            2,261,156
            
            $
            860,492
            
            $
            1,400,664
            
            $
            0
            
            
            10.0





Total
      amortization expense charged to operations for the three months ended September
      30, 2006 and 2005 was $180,583 and $137,674 respectively.











7.
      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts
      payable and accrued liabilities at September 30, 2006 are as
      follows:





Accounts
                payable and accrued expenses
            
            $
            844,035Payroll
                and related expenses
            
            
            76,986$
            921,021










11


8.
      EQUITY





Private
      Placement of Common Stock





On
      January 27, 2006, the Company signed subscription agreements with a group of
      offshore investors for the sale of an aggregate of $9.2 million in Company
      common stock, plus warrants (the "January Financing"). Due to the failure of
      the
      investment group to timely fund in full the first payment required for the
      purchase of shares and warrants, the Company terminated the January Financing;
      all shares and warrants issued thereunder were returned by the escrow holder
      to
      the Company for cancellation, and any funds received pursuant to the January
      Financing were returned by the escrow holder to the investors.





In
      March
      2006, a group of European investors , lead by Olympia Holding AS, informed
      the
      Company that they were willing to invest on the same terms and conditions that
      were negotiated for the now-terminated January Financing, and the Company agreed
      to this financing transaction with these investors (the "March
      Financing").





Pursuant
      to the March Financing, the Company agreed to issue 46 million shares of
      restricted common stock under Regulation S at $0.20 per share, plus warrants
      to
      purchase 50 million shares of common stock with two-year exercise periods and
      strike prices ranging from $1.50 to $8.50, as set forth below. The shares which
      will be held in escrow by Carl Hessel , a director and major stockholder of
      the
      Company based in Geneva, Switzerland, along with the warrants. Pursuant to
      the
      terms of the March Financing, the first payment of $4.6 million was due
      immediately, with a second payment of $4.6 million due within three months
      thereafter. As of September 30, 2006, the Company had received cash in the
      net
      amount $ 6,169,924 pursuant to the March Financing, and had issued 22,850,000
      shares of common stock and warrants to purchase an additional 24,836,957 shares.
      The Company has not yet issued the shares or warrants related to this
      $1,600,000, and this amount is carried as common stock subscribed on the
      Company’s balance sheet at September 30, 2006.








The
      Company also issued to consultants 7,600,000 shares of unregistered common
      stock
      with a fair value of $2,912,000; warrants to purchase 12,000,000 shares of
      common stock at a price of $1.00 per share with a fair value of $2,212,684;
      and
      warrants to purchase an additional 1,000,000 shares of common stock at a price
      of $1.50 with a fair value of $148,086 as commission to consultants related
      to
      the March Financing. The Company charged the aggregate amount of $5,272,770
      to
      operations during the twelve months ended June 30, 2006 with regard to the
      issuance of these shares and warrants.











The
      warrants to be issued pursuant to the investors in the March Financing are
      as
      follows:








Number
                of shares of CompanyCommon
                Stock underlying WarrantsExercise
                PricePer
                Share
            
            When
                fully subscribed
            
            At
                September 30, 2006$1.50
            
            14,000,000
            
            6,954,348$2.50
            
            11,000,000
            
            5,464,130$4.50
            
            7,000,000
            
            3,447,174$5.50
            
            7,000,000
            
            3,447,174$6.50
            
            7,000,000
            
            3,447,174$8.50
            
            4,000,000
            
            1,986,95750,000,000
            
            24,836,957







All
      warrants have a two-year exercise period from the date of issuance of the
      warrants. No registration rights were granted to the Investors in connection
      with the March Financing and the shares and warrants issued in the March
      Financing will be restricted securities, subject to the applicable restrictions
      set forth in Regulation S promulgated under the Securities Act of 1933, as
      amended.








12


April
      2006 Financing








In
      April
      2006, the Company signed subscriptions agreements with a group of offshore
      investors led by Swedish Credit and Finance.AB for the sale of an aggregate
      of
      25,000,000 shares of the Company’s common stock plus warrants to purchase an
      additional 25,000,000 shares of common stock for the aggregate price of
      $10,000,000 (the “April Financing”). Subject to the receipt of funds by the
      Company under the April Financing, shares of common stock will be issued as
      follows:







Number
                of
            
            Price
                per
            
            TotalShares
            
            Share
            
            Price
            
            Terms5,000,000
            
            $
            0.30
            
            $
            1,500,000
            
            
            90
                day note at 12% due August 9, 200610,000,000
            
            $
            0.55
            
            $
            5,500,000
            
            
            One
                year note at 12% due May 11, 200710,000,000
            
            $
            0.30
            
            $
            3,000,000
            
            
            Cash
                due 30 days, or June 10, 200625,000,000
            
            
            
            
            $
            10,000,000











These
      shares and warrants are being held in escrow by Margaux Investment Management
      Group, S.A., a Company controlled by a board member, Carl Hessel, and are not
      deemed to be issued and outstanding as of the date of the financial statements
      .




At
      September 30, 2006, the Company has not recognized interest income on these
      notes as the transactions are not yet deemed consummated as the Company has
      not
      received any of the proceeds of the April Financing.





Upon
      receipt of the funds from the April Financing, warrants will be issued as
      follows:






Exercise
                Price
            
            Number
                of shares of CompanyPer
                Share
            
            Common
                Stock underlying Warrants$
                1.50
            
            10,000,000$
                2.00
            
            7,500,000$
                2.50
            
            5,000,000$
                3.00
            
            2,500,000








All
      warrants will have a two-year exercise period from the date of issuance of
      the warrants. No registration rights were granted to the investors in connection
      with the April Financing and the shares and warrants issued in the April
      Financing will be restricted securities, subject to the applicable restrictions
      set forth in Regulation S promulgated under the Securities Act of 1933, as
      amended.








13




Sales
      Of Securities





During
      the three months ended September 30, 2006, the Company issued the following
      shares of common stock:





The
      Company issued 750,000 shares of common stock with a fair value of $352,500
      previously subscribed to an employee for services to be performed through July
      2007.





The
      Company issued 450,000 shares of common stock with a fair value of $209,000
      to a
      consultant for services to be performed through July 2007.





The
      Company issued 180,000 shares of common stock with a fair value of $75,600
      as
      prepaid rent through August, 2008.





The
      Company issued 350,000 shares of common stock to a consultant pursuant to the
      exercise of options for $52,500 cash.





The
      Company issued 50,000 shares of common stock to an employee for the exercise
      of
      options; the exercise price of $7,500 has not yet been received, and this amount
      is carried as subscription receivable on the Company’s balance sheet at
      September 30, 2006.





Non-Employee
      Stock Options





The
      following table summarizes the changes in options outstanding and the related
      prices for the shares of the Company’s common stock issued to the Company
      consultants. These options were granted in lieu of cash compensation for
      services performed (amounts have been adjusted to reflect the reverse stock
      split and other adjustments):





Weighted
            
            
            
            WeightedWeighted
            
            average
            
            
            
            averageaverage
            
            exercise
            
            
            
            exerciseRange
                of
            
            Number
                of
            
            remaining
            
            price
                of
            
            Number
                of
            
            price
                ofexercise
            
            shares
            
            contractual
            
            outstanding
            
            shares
            
            exercisableprices
            
            outstanding
            
            life
                (years)
            
            options
            
            exercisable
            
            options$      0.15
            
            
            166,666
            
            
            9.0
            
            $
            0.15
            
            
            166,666
            
            $
            0.15$      0.49
            
            
            756,303
            
            
            6.4
            
            $
            0.49
            
            
            756,303
            
            $
            0.49$      0.70
            
            
            756,303
            
            
            6.4
            
            $
            0.70
            
            
            756,303
            
            $
            0.701,679,272
            
            
            6.7
            
            $
            0.54
            
            
            1,679,272
            
            $
            0.54





Transactions
      involving stock options issued to non-employees are summarized as
      follows:





WeightedAverageNumber
                of
            
            ExerciseShares
            
            PriceOptions
                exercisable at June 30, 2006
            
            
            1,679,272
            
            $
            0.54Granted
            
            
            350,000
            
            
            0.150Exercised
            
            
            (350,000
            )
            
            (0.150
            )Cancelled
                / Expired
            
            
            -
            
            
            -Options
                exercisable at September 30, 2006
            
            
            1,679,272
            
            $
            0.54





During
        the three months ended September 30, 2006, the Company issued options to
        purchase 350,000 shares of the Company’s common stock at $0.15 per share to a
        consultant. The Company valued these options using the Black-Scholes valuation
        model, and charged the fair value of $127,689 to operations during the three
        months ended September 30, 2006.


The
      estimated value of non-employee stock options vested during the three months
      ended September 30, 2006 were determined using the Black-Scholes options pricing
      model and the following assumptions: expected option life of .01 to 6 months,
      a
      risk free interest rate of 3.75 to 4.75%, a dividend yield of 0%, and expected
      volatility of 108% to 167%.





14




Employee
      Stock Options








The
      following table summarizes the changes to employee stock options outstanding
      and
      the related prices of the Company’s common stock options issued to employees
      under a non-qualified stock option plan (amounts have been adjusted to reflect
      the reverse stock split and other adjustments):








Weighted
            
            
            
            WeightedWeighted
            
            average
            
            
            
            averageaverage
            
            exercise
            
            
            
            exerciseRange
                of
            
            Number
                of
            
            remaining
            
            price
                of
            
            Number
                of
            
            price
                ofexercise
            
            shares
            
            contractual
            
            outstanding
            
            shares
            
            exercisableprices
            
            outstanding
            
            life
                (years)
            
            options
            
            exercisable
            
            options$           0.15
            
            
            200,000
            
            
            9.7
            
            $
            0.15
            
            
            200,000
            
            $
            0.15$        
                  0.47
            
            
            375,000
            
            
            9.5
            
            $
            0.47
            
            
            375,000
            
            $
            0.47575,000
            
            
            9.6
            
            $
            0.36
            
            
            575,000
            
            $
            0.36





Transactions
      involving stock options issued to employees are summarized as
      follows:





WeightedAverageNumber
                of
            
            ExerciseShares
            
            PriceOptions
                exercisable at June 30, 2006
            
            625,000
            
            $
            0.34Granted
            
            -
            
            
            -Exercised
            
            (50,000)
            
            
            0.150Cancelled
                / Expired
            
            -
            
            
            -Options
                exercisable at September 30, 2006
            
            575,000
            
            $
            0.36











The
      weighted-average fair value of stock options granted to employees during the
      three months ended September 30, 2006 and the weighted average significant
      assumptions used to determine those fair values, using a Black-Scholes option
      pricing model are as follows:





Significant
                assumptions (weighted-average):
            
            2006Risk-free
                  interest rate at grant date
            
            4.5
            %Expected
                  stock price volatility
            
            105-115
            %Expected
                dividend payout
            
            0Expected
                  option life (in years)
            
            10.0





Warrants





The
      following table summarizes the changes in warrants outstanding and the related
      prices of the Company’s common stock issued to non-employees of the Company.
      These warrants were granted instead of cash compensation for services performed
      and settlement of legal dispute (amounts have been adjusted to reflect the
      reverse stock split and other adjustments):








15








Weighted
            
            
            
            WeightedWeighted
            
            average
            
            
            
            averageaverage
            
            exercise
            
            
            
            exerciseRange
                of
            
            Number
                of
            
            
            
            remaining
            
            price
                of
            
            Number
                of
            
            price
                ofexercise
            
            shares
            
            (days)
            
            contractual
            
            outstanding
            
            shares
            
            exercisableprices
            
            outstanding
            
            Weight
            
            life
                (years)
            
            warrants
            
            exercisable
            
            options$ 0.20
                - 0.2143
            
            
            1,204,786
            
            
            415
            
            
            1.14
            
            $
            0.2143
            
            
            1,204,786
            
            $
            0.20-.2143$                 0.75
            
            
            750,000
            
            
            589
            
            
            1.61
            
            $
            0.75
            
            
            750,000
            
            $
            0.75$      
                  0.98-1.00
            
            
            13,392,857
            
            
            3,398
            
            
            3.10
            
            $
            0.98-1.00
            
            
            13,392,857
            
            $
            0.98-1.00$                
                1.50
            
            
            7,954,348
            
            
            1,093
            
            
            1.00
            
            $
            1.50
            
            
            7,954,348
            
            $
            1.50$                2.50
            
            
            5,464,130
            
            
            1,130
            
            
            1.55
            
            $
            2.50
            
            
            5,464,130
            
            $
            2.50$       
                        4.50
            
            
            3,477,174
            
            
            547
            
            
            1.50
            
            $
            4.50
            
            
            3,477,174
            
            $
            4.50$        
                       5.50
            
            
            3,477,174
            
            
            547
            
            
            1.50
            
            $
            5.50
            
            
            3,477,174
            
            $
            5.50$         
                      6.50
            
            
            3,477,174
            
            
            547
            
            
            1.50
            
            $
            6.50
            
            
            3,477,174
            
            $
            6.50$           
                    8.50
            
            
            1,986,957
            
            
            547
            
            
            1.50
            
            $
            8.50
            
            
            1,986,957
            
            $
            8.50$             
                  2.77
            
            
            41,184,600
            
            
            
            
            
            2.00
            
            $
            2.77
            
            
            41,184,600
            
            $
            2.77








Transactions
      involving warrants are summarized as follows:





WeightedAverageNumber
                of
            
            ExerciseShares
            
            PriceWarrants
                exercisable at June 30, 2006
            
            41,184,600
            
            $
            2.77GrantedExercised
            
            -
            
            
            -Cancelled
                / Expired
            
            -
            
            
            -Warrants
                exercisable at September 30, 2006
            
            41,184,600
            
            $
            2.77





9.
      SEGMENT INFORMATION





The
      Company currently operates two business segments: (1) the sale of its secure
      transaction processing system ePayPad and related service (Paysafe), and (2)
      transaction processing fees generated through its wholly owned subsidiary,
      Rahaxi Processing Oy. Intercompany receivable and payable are subtracted from
      the total assets and liabilities for the segments, that are eliminated in
      consolidation and therefore, do not themselves impact consolidated
      results.






16




The
      following table summarizes segment asset and operating balances by reportable
      segment:




Three
                months endedSeptember
                302006
            
            2005Sales
                to external customers:Corporate
            
            **$                    
                -**
            
            **$       
                              -**PaySafe
            
            **-**
            
            **-**Rahaxi
            
            461,860
            
            602,748Total
                sales to external customers:
            
            $
            461,860
            
            $
            602,748Depreciation
                and amortization:Corporate
            
            
            1,230
            
            
            -PaySafe
            
            
            4,607
            
            
            13,150Rahaxi
            
            
            186,975
            
            
            133,376Total
                depreciation and amortization:
            
            $
            192,812
            
            $
            146,526General
                and administrative expense:(not
                including depreciation and amortization)Corporate
            
            $
            1,907,445
            
            $
            756,560PaySafe
            
            
            81,925
            
            
            52,765Rahaxi
            
            
            342,869
            
            
            153,348Total
                general and administrative expense
            
            $
            2,332,239
            
            $
            962,673Capital
                expenditures:Corporate
            
            $
            **-**
            
            $
            -Paysafe
            
            
            **-**
            
            
            -Rahaxi
            
            
            182,530
            
            
            30,871Total
                capital expenditures
            
            $
            182,530
            
            $
            30,871Operating
                income (loss):Corporate
            
            $
            (1,908,675
            )
            $
            (768,990
            )Paysafe
            
            
            (86,532
            )
            
            (66,406
            )Rahaxi
            
            
            (475,
                026
            )
            
            (84,866
            )Total
                operating income (loss)
            
            $
            (2,470,
                233
            )
            $
            (920,
                262
            )Segment
                assets:Corporate
            
            $
            3,799,317
            
            $
            1,542,068Paysafe
            
            
            185,039
            
            
            53,628Rahaxi
            
            
            4,701,004
            
            
            4,935,888Total
                segment assets
            
            $
            8,685,360
            
            $
            6,531,584
















17





10.
      RELATED PARTY TRANSACTIONS





Amounts
      due to related parties at September 30, 2006 consist of the
      following:





Accrued
      Salaries - Officers





The
      Company's president, Paul Egan, who is also a shareholder, had delayed payment
      of a portion of his salary in order to conserve the Company's cash. At September
      30, 2006, the amount of $39,903 in accrued salary is due to Paul Egan.





The
      Company's chief financial officer, Ciaran Egan, who is also a shareholder,
      had
      delayed payment of a portion of his salary in order to conserve the Company's
      cash. At September 30, 2006, the amount of $38,247 in accrued salary is due
      to
      Ciaran Egan.





Advances
      By Related Parties





Paul
      Egan
      has advanced funds to the Company for its operations. These amounts include
      net
      advances of $18,709 at September 30, 2006. This amount was repaid to Paul Egan
      subsequent to September 30, 2006.





11.
      SUBSEQUENT EVENTS





Subsequent
      to September 30, 2006, the Company issued 300,000 shares of its common stock
      to
      a consultant for services . The Company also received for cancellation 142,857
      shares of its common stock which had been issued to a consultant for services
      in
      December 2003.








18


ITEM
      2.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.





The
      following discussion and analysis of the Company's financial condition and
      results of operations is based upon, and should be read in conjunction with,
      its
      condensed consolidated financial statements and related notes included elsewhere
      in this Form 10-QSB.





Overview





The
      electronic payment transaction industry is composed of debit and credit card
      issuers, switch interchanges, transaction acquirers and transaction generators,
      including Automated Teller Machine networks, retail merchant locations and
      the
      Internet. The routing, control and settlement of electronic payments is a
      complex activity due to the large number of locations and variety of sources
      from which transactions can be generated, the large number of issuers in the
      market, high transaction volumes, geographically dispersed networks, differing
      types of authorization and varied reporting requirements. These activities
      must
      be conducted 24 hours a day, seven days a week.





Our
      products and services are primarily focused on facilitating electronic card
      transactions. These products and services are used principally by financial
      institutions, retailers, and payment processors, both in domestic and
      international markets.





We
      intend
      to increase revenue from our core payment processing products, which include:
      (1) Authorization: transaction fees derived from processing point of sale
      terminal transactions; (2) Dynamic Currency Conversion support services: fees
      for facilitating real-time currency conversion and transaction authorization
      and
      settlement services for merchants and acquiring banks; (3) Consulting and
      Software Development Fees: consulting services and customized software
      development provided to financial institutions and merchants; (4) Sale of Point
      of Sale solutions: sales of point of sale terminals; (5) Internet Payment
      Gateway: transaction fees from processing internet transactions through our
      Internet Payment Gateway; and (6) Private Label Cards: transaction management
      services provided for a private label card issuer. Our revenue for the quarter
      ended September 30, 2006 was primarily generated from transaction fees through
      our Finland operations.








We
      are
      continuously reviewing our product and service offerings to ensure that we
      maintain our competitive position in our target markets. Subsequent to our
      systems upgrade in December 2003 to the latest Hewlett-Packard NonStop servers
      and BASE24 e-payment processing software, the company has continued to invest
      heavily in its technical infrastructure in order to meet the highest industry
      standards . The company believes that this continued investment in our technical
      infrastructure will enhance our position in the market place ensuring that
      our
      product offerings are attractive to both our existing and potentially new
      clients alike.





Our
      business is continually evolving. Market conditions may require us to react
      quickly to problems and opportunities as they arise, and we may incur costs
      that
      we do not currently anticipate. Our business strategy to maximize growth and
      shareholder value may include future strategic acquisitions where we believe
      such acquisitions will help us quickly move forward in achieving our
      goals.





Management
      believes that our primary short-term growth opportunities will be derived form
      the European marketplace and a significant portion of our resources, both
      financial and personnel, will be directed towards developing those
      opportunities. We believe that our anticipated growth and ultimate profitability
      will depend in large part on the ability to promote our services, gain clients
      and expand our relationship with current clients. Accordingly, we intend to
      invest in marketing, strategic relationships, and development of our client
      base.





The
      Company's revenue for the three months ended September 30, 2006 was primarily
      generated from the transaction processing fees through our Finland
      operations.








19





The
      Company's principal offices are in Dublin, Ireland. The Company also has offices
      in Helsinki, Finland; Stockholm, Sweden; Geneva, Switzerland; and Santo Domingo,
      the Dominican Republic. While the Company's offices in Finland, Sweden, and
      Switzerland will primarily focus on the European market, the Company's office
      in
      the Dominican Republic will continue to pursue opportunities in the Caribbean
      and Latin America. Management believes that these emerging markets could offer
      favorable opportunities in the longer term. The Company has initiated
      discussions with regard to establishing a market for its products in Asia,
      specifically China.




Effective
      November 8, 2004, the Company implemented a one for seven reverse split of
      its
      common stock. The company's unaudited condensed consolidated financial
      statements for the three months ended December 31, 2004 reflected the effects
      of
      this reverse stock-split. The new trading symbol for the Company's common stock
      as of that date was "FSRT."




Results
      Of Operations





THREE
      MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30,
      2005





(a)
      REVENUE





The
      Company had revenue of $461,860 for the three months ended September 30, 2006
      compared to $602,748 for the three months ended September 30, 2005, a decrease
      of $140,888 or approximately 24%. The decrease was due primarily to the decrease
      in the amount of revenue generated from consulting and development fees. The
      company successfully completed stages of several projects in the prior fiscal
      year ended June 30, 2006. During the three months ended September 30, 2005,
      the
      Company derived revenues of $130,668 from development and consulting services
      supplied to clients. For the comparable period ended September 30, 2006 the
      Company did not receive any such fees for similar services. As the company’s
      clients move to the next stages of their projects the Company expects to receive
      further revenue from consulting and development fees throughout the remainder
      of
      fiscal 2007.




For
      the
      three months ended September 30, 2006, the Company processed 4,917,953
      transactions, an increase of 529,415 or approximately 12%, over the 4,388,538
      transactions that were processed in the corresponding period ended September
      30,
      2005.





The
      Company expects the trend of increased processing fees to continue throughout
      the remainder of fiscal 2007 with the addition of new clients and a continued
      increase in consumers' preference to use credit and debit cards as against
      cash,
      will result in increased transactional volume. The Company expects revenue
      levels to increase throughout the next twelve months as it continues to
      introduce its service offerings, such as EMV transaction processing and its
      Internet Payment Gateway. In addition, the Company believes that it will derive
      further revenue from the sale of Point Of Sale terminals through its
      relationships with Hypercom , Global Refunds and Thyron. The Company has placed
      orders for in excess of 2000 point of sale terminals from vendors such as
      Hypercom and Thyron, and the Company expects to sell these terminals to its
      clients during the remainder of fiscal 2007.There can be no guarantee that
      the
      Company's products will be accepted in the marketplace or that its sales efforts
      will be successful. Please see "Factors That May Affect Operating
      Results."





A
      significant percentage of the Company's revenue for the three months ended
      September 30, 2006 has been derived from a limited number of its customers,
      primarily Finnish customers for its transaction processing products.
      Approximately 56% of the Company's total revenues were attributable to its
      ten
      largest customers. The future loss of any major customer could have a material
      adverse effect on the Company's business, financial condition and results of
      operations. The Company believes that this customer concentration will continue
      for the remainder of fiscal 2007, but will gradually start to be diluted
      beginning in the second half of fiscal 2007 as it continues to pursue operations
      outside of Finland.. The Company is currently pursuing opportunities in several
      European countries through our relationship with Global Refunds. Initial pilot
      terminals have been deployed in Spain . The pilot program has been successful
      and the Company expects to deploy additional terminals in Spain and other
      countries through the remainder of fiscal 2007. Through our relationship with
      Hypercom , we have also identified opportunities for terminal deployment in
      the
      Dominican Republic and Sweden . The Company is also vigorously active in
      establishing a market for our products in Asia, specifically China.





The
      majority of Company's revenues for the three months ended September 30, 2006
      have been generated by our operations outside of the United States, and our
      future growth rate is in part dependent on continued growth in international
      markets. The Company expects the majority of our revenue to continue to be
      generated outside of the U.S. through the remainder of fiscal year 2007.








20


(b)
      COST
      OF REVENUE





Cost
      of
      revenue was $533,978 for the three months ended September 30, 2006, compared
      to
      $498,556 for the three months ended September 30, 2005, an increase of $35,422
      or approximately 7%. The increase in cost of revenue is due in part to continued
      investment in the Company's technical infrastructure and hiring of additional
      staff.





Cost
      of
      revenue can be expected to increase in the coming twelve months if the Company
      continues our current trend of increasing the number of transactions processed.
      The Company also intends to expand our service offering and its business mix
      will necessarily change, so that gross margin as a percent of sales may not
      remain constant.




(c)
      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
      general and administrative expenses were $2,398,115 for the three months ended
      September 30, 2006 compared to $1,024,454 for the three months ended September
      30, 2005, an increase of $1,373,661 or approximately 134%. During the three
      months ended September 30, 2006, the primary components of selling, general,
      and
      administrative expenses were: consulting fees of $1,201,492, of which
      $ 1,081,476
      were non-cash costs;
      payroll and related costs of $497,493; legal and accounting fees of $179,594;
      travel and entertainment costs of $153,614; facility costs, such as rent,
      telephone, and utilities, of $142,436; professional services of $78,778; and
      depreciation and amortization of $67,878.





The
      level
      of future selling, general and administrative expenses will largely depend
      on
      the pace of the Company's growth in the market for payment processing products
      and upon the cost of outside services and professional fees, including legal
      fees relating to litigation. The Company fully expects these costs to increase
      as it continues its expected rollout of product offerings. In addition, selling
      expenses will continue to increase due to increased focus on obtaining new
      customers. The Company intends to focus additional resources in the areas of
      sales personnel salaries, trade show participation, and other promotional
      expenses. In addition, the Company may pursue further acquisitions in order
      to
      facilitate its growth and exploit market opportunities, which would further
      drive up legal and accounting fees, payroll, and travel costs.





(d)
      INTEREST EXPENSE





The
      Company had net interest income of $12 during the three months ended September
      30, 2006 compared to net interest expense of $18,772 for the three months ended
      September 30, 2005, a decrease of $18,784. Lower interest expense was due to
      a
      decrease in the company’s debt.





Currently,
      the Company is utilizing equity financing partly in order to avoid the interest
      charges associated with debt financing. Accordingly, the Company does not expect
      interest expense to materially increase in the coming twelve months. There
      can
      be no guarantee that this will be the case, however, as the market price for
      the
      Company's common stock could change, forcing it to pursue alternative methods
      of
      financing the Company's cash needs. In addition, the Company could receive
      an
      offer of attractive debt financing or could undertake additional financing
      with
      regard to an acquisition, in which cases interest expense would significantly
      increase.





(e)
      NET
      LOSS





For
      the
      reasons stated above, the Company recorded a net loss of $2,470,221 for the
      three months ended September 30, 2006 compared to $937,030 for the three months
      ended September 30, 2005, an increase of $1,533,191 or approximately 164%.
      The
      increased loss is primarily due to the decrease in sales, general, and
      administrative expenses for the period. The Company may continue to incur losses
      on both a quarterly and annual basis, and anticipates continued losses for
      at
      least the next 12 months. In addition, the Company expects to continue to incur
      significant costs of services and substantial operating expenses. Therefore,
      the
      Company will need to significantly increase revenues to achieve profitability
      and a positive cash flow. The Company may not be able to generate sufficient
      revenues to achieve profitability. The Company expects losses to continue for
      at
      least the next twelve months.





The
      Company will attempt to continue to fund its operations primarily through equity
      financing, and possibly debt financing, until it achieves profitability, of
      which there is no guarantee. The Company expects these concerns regarding its
      perceived viability to continue throughout the fiscal year 2007.








21


OPERATING
      ACTIVITIES





The
      net
      cash used in operating activities was $1,421,228 for the three months ended
      September 30, 2006 compared to $800,198 for the three months ended September
      30,
      2005, an increase of $621,030 or approximately 78%. Cash used in operating
      activities during the three months ended September 30, 2006 is attributable
      primarily to the net loss of $2,470,221 partially offset by non-cash charges
      of
      $1,081,476 and $192,812 of depreciation and amortization. During the three
      months ended September 30, 2006, cash used in operating activities of $225,294
      was due to changes in the components of working capital. During the three months
      ended September 30, 2005, cash used in operating activities of $342,729 was
      due
      to changes in the components of working capital





INVESTING
      ACTIVITIES





Net
      cash
      used in investing activities was $180,192 for the three months ended September
      30, 2006, which was an increase of $151,325 or approximately 524% compared
      to
      cash used in investing activities of $28,867 for the three months ended
      September 30, 2005. This increase was primarily due to increased investing
      by
      the Company in software and capitalized software costs.





LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      September 30, 2006, the Company had total current assets of $3,828,828 and
      total
      current liabilities of $1,017,880, resulting in working capital of $2,810,948.
      The Company had cash and cash equivalents of $3,040,769 at September 30, 2006.
      As of September 30, 2006, the Company had an accumulated deficit of $60,583,936.
      These factors raise substantial doubt as to the Company's ability to continue
      as
      a going concern. The independent auditors report on our June 30, 2006 financial
      statements included in the Form 10-KSB states that our difficulty in generating
      sufficient cash flow to meet our obligations and sustain operations raise
      substantial doubts about the our ability to continue as a going
      concern.




On
      January 27, 2006, the Company signed subscription agreements with a group of
      offshore investors for the sale of an aggregate of $9.2 million in Company
      common stock, plus warrants (the "January Financing"). Due to the failure of
      the
      investment group to timely fund in full the first payment required for the
      purchase of shares and warrants, the Company terminated the January Financing;
      all shares and warrants issued thereunder were returned by the escrow holder
      to
      the Company for cancellation, and any funds received pursuant to the January
      Financing were returned by the escrow holder to the investors.





In
      March
      2006, a group of European investors , lead by Olympia Holding AS, informed
      the
      Company that they were willing to invest on the same terms and conditions that
      were negotiated for the now-terminated January Financing, and the Company agreed
      to this financing transaction with these investors (the "March
      Financing").





Pursuant
      to the March Financing, the Company agreed to issue 46 million shares of
      restricted common stock under Regulation S at $0.20 per share, plus warrants
      to
      purchase 50 million shares of common stock with two-year exercise periods and
      strike prices ranging from $1.50 to $8.50, as set forth below. The Company
      intends to issue these shares in two tranches of 23,000,000 shares each. The
      shares which will be held in escrow by Carl Hessel , a director and major
      stockholder of the Company based in Geneva, Switzerland, along with the
      warrants. Pursuant to the terms of the March Financing, the first payment of
      $4.6 million was due immediately, with a second payment of $4.6 million due
      within three months thereafter. As of September 30, 2006, the Company had
      received cash in the net amount $ 6,169,924 pursuant to the March Financing,
      and
      had issued 22,850,000 shares of common stock and warrants to purchase an
      additional 24,836,957 shares. The Company is holding is escrow the remaining
      150,000 shares of common stock issuable under the first tranche of the March
      Financing.





During
      the three months ended September 30, 2006, the Company received an additional
      $1,600,000 pursuant to the second tranche of the March Financing. The Company
      has not yet issued the shares or warrants related to this $1,600,000. The
      23,000,000 shares of common stock issuable under the second tranche of the
      March
      Financing have been issued by the Company’s transfer agent, and are being held
      in escrow pending receipt of the proceeds of the March Financing by the Company.
      The amount of $1,600,000 is shown as common stock subscribed on the Company’s
      balance sheet at September 30, 2006.








The
      Company also issued to consultants 7,600,000 shares of unregistered common
      stock
      with a fair value of $2,912,000; warrants to purchase 12,000,000 shares of
      common stock at a price of $1.00 per share with a fair value of $2,212,684;
      and
      warrants to purchase an additional 1,000,000 shares of common stock at a price
      of $1.50 with a fair value of $148,086 as commission to consultants related
      to
      the March Financing. The Company charged the aggregate amount of $5,272,770
      to
      operations during the twelve months ended June 30, 2006 with regard to the
      issuance of these shares and warrants.








22





In
      April
      2006, the Company signed subscriptions agreements with a group of offshore
      investors led by Swedish Credit and Finance .AB for the sale of an aggregate
      of
      25,000,000 shares of the Company’s common stock plus warrants to purchase an
      additional 25,000,000 shares of common stock for the aggregate price of
      $10,000,000 (the “April Financing”). Subject to the receipt of funds by the
      Company under the April Financing, shares of common stock will be issued as
      follows:







Number
                of
            
            Price
                per
            
            TotalShares
            
            Share
            
            Price
            
            Terms5,000,000
            
            $
            0.30
            
            $
            1,500,000
            
            90
                day note at 12% due August 9, 200610,000,000
            
            $
            0.55
            
            $
            5,500,000
            
            One
                year note at 12% due May 11, 200710,000,000
            
            $
            0.30
            
            $
            3,000,000
            
            Cash
                due 30 days, or June 10, 200625,000,000
            
            
            
            
            $
            10,000,000








These
      shares and warrants are being held in escrow by Margaux Investment Management
      Group, S.A., a Company controlled by a board member, Carl Hessel and are not
      deemed to be issued and outstanding as of the date of the financial statements
      .




At
      September 30, 2006, the Company has not recognized interest income on these
      notes as the transactions are not yet deemed consummated as the Company has
      not
      received any of the proceeds of the April Financing.








The
      accompanying financial statements have been prepared assuming that the Company
      continues as a going concern that contemplates the realization of assets and
      the
      satisfaction of liabilities in the normal course of business. However, the
      ability of the Company to continue as a going concern on a longer-term basis
      will be dependent upon its ability to generate sufficient cash flow from
      operations to meet its obligations on a timely basis, to obtain additional
      financing, and ultimately, attain profitability.





Management
      plans to continue raising additional capital through a variety of fund raising
      methods during fiscal 2007 and to pursue all available financing alternatives
      in
      this regard. Management may also consider a variety of potential partnership
      or
      strategic alliances to strengthen its financial position. Although the Company
      has been successful in the past in raising capital, no assurance can be given
      that these sources of financing will continue to be available to us and/or
      that
      demand for our equity/debt instruments will be sufficient to meet our capital
      needs, or that financing will be available on terms favorable to the Company.
      The financial statements do not include any adjustments relating to the
      recoverability and classification of liabilities that might be necessary should
      the Company be unable to continue as a going concern. If funding is insufficient
      at any time in the future, the Company may not be able to take advantage of
      business opportunities or respond to competitive pressures, or may be required
      to reduce the scope of its planned product development and marketing efforts,
      any of which could have a negative impact on its business and operating results.
      In addition, insufficient funding may have a material adverse effect on the
      Company's financial condition, which could require the Company to:




·
            curtail
                operations significantly;


·
            sell
                significant assets;


·
            seek
                arrangements with strategic partners or other parties that may require
                the
                Company to relinquish significant rights to products, technologies
                or
                markets; or


·
            explore
                other strategic alternatives including a merger or sale of the
                Company.





To
      the
      extent that the Company raises additional capital through the sale of equity
      or
      convertible debt securities, the issuance of such securities may result in
      significant dilution to existing stockholders. If additional funds are raised
      through the issuance of debt securities, these securities may have rights,
      preferences and privileges senior to holders of common stock and the terms
      of
      such debt could impose restrictions on the Company's operations. Regardless
      of
      whether the Company's cash assets prove to be inadequate to meet the Company's
      operational needs, the Company may seek to compensate providers of services
      by
      issuance of stock in lieu of cash, which may also result in dilution to existing
      shareholders.





The
      Company has been successful in obtaining cash resources through private
      placements and the exercise of options. Financing activities provided cash
      of
      $1,652,500 during the three months ended September 30, 2006 compared to
      $1,884,948 for the three months ended September 30, 2005, an increase of
      $232,448 or approximately 12.33%. During the three months ended September 30,
      2006, the Company received $1,600,000 in cash from the sale of common stock,
      and
      $52,500 from the exercise of stock options.






23




CERTAIN
      INDEBTEDNESS





Paul
      Egan
      has advanced funds to the Company for its operations. These amounts include
      net
      advances of $18,709 at September 30, 2006. No interest was accrued on this
      advance, which was repaid to Paul Egan subsequent to September 30,
      2006.





ACCRUED
      SALARIES





The
      Company's president, Paul Egan, who is also a shareholder, had delayed payment
      of a portion of his salary in order to conserve the Company's cash. At September
      30, 2006, the amount of $39,903 in accrued salary is due to Paul Egan.





The
      Company's chief financial officer, Ciaran Egan, who is also a shareholder,
      had
      delayed payment of a portion of his salary in order to conserve the Company's
      cash. At September 30, 2006, the amount of $38,247 in accrued salary is due
      to
      Ciaran Egan.





EXCHANGE
      RATES





The
      Company's operations are principally in Helsinki, Finland under the name of
      Rahaxi Processing Oy., operated in its local currency, the Euro, and in
      Dominican Republic under the name ePayLatina S.A., operated in its local
      currency, the Dominican Republic Peso. All assets and liabilities are translated
      at exchange rates in effect at the end of the year. Accounts for consolidated
      statements of operations are translated at weighted average rates for the year.
      Gains and losses from translation of foreign currency financial statements
      into
      U.S. dollars are included in Other - comprehensive income (loss). The
      accumulated foreign currency translation adjustment was $(97,883) at September
      30, 2006.





Any
      significant change in exchange rates may have a favorable or negative effect
      on
      both the revenues and operational costs of the Company. In particular, the
      value
      of the U.S. dollar to the Euro impacts the Company's operating results. The
      Company's expenses are not necessarily incurred in the currency in which revenue
      is generated, and, as a result, it is required from time to time to convert
      currencies to meet the Company's obligations. In addition, a significant portion
      of the Company's financial statements are prepared in Euro and translated to
      U.S. dollars for consolidation.





INFLATION





The
      impact of inflation on the costs of the Company, and the ability to pass on
      cost
      increases to its customers over time is dependent upon market conditions. The
      Company is not aware of any inflationary pressures that have had any significant
      impact on the Company's operations over the past quarter, and the Company does
      not anticipate that inflationary factors will have a significant impact on
      future operations.








OFF-BALANCE
      SHEET ARRANGEMENTS





The
      Company does not maintain off-balance sheet arrangements nor does it participate
      in non-exchange traded contracts requiring fair value accounting
      treatment.





OTHER





The
      Company does not provide post-retirement or post-employment benefits requiring
      charges under Statements of Financial Accounting Standards No. 106 and No.
      112.





CRITICAL
      ACCOUNTING POLICIES





The
      SEC
      has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies
      provide additional disclosure and commentary on their most critical accounting
      policies. In FRR 60, the Commission has defined the most critical accounting
      policies as the ones that are most important to the portrayal of a Company's
      financial condition and operating results, and require management to make its
      most difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition,
      the Company's most critical accounting policies include: (a) use of estimates
      in
      the preparation of financial statements; (b) stock-based compensation
      arrangements; (c) revenue recognition; and (d) long-lived assets. The methods,
      estimates and judgments the Company uses in applying these most critical
      accounting policies have a significant impact on the results the Company reports
      in its financial statements.







24





(a)
      USE
      OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS





The
      preparation of these financial statements requires the Company to make estimates
      and judgments that affect the reported amounts of assets, liabilities, revenues
      and expenses, and related disclosure of contingent assets and liabilities.
      On an
      on-going basis, the Company evaluates these estimates, including those related
      to revenue recognition and concentration of credit risk. The Company bases
      its
      estimates on historical experience and on various other assumptions that is
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.




(b)
      STOCK-BASED COMPENSATION ARRANGEMENTS





The
      Company intends to issue shares of common stock to various individuals and
      entities for management, legal, consulting and marketing services. These
      issuances will be valued at the fair market value of the service provided and
      the number of shares issued is determined, based upon the open market closing
      price of common stock as of the date of each respective transaction. These
      transactions will be reflected as a component of selling, general and
      administrative expenses in the accompanying statement of
      operations.





(c)
      REVENUE RECOGNITION





The
      Company recognizes revenues from contracts in which the Company provides only
      consulting services as the services are performed. The contractual terms of
      the
      agreements dictate the recognition of revenue by the Company. 
 Payments received in advance are deferred until the service is
      provided.





Contract
      costs include all direct equipment, material, and labor costs and those indirect
      costs related to contract performance, such as indirect labor. Selling, general
      and administrative costs are charged to expense as incurred. Provisions for
      estimated losses on uncompleted contracts are made in the period in which such
      losses are determined. Changes in contract performance, contract conditions,
      and
      estimated profitability that may result in revisions to costs and income are
      recognized in the period in which the revisions are determined.




For
      revenue from product sales, the Company recognizes revenue in accordance with
      Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which
      superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB
      No.
      101 requires that four basic criteria must be met before revenue can be
      recognized: (1) persuasive evidence of an arrangement exists; (2) delivery
      has
      occurred; (3) the selling price is fixed and determinable; and (4)
      collectibility is reasonably assured. Determination of criteria (3) and (4)
      are
      based on management's judgments regarding the fixed nature of the selling prices
      of the products delivered and the collectibility of those amounts. Provisions
      for discounts and rebates to customers, estimated returns and allowances, and
      other adjustments are provided for in the same period the related sales are
      recorded. The Company defers any revenue for which the product has not been
      delivered or is subject to refund until such time that the Company and the
      customer jointly determine that the product has been delivered or no refund
      will
      be required. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No.
      00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses
      accounting for arrangements that may involve the delivery or performance of
      multiple products, services and/or rights to use assets. The effect of
      implementing EITF No. 00-21 on the Company's consolidated financial position
      and
      results of operations was not significant. This issue addresses determination
      of
      whether an arrangement involving more than one deliverable contains more than
      one unit of accounting and how the arrangement consideration should be measured
      and allocated to the separate units of accounting. EITF No. 00-21 became
      effective for revenue arrangements entered into in periods beginning after
      June
      15, 2003. For revenue arrangements occurring on or after August 1, 2003, the
      Company revised its revenue recognition policy to comply with the provisions
      of
      EITF No. 00-21.





For
      those
      contracts which contain multiple deliverables, management must first determine
      whether each service, or deliverable, meets the separation criteria of EITF
      No.
      00-21. In general, a deliverable (or a group of deliverables) meets the
      separation criteria if the deliverable has standalone value to the customer
      and
      if there is objective and reliable evidence of the fair value of the remaining
      deliverables in the arrangement. Each deliverable that meets the separation
      criteria is considered a "separate unit of accounting." Management allocates
      the
      total arrangement consideration to each separate unit of accounting based on
      the
      relative fair value of each separate unit of accounting. The amount of
      arrangement consideration that is allocated to a unit of accounting that has
      already been delivered is limited to the amount that is not contingent upon
      the
      delivery of another separate unit of accounting. After the arrangement
      consideration has been allocated to each separate unit of accounting, management
      applies the appropriate revenue recognition method for each separate unit of
      accounting as described previously based on the nature of the arrangement.
      All
      deliverables that do not meet the separation criteria of EITF No. 00-21 are
      combined into one unit of accounting, and the appropriate revenue recognition
      method is applied.








25


Processing
      fee revenue is earned based upon the actual number of transactions processed
      through the Company's processing system. Transaction processing fees are
      recognized in the period that the service is performed. These fees are typically
      charged on a per transaction basis, depending on the arrangement with the
      customer.




(d)
      LONG-LIVED ASSETS





Long-lived
      assets to be held and used are analyzed for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. The Company evaluates at each balance sheet date whether events
      and circumstances have occurred that indicate possible impairment. If there
      are
      indications of impairment, the Company uses future undiscounted cash flows
      of
      the related asset or asset grouping over the remaining life in measuring whether
      the assets are recoverable. In the event such cash flows are not expected to
      be
      sufficient to recover the recorded asset values, the assets are written down
      to
      their estimated fair value. Long-lived assets to be disposed of are reported
      at
      the lower of carrying amount or fair value of asset less the cost to
      sell.





FORWARD
      LOOKING STATEMENTS





This
      Form
      10-QSB contains "forward looking statements" within the meaning of Rule 175
      of
      the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act
      of
      1934, as amended. When used in this Form 10-QSB, the words "expects,"
      "anticipates," "believes," "plans," "will" and similar expressions are intended
      to identify forward-looking statements. These are statements that relate to
      future periods and include, but are not limited to, statements regarding our
      adequacy of capital resources, need and ability to obtain additional financing,
      the features and benefits of our services, our operating losses and negative
      cash flow, and our critical accounting policies.





Forward-looking
      statements are subject to certain risks and uncertainties that could cause
      actual results to differ materially from those projected. These risks and
      uncertainties include, but are not limited to, those discussed above, as well
      as
      the risks set forth under "Factors That May Affect Operating Results." These
      forward-looking statements speak only as of the date hereof. The Company
      expressly disclaims any obligation or undertaking to release publicly any
      updates or revisions to any forward-looking statements contained herein to
      reflect any change in its expectations with regard thereto or any change in
      events, conditions or circumstances on which any such statement is
      based.





FACTORS
      THAT MAY AFFECT OPERATING RESULTS





The
      operating results of the Company can vary significantly depending upon a number
      of factors, many of which are outside the Company's control. General factors
      that may affect the Company's operating results include:










•
            market
              acceptance of and changes in demand for products and services; •
            a
              small number of customers account for, and may in future periods account
              for, substantial portions of the Company's revenue, and revenue could
              decline because of delays of customer orders or the failure to retain
              customers; •
            gain
                or loss of clients or strategic relationships;


•
            announcement
                or introduction of new services and products by the Company or by
                its
                competitors;


•
            price
                competition;


•
            the
                ability to upgrade and develop systems and infrastructure to accommodate
                growth;


•
            the
                ability to introduce and market products and services in accordance
                with
                market demand;


•
            changes
                in governmental regulation; and


•
            reduction
                in or delay of capital spending by clients due to the effects of
                terrorism, war and political instability





26





The
      Company believes that any future growth and profitability will depend in large
      part on the ability to promote its services, gain clients and expand its
      relationship with current clients. Accordingly, the Company intends to invest
      in
      marketing, strategic partnerships, and development of its client base. If the
      Company is not successful in promoting its services and expanding its client
      base, this may have a material adverse effect on its financial condition and
      the
      ability to continue to operate the business.





The
      Company is also subject to the following specific factors that may affect the
      Company's operating results:





(a)
      COMPETITION





The
      market for electronic payment systems and electronic POS systems is intensely
      competitive and we expect competition to continue to increase. The Company's
      competitors for POS systems include VeriFone and Ingenico, amongst others,
      and
      companies such as Global Payments, First Data and Euroconnex for the Company's
      electronic payment software. In Finland the company faces competition from
      companies such as Point, which is the largest terminal vendor in the Finnish
      market, as well as companies such as Screenway and Altdata, which are Point
      of
      Sale software vendors. In addition, the companies with whom we have strategic
      relationships could develop products or services that compete with the Company's
      products or services. In addition, some competitors in the Company's market
      have
      longer operating histories, significantly greater financial, technical,
      marketing and other resources, and greater brand recognition than the Company
      does. The Company also expects to face additional competition as other
      established and emerging companies enter the market for electronic payment
      solutions. To be competitive, the Company believes that it must, among other
      things, invest significant resources in developing new products, improve its
      current products and maintain customer satisfaction. Such investment will
      increase the Company's expenses and affect its profitability. In addition,
      if it
      fails to make this investment, the Company may not be able to compete
      successfully with its competitors, which could have a material adverse effect
      on
      its revenue and future profitability.





(b)
      TECHNOLOGICAL AND MARKET CHANGES





The
      markets in which the Company competes are characterized by rapid technological
      change, frequent new product introductions, evolving industry standards and
      changing needs of customers. There can be no assurance that the Company's
      existing products will continue to be properly positioned in the market or
      that
      the Company will be able to introduce new or enhanced products into the market
      on a timely basis, or at all. Currently, the Company is focusing on upgrading
      and introducing new products. There can be no assurance that enhancements to
      existing products or new products will receive customer acceptance. As
      competition in the electronic payments industry increases, it may become
      increasingly difficult for the Company to be competitive.





Risks
      associated with the development and introduction of new products include delays
      in development and changes in payment processing, and operating system
      technologies that could require the Company to modify existing products. There
      is also the risk to the Company that there may be delays in initial shipments
      of
      new products. Further risks inherent in new product introductions include the
      uncertainty of price-performance relative to products of competitors,
      competitors' responses to the introductions and the desire by customers to
      evaluate new products for longer periods of time. Further, the Company expects
      that its revenue during fiscal 2007 will be significantly affected by the timing
      and success of the introduction of new products and services during the fiscal
      year.





(c)
      NEW
      VERSIONS OF COMPANY'S PRODUCTS MAY CONTAIN ERRORS OR DEFECTS





The
      Company's electronic payment software products and point of sale devices are
      complex and, accordingly, may contain undetected errors or failures when first
      introduced or as new versions are released. This may result in the loss of,
      or
      delay in, market acceptance of the Company's products. The Company has in the
      past discovered software errors in its new releases and new products after
      their
      introduction. The Company has experienced delays in release, lost revenues
      and
      customer frustration during the period required to correct these errors. The
      Company may in the future discover errors and additional scalability limitations
      in new releases or new products after the commencement of commercial shipments
      or be required to compensate customers for such limitations or errors, as a
      result of which the Company's business, cash flow, financial condition and
      results of operations could be materially adversely affected.





27





(d)
      NO
      ASSURANCE OF SUCCESSFUL AND TIMELY PRODUCT DEVELOPMENT





The
      Company's products and proposed enhancements are at various stages of
      development and additional development and testing will be required in order
      to
      determine the technical feasibility and commercial viability of the products.
      There can be no assurance that the Company's product development efforts will
      be
      successfully completed. The Company's proposed development schedule may be
      affected by a variety of factors, many of which will not be within the control
      of the Company, including technological difficulties, access to proprietary
      technology of others, delays in regulatory approvals, international operating
      licenses, and the availability of necessary funding. In light of the foregoing
      factors, there can be no assurance that the Company will be able to complete
      or
      successfully commercialize new products. The inability of the Company to
      successfully complete the development of new products or to do so in a timely
      manner, could force the Company to scale back operations, or cease operations
      entirely.





(e)
      MARKET ACCEPTANCE





The
      Company's success is dependent on the market acceptance of its products. Market
      acceptance of the Company's products will be dependent, among other things,
      upon
      quality, ease of use, speed, reliability, and cost effectiveness. Even if the
      advantages of the Company's products are established, the Company is unable
      to
      predict how quickly, if at all, the products will be accepted by the
      marketplace.





(f)
      PROTECTION OF PROPRIETARY RIGHTS





The
      Company's success and ability to compete will be dependent in part on the
      protection of its potential patents, trademarks, trade names, service marks
      and
      other proprietary rights. The Company intends to rely on trade secret and
      copyright laws to protect the intellectual property that it plans to develop,
      but there can be no assurance that such laws will provide sufficient protection
      to the Company, that others will not develop services that are similar or
      superior to the Company's, or that third parties will not copy or otherwise
      obtain and use the Company's proprietary information without authorization.
      In
      addition, certain of the Company's know-how and proprietary technology may
      not
      be patentable.





The
      Company may rely on certain intellectual property licensed from third parties,
      and may be required to license additional products or services in the future.
      There can be no assurance that these third party licenses will be available
      or
      will continue to be available to the Companion acceptable terms or at all.
      The
      inability to enter into and maintain any of these licenses could have a material
      adverse effect on the Company's business, financial condition or operating
      results.




There
      is
      a risk that some of the Company's products may infringe the proprietary rights
      of third parties. In addition, whether or not the Company's products infringe
      on
      proprietary rights of third parties, infringement or invalidity claims may
      be
      asserted or prosecuted against it and it could incur significant expense in
      defending them. If any claims or actions are asserted against the Company,
      it
      may be required to modify its products or seek licenses for these intellectual
      property rights. The Company may not be able to modify its products or obtain
      licenses on commercially reasonable terms, in a timely manner or at all. The
      Company's failure to do so could have a negative affect on its business and
      revenues.





(g)
      DEPENDENCE ON SUPPLIERS





The
      Company depends upon a number of suppliers for components of its products.
      There
      is an inherent risk that certain components of the Company's products will
      be
      unavailable for prompt delivery or, in some cases, discontinued. The Company
      only has limited control over any third-party manufacturer as to quality
      controls, timeliness of production, deliveries and various other factors. Should
      the availability of certain components be compromised, it could force the
      Company to develop alternative designs using other components, which could
      add
      to the cost of goods sold and compromise delivery commitments. If the Company
      is
      unable to obtain components in a timely manner, at an acceptable cost, or at
      all, the Company may need to select new suppliers or redesign or reconstruct
      processes used to build its products. In such an instance, the Company would
      not
      be able to manufacture any security devices for a period of time, which could
      materially adversely affect its business, results from operations, and financial
      condition.





28





(i)
      KEY
      PERSONNEL





The
      Company's success is largely dependent on the personal efforts and abilities
      of
      its senior management. The loss of certain members of the Company's senior
      management, including the Company's chief executive officer, chief financial
      officer and chief technical officer, could have a material adverse effect on
      the
      Company's business and prospects.





The
      Company intends to recruit in fiscal year 2007 employees who are skilled in
      e-commerce, payment, funds management, payment reconciliation, Internet and
      other technologies. The failure to recruit these key personnel could have a
      material adverse effect on the Company's business. As a result, the Company
      may
      experience increased compensation costs that may not be offset through either
      improved productivity or higher revenue. There can be no assurances that we
      will
      be successful in retaining existing personnel or in attracting and recruiting
      experienced qualified personnel.





(j)
      LIMITATIONS ON LIABILITY AND INDEMNIFICATION





The
      Company's articles of incorporation and bylaws include provisions to the effect
      that we may indemnify any director, officer, or employee, as well as limit
      the
      liability of such persons. In addition, provisions of Nevada law provide for
      such indemnification, as well as for a limitation of liability of our directors
      and officers for monetary damages arising from a breach of their fiduciary
      duties. Any limitation on the liability of any director or officer, or
      indemnification of any director, officer, or employee, could result in
      substantial expenditures being made by the Company in covering any liability
      of
      such persons or in indemnifying them.





(k)
      LITIGATION





As
      stated
      under Legal Proceedings, the Company is subject to a lawsuit and a regulatory
      investigation. It is possible that one or more of these matters could be
      resolved in a manner that ultimately would have a material adverse impact on
      the
      Company's business, and could negatively impact its revenues, operating margins,
      and net income.








ITEM
      3.
      CONTROLS AND PROCEDURES




EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES





The
      Company maintains disclosure controls and procedures (as defined in Rule
      13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as
      amended) that are designed to ensure that information required to be disclosed
      in our periodic reports filed under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the SEC's rules
      and
      forms, and that such information is accumulated and communicated to our
      management, including our principal executive officer and principal financial
      officer, to allow timely decisions regarding required disclosure.





As
      of the
      end of the period covered by this report, our management carried out an
      evaluation, under the supervision and with the participation of our principal
      executive officer and principal financial officer, of our disclosure controls
      and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
      Act). Based upon the evaluation, our principal executive officer and principal
      financial officer concluded that our disclosure controls and procedures were
      effective to ensure that information required to be disclosed by us in the
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the SEC's rules
      and forms. In addition, our principal executive officer and principal financial
      officer concluded that the Company's disclosure controls and procedures were
      effective to ensure that information required to be disclosed in the reports
      that the Company files or submits under the Exchange Act is accumulated and
      communicated to the Company's management, including our principal executive
      officer and principal financial officer, to allow timely decisions regarding
      required disclosure.








29


CHANGES
      IN DISCLOSURE CONTROLS AND PROCEDURES








There
      were no changes in our internal controls over financial reporting that occurred
      during the quarter ended September 30, 2006 that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.





PART
      II -
      OTHER INFORMATION





ITEM
      1.
      LEGAL PROCEEDINGS





There
      have been no material changes to the legal proceeding or investigations reported
      in Part II, Item 1 - "Legal Proceedings" in the Company's Form 10-KSB filed
      with
      the SEC on September 29, 2006(the "Prior 10-K"). Other than as set forth in
      the
      Prior 10-K, the Company is not a party to any material pending legal
      proceeding.














30








ITEM
      2.
      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





The
      Company made the following sales of unregistered (restricted) securities during
      the quarter ended on September 30, 2006 (not previously reported in a Form
      8-K):





On
      July
      26, 2006, the Company issued 100,000 shares of its common stock valued at
      $50,000 to a consultant for services to be provided through July 2007.





On
      August
      29, 2006, the Company issued 180,000 shares of its common stock valued at
      $75,600 for prepaid rent.





There
      have been no purchases of common stock of the Company by the Company or its
      affiliates during the three months ended September 30, 2006.





ITEM
      3.
      DEFAULTS UPON SENIOR SECURITIES.





Not
      applicable.








ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None.








ITEM
      5.
      OTHER INFORMATION.





SUBSEQUENT
      EVENTS





Subsequent
      to September 30, 2006, the Company issued 300,000 shares of its common stock
      to
      a consultant for services . The Company also received for cancellation 142,857
      shares of its common stock which had been issued to a consultant for services
      in
      December 2003.








ITEM
      6.
      EXHIBITS.





Exhibits
      included or incorporated by reference herein are set forth in the attached
      Exhibit Index.









31






SIGNATURES




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




********************************************************************
            
            **FREESTAR
                TECHNOLOGY CORPORATION**Date: November
                20, 2006
            By:
            /s/ Paul
                EganChief
                Executive Officer






Date: November
                20, 2006
            By:
            /s/ Ciaran
                EganSecretary/Treasurer/
              Chief
                Financial Officer









32







EXHIBIT INDEXNumber
            
            Description3.1
            
            Articles
                of Incorporation, dated November 17, 1999 (incorporated by reference
                to
                Exhibit 3.3 of the Form 10-SB filed on January 3,
                2000).3.2
            
            Certificate
                of Amendment of Articles of Incorporation, dated September 8, 2000
                (incorporated by reference to Exhibit 3.4 of the Form S-8 filed on
                August
                17, 2001).3.3
            
            Certificate
                of Amendment to Articles of Incorporation, dated February 15, 2001
                (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on
                February 20, 2001).3.4
            
            Certificate
                of Amendment to Articles of Incorporation, dated December 15, 2002
                (incorporated by reference to Exhibit 3.4 of the Form 10-QSB filed
                on
                March 12, 2003).3.5
            
            Certificate
                of Amendment to Articles of Incorporation, dated February 24, 2003
                (incorporated by reference to Exhibit 3.5 of the Form 10-QSB filed
                on
                March 12, 2003).3.6
            
            Bylaws,
                dated November 17, 1999 (incorporated by reference to Exhibit 3.2
                of the
                Form 10-SB filed on January 3, 2000)4.1
            
            Certificate
                of Powers, Designations, Preferences and Rights of Series A Preferred
                Stock of the Company, dated August 10, 2001 (incorporated by reference
                to
                Exhibit 4 of the Form 8-K filed on August 14, 2001).4.2
            
            Certificate
                of Designation (Series A), dated June 9, 2005 (incorporated by reference
                to Exhibit 4.1 of the Form 8-K filed on October 20,
                2005).4.3
            
            Certificate
                of Designation (Series B), dated June 9, 2005 (incorporated by reference
                to Exhibit 4.2 of the Form 8-K filed on October 20,
                2005).31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of Paul Egan (filed
                herewith).31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of Ciaran Egan (filed
                herewith).32
            
            Section
                1350 Certification of Paul Egan and Ciaran Egan (filed
                herewith).








33